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    Explaining Hollywood

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    gnne7
    The Hollywood film industry is dominated by six major studios that form an oligopoly. These studios have extensive vertical and horizontal integration, controlling markets from film production through distribution channels. This level of market control allows the major studios to engage in practices like block booking that limit competition. While new technologies pose threats to established revenue streams, the major studios actively work to protect their business model through lobbying and litigation.

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    Explaining Hollywood

    Uploaded by

    gnne7
    69 views19 pages
    The Hollywood film industry is dominated by six major studios that form an oligopoly. These studios have extensive vertical and horizontal integration, controlling markets from film production through distribution channels. This level of market control allows the major studios to engage in practices like block booking that limit competition. While new technologies pose threats to established revenue streams, the major studios actively work to protect their business model through lobbying and litigation.

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    Explaining Hollywood

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    The Hollywood film industry is dominated by six major studios that form an oligopoly. These studios have extensive vertical and horizontal integration, controlling markets from film production through distribution channels. This level of market control allows the major studios to engage in practices like block booking that limit competition. While new technologies pose threats to established revenue streams, the major studios actively work to protect their business model through lobbying and litigation.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    69 views19 pages

    Explaining Hollywood

    Uploaded by

    gnne7
    The Hollywood film industry is dominated by six major studios that form an oligopoly. These studios have extensive vertical and horizontal integration, controlling markets from film production through distribution channels. This level of market control allows the major studios to engage in practices like block booking that limit competition. While new technologies pose threats to established revenue streams, the major studios actively work to protect their business model through lobbying and litigation.

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    © All Rights Reserved
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    Download as ppt, pdf, or txt
    of 19

    HOW HOLLYWOOD

    WORKS

    Dominant companies have been around


    since 1930s
    1990s saw major consolidations (Time
    and Warner, Disney & Capital
    Cities/ABC, Viacom/Paramount)

    Oligopoly
    Market is dominated by small number of
    sellers
    Markets are characterized by interactivity
    Decisions of one firm influences - and are
    influenced by - the others

    The Big Six


    1.
    2.
    3.
    4.
    5.
    6.

    Warner Bros (AOL Time Warner)


    Disney
    Twentieth Century Fox (News Corp)
    Colombia (Sony)
    Paramount (Viacom)
    Universal Studio (GE)

    Release windows
    1.
    2.
    3.
    4.
    5.

    Theaters
    Video & DVD
    Pay-per-view
    Pay cable
    Broadcast & basic cable

    Box office & back end sales


    Box Office: $10 billion
    DVD/video sales, rentals: $23.8 b

    Cable, pay-per-view: $2.2 b

    (5-6 months after release)


    (7-8 months after release)

    Premium cable: $10.4 billion

    (a year after release)

    Causes of Hollywood Oligopoly


    New contenders rarely survive, as they
    lack the advantages of the giants
    Cross-subsidization opportunities
    Privileged dealing with other units of the
    conglomerate
    Horizontal and, esp. vertical integration

    Horizontal Integration

    Wide spectrum, including theme parks,


    music, print, etc.

    Vertical Integration
    Controlling markets downstream
    Theater chains
    Cable TV
    TV stations
    TV networks
    Home video outlets

    Theater release provides instantaneous


    national/international marketing outlets
    boosted by huge TV advertising
    Price discrimination (one pays less down
    the line of outlets)
    Importance of box office revenue falling
    (now down to 20%) due to home video,
    pay cable and other revenue sources.

    Global Hollywood
    Strong international trade, protected by
    MPAA
    18th most powerful Washington lobby
    Hollywood product dominates many
    foreign film markets
    Regular production of films encourages
    foreign buyers to deal with the majors
    International box office revenue increasing

    In bed with the competition


    Market control is critical
    Studios often collude
    Keeps market closed
    Concern not with losing money, but with
    maximizing profits

    Feature film production


    Average movie costs $60 million to
    produce
    $20 million to market

    Feature film cycle

    Production

    Locations often subsidized

    Distribution
    Basis of Hollywoods power
    Presentation

    Key is strong opening


    But most money made in aftermarket

    Hollywood Business Model


    USA an Ideal Market
    Highly-populated
    melting-pot
    wealthy
    strong media systems
    many cinema screens (now 37,000)
    easily cover costs on national market
    sell aggressively overseas

    Distribution/Exhibition Strategies

    First weekend fast, blanket release


    Selective openness to small-budget and
    international films
    Openness to independent producers and
    distributors (often have close ties to studios).
    International sales increasingly important
    (nearly 50% of rev)
    enhanced by co-productions, and increasing
    television outlets

    Threats to Hollywoods income


    Personal video recorders (skip
    commercials, subvert prime time, copy
    DVDs)
    DVD burners and recorders (no need to
    rent)
    Digital television (may intensify piracy)
    File-sharing services (undermine value of
    syndicated programs, sales of
    prerecorded shows and movies)
    Camcorders

    Studio/Network Response
    Sue to prevent automatic ad-skipping and
    online sharing
    Recording devices that delete shows after a
    period of time
    Limit hard drives of recording devices
    Set-top boxes that make only one copy of
    cable/sat shows, and prevent copies of payper-view programs
    Suing customers of file-sharing networks

    Provision of studio online subscription


    movie services
    Watermarking master copies so
    camcorders cant work
    Pressure on wi-fi companies to go for
    streaming rather than downloading and
    transfer
    Offering movie products to the consumer
    much sooner

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