Re-defining the Independent Film Value Chain
A paper by Peter Bloore
An industry value chain or system could be summarized as a connected series of activities, that combine to create and deliver a product (or value) to customers. These activities could include research and development, manufacturing, packaging, marketing, and distribution. Strictly speaking, a value chain represents those activities as carried out within a single company, and a value system represents those activities being carried out by a series of different businesses or freelancers, acting together to create and deliver the product. The value chain and system has already been applied by business academics and consultants in various sectors, including for example the automobile industry and food processing and retail sector (Lynch 2006, pg 203-6). It can also be applied to the film industry. In the US studio system a film is often developed, produced, distributed and exploited without leaving a single integrated company or consortium: a simple corporate value chain. This is also the case with a small number of international studio-style companies.1 However the independent feature film production and distribution sector (the prevalent model outside America) is a value system business, in that a feature film is not made and delivered to its final audience by a single company. Instead there is a chain of companies, businesses, and freelancers, all working on different elements of the production and exploitation process, and adding value in different ways along the chain. Furthermore once the film is exploited, the money handed over by the consumer (whether it be in return for a cinema ticket, DVD purchase or online download) is subject to various revenue shares or commissions as it passes back through the chain, which then complicates the revenue flow. There has recently been a rise of interest in the analytical concepts of the film value chain and value system, as a result of changes in the economies of film financing and distribution which threaten the existing business models (for example technological convergence, the decline of DVD sales and the projected rise of digital downloads). A key part of competitive business strategy involves aligning an organisation with its strategic environment (Porter 1985), so it is therefore vital for those running businesses in the film industry to fully understand the value chain they are working in. This context makes this paper both timely and relevant. Despite the recent use of the “film value chain” as a concept by writers, consultants and lecturers in the UK, there have been few attempts to accurately codify the chain and explore its complexity, especially within the independent sector. The aim of this paper is to provide a workable diagram to define the current customary independent film value chain and system, for use as a teaching aid and as a tool for further analysis of the strategic challenges and opportunities facing companies in this sector. It is not the aim of this paper to look at potential future models for the value chain.
Examples in France are Pathe, Studio Canal, UGC, and Gaumont. Other international examples include Japan’s Shochiku and Australia’s Village Roadshow.
Literature review: the origins of the value chain concept
The term “value chain” was codified in 1985 by Michael Porter, in his influential book “Competitive Advantage: Creating and Sustaining Superior Performance.”2 He subsequently summarised the value chain as “the set of activities through which a product or service is created and delivered to customers” (Porter 2001, pg 74). Within Porter’s definitions the value chain refers to the activities within a single company, as shown in the diagram below.
The company value chain is used to help analyse that company’s competitive advantage and strategy within the marketplace (in combination with Porter’s Five Forces, as defined in his earlier book...
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