The Movie Exhibition Industry Case Analysis
I. Case Synopsis
Motion pictures are a key driver of the market for entertainment products, one of the largest export markets in US. Motion picture industry consists of three stages: studio production, distribution, and exhibition. The studios produce the lifeblood of the industry, the films that are its content. The biggest players at this level are the majors, big studios which integrate production and distribution, as do the slightly smaller mini-majors. The next stage is distribution. Distributors are the intermediaries between the studios and exhibitors. Distribution entails all steps following a film’s artistic completion including marketing, logistics, and administration. Distributors coordinate the manufacture and distribution of the film to exhibitors. Finally, exhibitors are movie theaters owners, controlling anywhere from a single-screen theater in a local community to a nationwide chain of multiplexes. Exhibitors are not vertically integrated with distributors and fully independent to pursue their own profit-maximizing strategies.
There are three primary sources of revenue for exhibitors: concessions, advertising, and box office receipts. Exhibitors seek to maximize their profit from selling movie tickets and concessions. Overall, the exhibitor has limited control over both revenues and profits. Attendance allows for profitable sales of concessions and advertisements, but there are significant caps on the volume of concession sales per person, and selling prices seem to have reached a maximum. Advertising remains an attractive avenue for revenues and profits, but audiences loathe it. In the late 90s, the industry began converting to digital distribution, a format that is now becoming economically viable. However, the cost for a digital release print is far lower than traditional film; but these cost savings most directly benefit the studio while, in the meantime, exhibitors pay to convert their theaters. Financing these investments was a significant
Motion pictures are a key driver of the market for entertainment products, one of the largest export markets in US. Motion picture industry consists of three stages: studio production, distribution, and exhibition. The studios produce the lifeblood of the industry, the films that are its content. The biggest players at this level are the majors, big studios which integrate production and distribution, as do the slightly smaller mini-majors. The next stage is distribution. Distributors are the intermediaries between the studios and exhibitors. Distribution entails all steps following a film’s artistic completion including marketing, logistics, and administration. Distributors coordinate the manufacture and distribution of the film to exhibitors. Finally, exhibitors are movie theaters owners, controlling anywhere from a single-screen theater in a local community to a nationwide chain of multiplexes. Exhibitors are not vertically integrated with distributors and fully independent to pursue their own profit-maximizing strategies.
There are three primary sources of revenue for exhibitors: concessions, advertising, and box office receipts. Exhibitors seek to maximize their profit from selling movie tickets and concessions. Overall, the exhibitor has limited control over both revenues and profits. Attendance allows for profitable sales of concessions and advertisements, but there are significant caps on the volume of concession sales per person, and selling prices seem to have reached a maximum. Advertising remains an attractive avenue for revenues and profits, but audiences loathe it. In the late 90s, the industry began converting to digital distribution, a format that is now becoming economically viable. However, the cost for a digital release print is far lower than traditional film; but these cost savings most directly benefit the studio while, in the meantime, exhibitors pay to convert their theaters. Financing these investments was a significant