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Windowing and Revenue Streams
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Following the movie money
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Box office revenues overstate success
Net box office revenues are not the major source of revenue
Pay attention to profit, not revenue
Profit is part of a larger movie enterprise
Movie studio profits are part of a larger corporate enterprise http://www.cjr.org/cover_story/gross_misunderstanding.php?page=all
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Indie Box Office Revenues
Benedetta Lucini, “Analyzing the ROI of Independently Financed Films,” Stern SoB, MBA
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Box office revenue is not the main event for the movie industry.
Trend in Revenue
Source of Revenue
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Careful! This is 6, not 0.
DVD data: http://www.edwardjayepstein.com
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Film Studio Revenues: 2004, 2008, 2009
Free TV
12%
Studio Revenue Breakdown, 2004
Pay TV
8%
Licensing
7%
PPV/Other
2%
Home Video
51%
Theatrical
20%
The share of theatrical rose from
2004 to 2008, from 20% to 25%.
This is consumer spending. Half of the revenue went to exhibitors.
2012 Studio
Revenue Sources
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Studio Revenue vs. Profits
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We need to distinguish between revenue and profit.
TV appears to be the main profit center.
But, the figures allocate the entire production cost to theatrical. This is grossly misleading http://www.edwardjayepstein.com/TVnumbers.htm
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The studios are embedded in larger conglomerate corporations.
How should studio “profits” be allocated?
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The movie is rarely a one off project.
 Multiple release windows
 A form of price discrimination
 Market segmentation
 (Can this be applied to the music business?)
 The movie as product line
 What is the source of “value” generated by a movie?
 Successful strategies
 Movie as part of a product line
 Batman: print media, movies, home video, domestic TV, foreign TV, licensing and merchandise, Broadway show
 Harry Potter: Books  movies  infinite line of products
 Fast and Furious: Videoames, toys and models, movies
 Taylor Swift: Concerts, televised specials, movie(s?), lunch boxes, awards shows, etc.
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Best Selling Movie By Year
Every one is a franchise or sequel
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Batman
Franchise
Includes Movies
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This does not include licensed merchandise.
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Fast and Furious Movie Franchise
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Movie as Franchise: Capturing All the Value
Out to the Margin
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Movie
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Licensed Merchandise
 The Mummy Returns  “Action Figure” + toys + Happy Meal + …
Product  Movie
 Pirates of the Caribbean Disney Ride
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Movie (2003)
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Movie (2006)

Movie (2007)
 Movie (2011) …
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Movie  Movie:
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“When Warner Br os. released “The Matrix,” the studio feared the movie would baffle audiences and bomb. Now it’s hard to think of projects more eagerly anticipated than parts two and three.” (TIME, 4/22/02.
Part Three bombed in 2003)
 Sequels are among the most successful: Iron Man, etc., Harry Potter
Movie and Movie and Movie …
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Fast and Furious. Is this a sequel?
James Bond, Jason Bourne
Shreck
Cartoons
Not a sequence: Defiance video game and Syfy TV series (2013)
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Movie as Advertising Platform
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Movie Release Windows
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First run theatrical:
Domestic  International
Home video:
Domestic  International
Cable:
Domestic  International
U.S. network TV
U.S. syndication TV
Foreign syndication TV
THE LORD OF THE RINGS
…Peter Jackson made three films at once and then sold them all to the same fans again and again and again. The theatrical releases, in consecutive years, turned out to be teasers for the DVD release.
(A.O.Scott, NYT Magazine,.)
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Market Segmentation?
What is the strategy?
What is the objective?
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Fame is Fleeting
 Shortened Movie Runs – Why?
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Demand driven – short lived demand
Supply effects – studio strategy
 Implications for Production
 Implications for Profits and Revenues
 Costs and Benefits for Studios and for Exhibitors
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1:4/20
Dropoff in 2 nd Week Revenues of the
Number one Movie, by Week
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Summer 1991
FX2 -30%
What about Bob? +22%
Backdraft
City Slickers
-28%
-13%
Robin Hood
Naked Gun 2.5
Terminator 2
Hot Shots!
-29%
-44%
-35%
-26%
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Summer 2001
The Mummy Returns
Shrek
Pearl Harbor
Swordfish
Lara Croft
Fast and Furious
A.I.
Cats and Dogs
Legally Blonde
Jurassic Park III
Planet of the Apes
-50% even
-50%
-30%
-59%
-50%
-52%
-45%
-46%
-56%
-60%
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Summer 2006
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Source: www.boxofficemojo.com
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October, 2009
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The initial run can be misleading
LOS ANGELES
— In early April, as Lionsgate prepared to release “Kick-Ass,” the movie capital buzzed that the film looked to be a smash hit.
Lionsgate had acquired it for just $15 million, and surveys that track audience interest projected a
$30 million opening weekend. The movie, directed by Matthew Vaughn, instead opened with
$19.8 million, and the chatter, fueled by the blogosphere, abruptly turned negative. Misfire!
Bomb! Flop!
As it turns out, “Kick-Ass” is living up to its title. The picture, about a teenager who tries to become a superhero, went on to generate about
$97 million in ticket sales and is on track to sell over two million copies on DVD and digital download services. Still to come: lucrative sales to
TV channels around the world.
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Benedetta Lucini, “Analyzing the ROI of Independently Financed Films,” Stern SoB, MBA.
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Book Release Windows
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Shorter Release Windows
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Video on Demand
 Useful Distinctions
 YouTube
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Television - Hulu
Cable Operators’ Movie Distribution
 Pricing
 Advertising model – in stream
 Subscription model
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Mobile Video… (Important change.
Blurs the distinction)
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Changed Market – 40% Decline in Home
Entertainment Revenue
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Connecting Consumers: Cinematch
Personalized movie recommendor provides Netflix visitors with highly accurate film recommendations based on their individual movie taste history.
http://www.nytimes.com/2008/11/23/magazine/23Netflix-t.html?hp=&pagewanted=all (11/23/08)
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1:H - 32(34) www.netflixprize.com
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Big Data in Music
How can companies use these data?
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Movie distributors and book publishers time releases into different windows to exploit different market segments.
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