Principles of Marketing
Marketing Plan
Summer 2011
Jenielle Balkowski
7/12/11
Five-Year Marketing Plan
Metro-Goldwyn Mayer Studios Inc.
1. Company Description
Metro-Goldwyn Mayer Studios Inc (aka MGM Studios), was founded by Marcus Loew, who
owned a theater chain “Loew’s Theaters.” In the year’s 1916 and 1917, Mr. Loew bought Metro
Pictures Corporation and Goldwyn Pictures in order to supply his large movie chain with an
abundance supply of films. In addition, In order to provide the company with an overseer in
Hollywood, Marcus Loew bought Louis B Mayer pictures because Mayer had experience as a
movie producer. Metro-Goldwyn- Mayer studio was the first American film company to
experiment with the Technicolor Two-color system for portions of the films The Uninvited Guest
in 1923, The Big Parade and Ben-Hur in 1925. However, the first motion picture released by
Metro-Goldwyn-Mayer Studio that was filmed entirely in Technicolor that included a
synchronized score and sound effect but no spoken dialogue was The Viking in 1928. In addition,
MGM studios released noteworthy films during the Great Depression such as Gone with the
Wind and the Wizard of Oz. As a result, MGM replaced Universal Studios as the largest studio in
Hollywood which they would maintain that title for over thirty years.
2
Executive Summary
For the past couple of years, Metro-Goldwyn-Mayer Studios entered into financial turmoil
because the studio was involved in a consortium of buyout s in 2005 from Providence Equity
Partners, TPG (aka Teas Pacific Group) Capital, Quadrangle Group, Sony and Comcast resulted
in the studio of have a debt of $2.85 billion dollars which lead to talks with other studios such as;
Lionsgate, Spyglass Entertainment, Warner Bros Time Warner and Twenty Century Fox. In
December 2010, MGM filed a Chapter Eleven Reorganization Plan with the Federal Court, the
plan included the removal of the studios current owners based upon an agreements in 2005. In
addition, the studio would be overseen by Spyglass Entertainment.
Since remerging from bankruptcy Metro-Goldwyn-Mayer and Spyglass Entertainment began
to reorganize the company by making deals with international Distribution companies such as
Forum Film for Theatrical and Blue-ray DVD releases rights of movies such as The Hobbit films
in 2012 and 2013 and the James Bond movies. In addition, the studios made an agreement with
Sony Pictures for two James Bond films and the Girl with the Dragon Tattoo.
3
Strategic Focus and Plan
This section covers three aspects of corporate strategy that influenced the marketing plan: (1)
the mission, (2) goals, and (3) core competence/sustainable competitive advantage of MetroGoldwyn-Mayer studios.
Mission
The Mission of Metro-Goldwyn-Mayer Studios is to re-market itself in the entertainment
Industry with new theatrical productions that encourage and provide patrons of all ages of
premium entertainment for their money at both the box office and DVD sales while providing
challenging career opportunities for employees and above average returns to stockholders.
Goals
For the coming five years Metro-Goldwyn-Mayer studio seeks to achieve the following
objectives:
•
Nonfinancial goals
1) To retain its former image as the producer of the highest quality of
entertainment worldwide
•
Financial goals
1) To regain profitability and come out of bankruptcy
Core Competency and Sustainable Competitive Advantage
In terms of core competency, Metro-Goldwyn-Mayer studio seeks to achieve the ability to (1)
provide distinctive, high quality entertainment for both all moviegoers and (2) engage in new
production deals with other studios regarding producing and distributing films both for theatrical
and DVD release.
To translate these core competency objectives into a sustainable competitive advantage, the
company will collaborate with key directors, producers, screen writers, actors, entertainment
lawyers and production companies to build relationships and joint-productions necessary to
provide high quality entertainment to all movie patrons worldwide.
