How the Internet Changes Hollywood
Shifts in Film and Media Distribution Threaten Studios
Breaking down the dollars in Hollywood from box office to cable and pay-per -view, video to TV, the margins are shrinking and the rules of film production in flux.
Harvard Business School’s 2008 Entertainment & Media Conference emphasized the volume of "moving parts" that up-and-coming media producers will have to deal with in the not so distant future. The Internet has changed all the rules, but will it benefit or hurt the next generation of media moguls?
Executives and leaders in the film industry must rethink media distribution in order to find profitable financial models. Hollywood is a town built on inertia and the recent writers strike and the potential upcoming actor’s strike has given everyone cause to reimagine the business.
Film Distribution vs Box Office
What should young media producers do to survive in this tumultuous ever-changing new world? The potential to distribute media products via the Internet begs young and aspiring producers to seize the reigns and innovate.
Hollywood studios used to generate revenues at the boxoffice, but this is rapidly changing:
- average number of movies viewed in a theater per person per year 5.5
- 2006 gross revenue for the film industry $46.2 Billion
- percentage of revenue from theater distribution 19%
- percentage of revenue from basic/pay cable and pay-per-view/on-demand 26%
- percentage of revenue from television rights 36%
- percentage of revenue from video rights 45%
Distribution in the US via DVD and on-demand is the new growth sector, but theatrical exhibition still has a huge impact on how these and other rights perform. The biggest growth in theatrical distribution is overseas where they are still building screens. However, revenues from theatrical distribution in the US are shrinking dramatically as less and less people use cinemas as their primary source of entertainment.
For an insider's take on Hollywood and industry tips for up-and-coming producers in the making, check out his series of articles on The New Breed of Film Producers, and why the Internet is Replacing TV for Film Ads.
