Decision Management in the Motion Picture Industry

Topics: Film, Decision making, Net present value Pages: 9 (3195 words) Published: April 16, 2013
Decision Management in the Motion Picture Industry
By: Jasmine Gordon, Pablo Campos, Jose Silva and Daniel Villareal MGMT-4363-90L-SummerII 2012

The motion picture industry provides a productive research field for people in marketing and other disciplines. The industry has a high economic importance and is appealing because it offers both rich data that cover the entire product lifecycle for a big number of new products and because it provides many unsolved puzzles. Even though the amount of research in this area is rapidly growing, its impact on practice has not been as major as in other industries.

In this paper, we discuss critical, realistic issues for the motion picture industry, review existing knowledge on those issues, and outline research directions. Our review is organized around the three key stages in the value chain for motion pictures: production, distribution, and exhibition. We discuss various issues, framed as research challenges or specific research hypotheses, related to each stage in the value chain, followed by a set of specific research avenues for each of those stages.

We focus on what we believe are serious managerial issues. Different types of entities and individuals participate in each stage of the value chain. The competitive landscape includes vertically incorporated major studios, independent production companies, independent distributors, major national exhibition chains as well as smaller regional exhibitors and art houses. Studios are often concurrently engaged in four distinct functions: financing, producing, distributing, and advertising. Here, we believe the first two functions together under the heading Production. It can be defined as the activities needed to produce one copy of the movie.

The other two functions are under the heading Distribution. These functions include all of the distributor’s interactions with its two main groups of customer, exhibitors and audiences. Exhibition refers to activities performed by theater chains and individual theater sites. We know that the motion picture industry encompasses a number of following profit windows including domestic theatrical, foreign theatrical, home video, pay television, network television, video games and merchandising. Although a full review of non-theatrical windows is beyond us, we look into these areas as far as they are relevant to the behavior of players involved in the theatrical arena. An understanding of audience behavior is primary to shedding more light on the challenges faced by producers, distributors, and exhibitors. For instance, it plays a critical role in forecasting movies, financial performance and assessing the contact of new technologies.

The literature has been divided into two research traditions: the 'psychological approach' and the 'economic approach'. The psychological approach focuses on individual decisions to first attend movies from among the many entertainment options and second, to choose particular movies. People adopting this approach look to relate such variables such as opinions, needs, values, attitudes and personality traits to consumers' decision-making processes.

Such studies generally use data collected by surveying individual consumers. Studies within the economic approach explore factors that influence collective movie attendance decisions. The economic approach looks to explore the influence of the financial performance of motion pictures. These studies typically use aggregate data on movie-going behavior collected by the industry. Technological advances emerge as an important driver of the research avenues that we propose. Technology has always played a big role in the evolution of the motion picture industry, but today, more than in the past, technological developments seem to be essential to all stages of the value chain.

We all know that the movie industry accounts for a large part of our nation’s economy as well as part of the world’s economy as well...
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