4. Situation Analysis
The Situation Analysis on the strengths, weaknesses, opportunities and threats on the current
environment of Metro-Goldwyn-Mayer studios. One of the strengths that MGM studios has in its
arsenal is it reputation for being one of the most noteworthy and top film producers and
distributors worldwide. In addition, another strength that the studio has is its massive film
collection in its library and the rights to those movies. One of the disadvantages that MGM
studios have is the lack of monetary funds to budget movies such as James Bond. In addition,
another disadvantage is that the studio must join with other studios to fund movies and distribute
them. One of the opportunities that MGM studio has is to re-branding old films or re-releasing
them to patrons either in blue-ray/DVD or in theaters. In addition, another opportunity that
MGM has is its ability to use the new 3D film technology for movies. However, the threats the
MGM studio are the following: Box Office prices and results, competitors’ product and the
rating system. For example, at each theater chain throughout the world, each have different
movie price system that sole depends on the contract between the distributor, film booker of the
theater and the theater itself, which I’ll give more detail on in the marketing program section. In
addition, the results from the box office sales come from the prices points at the box office.
However, its important to note that one of the factors of box office results is the format of the
movie such as if the film is in the Standard 35mm film, 35mm 3D, digital standard or digital 3d
format. In addition, the second threat facing the studio is the competition product that’s currently
in, being released around the same time or future releases. The final and most important threat to
the studio is the rating system from either Motion Pictures Association of America or Europe’s
rating system because each of these ratings systems depending of the material, language,
violence and/or actions portrayed in the movie dictates the appropriate age groups that may or
may not view these films. For example, I’ve provided a chart that illustrated the rating system
provided by MPAA and the British Board of Film Classification in Figure 1.1
MPAA
Description
BBFC
Description
G
General
Audiences-all
ages permitted
U
“Universal”-all
ages permitted
PG
Parental
Guidance
Suggested- some
material may not
be suitable for
children
Parents Strongly
Cautioned- Some
material may be
inappropriate for
children under
13.
PG
Parental Guidance
is advise
12A/12
Suitable for 12
years age and
older
PG-13
R
NC-17
MA
RestrictedUnder 17 years
of age must be
accompanied by
a parent or legal
guardian that is
21 years or older
NO One 17 or
under permitted
Mature
Audiences
ONLY
15
Suitable for 15
years or older
18
Suitable for adults
only- no one under
18 years of age is
permitted
To be shown only
in specially
licensed cinemas,
or supplied only in
licensed sex shops,
and to adults of
not less than 18
years
R18
Industry Analysis: Trends in Entertainment Industry:
According to the Numbers.com, within the entertainment industry, there are over 500 production
companies worldwide that included: Walt Disney, Warner Bros, Paramount, 20th Century Fox,
Universal, DreamWorks, Fox Searchlight, Lionsgate and Sony Pictures.2 Within the past couple
of years, each of these studios have produced or released movies in the new 3D technology
available along with the standard 35mm print.
In addition, some studios are forming joint production deals with each other to budget, produce
and/or distribute there products. For example, MGM and Sony Pictures are in joint agreement to
produce two James Bond movies.3 Also, some companies have bought other companies like
Disney in December of 2009 acquired Marvel Entertainment for $4.24 billion dollars. The
agreement between these companies is that Disney with have no affect on Marvel products or
characters.4
Competitor Analysis
In the entertainment industry, According to Robert Freidman, ‘The competition has increased
dramatically, with two or three movies opening most weekends that pushes against the second
weekend movies of the pervious released movies’5 Which means that there are many as six or
more new movies in the theaters that are competing for the audience awareness and choice
selection for that weekend. For example, this month for movies is an excellent example; you
currently have Paramount studios Transformers: Dark of the Moon playing in theaters worldwide
and has grossed over 645,078,700 worldwide. This weekend you have the last film in the Harry
Potter franchise from Warner Bros and then the following weekend Paramount and Marvel will
be releasing Captain America: The First Avenger. Each of these movies along with the movies
like Monte Carlo from 20th Century Fox (grossed $17,473,763 worldwide), Larry Crown from
Universal Pictures (grossed $34,597,690 worldwide) and last weekend’s releases Sony Pictures
Zookeeper with a gross of $20,065,617 and Warner Bros Horrible Bosses with a gross of
$28,302,165 worldwide will be competing for audience attention and selection at the box office.6
Company Analysis.
The Metro-Goldwyn-Mayer has over 87 years of experienced within the entertainment industry.
The market share of MGM, in 1920s to 1940’s held a market share of 22% at the height of the
success as one of big studios along with Paramount, Fox and Universal. However, according to
numbers.com went from 6.26% in 1995 with 500,000,000 tickets sold to .48% in 2010 with
250,000,000. However, in 1995 MGM released 15 movies and only one in 2010.
