ancillary market rev

ancillary market rev - Recent Research on the Motion...

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1 Recent Research on the Motion Picture Industry By Steven M. Shugan University of Florida Russell Berrie Eminent Scholar Chair and Professor University of Florida Warrington College of Business Administration 212 Bryan Hall • Campus Box 117155 Gainesville, FL 32611-7153 SMS@UFL.EDU
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2 The Motion Picture Industry 1. Introduction The motion picture or film industry is a 14 billion-dollar business. American studios alone produce over 450 feature films exhibited at 25,000 theater screens (including multi- screen or multiplex theaters) in the U.S. and Canada. Revenues, however, no longer come primarily from traditional local theaters, known as theatrical releases. "Sell-through" home videos sold to the mass market, rental videos sold to video stores, broadcast television, cable television, merchandising rights, publication rights and, primarily, international receipts, now usually provide more revenue. The feature film Basic Instincts , for example, generated twice as many international box office receipts ($ 235 million) as domestic receipts ($ 117 million). 1 New films continue to break the record for top box office gross. In 1982, the motion picture E.T.-The Extra-Terrestrial held the record with $ 228 million in domestic sales. In 1993, the motion picture Jurassic Park broke that record. In only 23 weeks, Jurassic Park box office gross was $ 330 million, domestically, and $ 525 million, internationally. For both feature films, box office receipts were only a small part of the generated revenue. Both films also provided substantial revenues from licensing ancillary products including toys, video games, clothing and other merchandise including subsequent films on how the original film was made. Figure 2, for examle, illustrates some of the wide-variety of merchandise generated by the film Teenage Mutant Ninja Turtles . 1 For additional information on the industry, see Lazarus III, Paul N., The Film Producer , (New York: St. Martin Press, 1992) and Robertson, Patrick, The Guinness Book of Movie Facts and Feats , (New York: Abbeville Press Publishers, 1993), p. 31.
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3 Figure 2 Similar to other services, the largest expenses comes from distribution rather than production expenses or raw materials. The selling of motion pictures is as large a business as the production. The cost of promoting a feature film is often of the same magnitude as the production of the film itself. The film, Jurassic Park , for example, cost $ 60 million to produce. Universal studios and licensed merchandisers, in contrast, spent $ 68 million in promotional expenses. 1. Motion Pictures as a Risky Business In nearly every industry, the introduction of new products and services is replete with dangers. Many industries are very innovative and offer many new services each year. Many hospitals, for example, are not only seeking new medical devices incorporating the latest technology; they are also developing new outpatient services such as mobile mammography. The motion picture industry, however, may represent the ultimate in risky businesses.
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This note was uploaded on 10/05/2010 for the course ARTM 360 taught by Professor Wentworth during the Spring '09 term at CofC.

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ancillary market rev - Recent Research on the Motion...

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