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From The Hollywood Economist: Five New Ways That Movie Studios are Making Money
Edward Jay Epstein, industry expert and author of The Hollywood Economist 2.0: The Hidden Financial Reality Behind the Movies (one of the best books on the business of film) says that despite what you read, studios are making money. Here’s how:
The ways that Hollywood loses money are the meat of news reporting on Hollywood. The headlines screamed in early 2012: “Movie Attendance Falls to 16-year Low,” reflecting a secular decline at the box-office that has gone on since 1949; “Hollywood in Turmoil as DVD Sales Drop,” reporting on what had been, earlier this decade, the cash cows of the big studios; and “John Carter a Financial Disaster For Disney,” a $200 million fiasco which led the resignation of the studio chief.
What goes largely unreported is that the studios have found other ways to make money. Despite all the bad press, most of the major studios are making record profits. Even Disney, the John Carter loss not withstanding, will make more money this year than it ever has before.
Here are five ways that the big studios are now greatly enhancing their profits:
1. Licensing to new media
Since 2010, there has been an explosive growth in license fees for studio-owned recent/still-airing TV series and older series. The big studios have tens of thousands of TV episodes, movies, and animated shorts in their libraries. Warner Bros, for example, has over 30,000. Non-exclusivity is gone for the ones most in demand as their competition heats up between Amazon, Hulu, and Netflix. Each are buying exclusive rights to compete which each other. As a top Warner Bros. executive recently wrote me, “license fees that were chump change two years ago are now mind-boggling. Since studios do not pay for advertising or prints on licensed material, almost all the revenues, except for residuals, go directly to the bottom line. As a result, the surging license fees have more than compensated for the decline in DVDs.
The Hollywood Economist 2.0: Three “Massive Changes” and What the Digital Future Holds
The Hollywood Economist: The Hidden Financial Reality Behind the Movies is one of the best books on the business of film (some would say THE best). And earlier this year, author Edward Jay Epstein came out with an updated version of the 2010 original — The Hollywood Economist 2.0. Here’s his take on how the business has shifted in the eventful time between editions:
Hollywonk: What are the three biggest changes you’ve seen since you wrote the first edition of The Hollywood Economist?
Edward Jay Epstein: The three massive changes are:
1) The abandonment of the American adult audience in the major studios’ business plans.
Not only did most studios get rid of their “indie” units (eg. New line, Miramax, Paramount Vantage, Fox Atomic) but they no longer acquire them for distribution. Instead, they have concentrated their resources on movies for teens, children and the foreign audience, which mean movies long on visual effects and short on dialogue.
2) The huge expansion of broadband.