Customer Analysis:
The Customer Analysis for MGM studios is that each movie has the standard goal that it will be
viewed by patrons of all ages worldwide. However, as stated in the SWOT analysis outside
factors hinder that goal because each ranking tells the parents whether it’s appropriate for their
children. However, if there is a specific director such as Steven Spielberg, actor such as Johnny
Depp or comic books or childhood memory like Transformers, people will go see the movie
regardless of the rating because the love the actor/directors work or they loved Transformers as a
child.
5. Marketing-Product Focus:
Marketing and Product Objectives:
Metro-Goldwyn-Mayer studios marketing and product objective is re-release old movies either
into theaters or by DVD with extra footage and material to showcase the golden standard of
entertainment and podcasts new upcoming movies.
Target MarketsMGM will be targeting at new and old patrons of their movies worldwide.
Points of Difference:
For MGM, the key point of difference is that the studio sole owns the rights and ownership of the
film and their materials from post April of 1986 and other companies’ libraries like Filmways
such as the film Petticoat Junction which would help the studio avoid legal and ownership right
lawsuits.
Positioning:
MGM will position itself in other studios’ and patrons’ minds as the “GOLDEN STUDIO” of
entertainment.
6. Marketing Program
Product Strategy:
The Branding for MGM for the re-release of movies or DVD from their extensive library is to
release the directors cut with includes alternative opening, ending, deleted or extended scenes
and never before-scene scenes for limited release in theaters and then the movies will be released
in the future on DVD
Price Strategy:
Before discussing the Price Strategy, I’ll summarize how the box office profit and constraints
between the agreement between the studios and theaters work.
Box office Profit
There is a big miss interpretation in the minds of patrons that the individual movie theater
collects half the profit of the movie sells, while the other half goes to the respected distributor of
that particular movie. That is 100% inaccurate because as shown in the figure below7, in the
opening weekend of a new movie the distributor get 90% of the net and gross percentage and
the theater get 10% of net and gross percentage. In addition, as the weeks of a movie release is
and/or if the theater has it for an x-amount of weeks the distributor net and gross percentage will
decrease after either three or four.
Agreement between theaters and distribution Companies
The price of a particular movie is based on the agreement between the distributor and the theater.
For example, from my own personal experience as being a manager of a local movie theater,
certain companies don’t allow a discounts prices or passes for a particular movie such as Sony
Pictures and Warner Bros. However, some studios like Sony Pictures allow discounts after a
theater has the movie for two weeks.
As a Price Strategy, MGM should allow the theaters to discount the movies so that more patrons
become attracted to seeing the movies. In addition, to attract theaters to show movies that are 1020 years old, the studio could give the individual theater a higher percentage of the net and gross
percentages.
Promotion Strategy:
The promotion strategy could be used in two ways television aid that state “for the first time
never before seen footage, etc will be released from the vault for a special two week engagement
in theaters only or on DVD”
When the movie is in theaters, MGM could have in there contract with the theaters to show only
trailers of their upcoming movies prior that way MGM can introduce new upcoming products to
a worldwide audience
Place Strategy:
Give the opportunity to independent and big chain theater companies worldwide the option to do
a two-week engagement on any prior released film.
1
Motion Pictures Association of America and British Board of Film Commission
http://www.bbfc.co.uk/classification/guidelines/advice-viewings/ and http://www.mpaa.org/ratings
2
Nash Information Systems LLC “Top Grossing Distributors 1995-2011” http://www.the-
numbers.com/market/Distributors/ (July 12, 2011
3
Nikki Finke and Mike Fleming “Toldja! MGM makes Distribution Deal with Sony Pictures”
http://www.deadline.com/2011/04/toldja-mgm-makes-distribution-deal-with-sony-pictures-that-includes-jamesbond/ (April 13,2011) retrieved July 12, 2011
4
Jay Cochran “Disney Announces Acquisition of Marvel Entertainment Inc”
http://www.enewsi.com/news.php?catid=190&itemid=15744 (August 31,2009)
5
Robert Friedman“The movie Business book” (Simon & Schuster, NY 2004)
6
Nash Information Systems LLC “Weekend Box Office results July 8,2011” http://www.the-
numbers.com/charts/thisweek.php
7
Jeff Tyson“ How Movie Distribution Works” http://entertainment.howstuffworks.com/movie-distribution2.htm
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