March 30, 2005

Changes In The Movie Business Model? [8:05 am]

In Face of Soaring Costs, Studios Cut Films

But studio bosses say their parent conglomerates are trying harder to rationalize spending, seeking a sweet spot: the least number of film releases that can keep enough profits pumping through their cable networks, theme parks, music and book publishers and other subsidiaries.

“The consensus is that things have gone too far,” said a top studio executive who spoke on condition of anonymity so as not to alienate his peers. A crucial complaint is marketing costs, which reached an average of $39 million a film in 2003 before falling last year to $34.4 million, according to the Motion Picture Association of America.

But studio executives also lament that release dates are cluttered by too much competition. And the studio-owned specialty divisions created to capture the market for independent movies could feel the pain first. [...]

“You’ve got to start out with a plan that says, how many films should we release a year, and work back,” the executive said. “In the ’90’s, all the international markets were still opening up, DVD and video were still growing by leaps and bounds, and the revenue profile was still growing at a very accelerating rate. Now, most of the world’s opened up, DVD is flattening - all the markets are maturing.” And video-on-demand and high-definition TV - the next big things - seem a few years away from invigorating the industry, he added.

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