Contents
1 Market Opportunity and Segmentation: The Diverse Role of Studios and Networks
Market Opportunity and Segmenting the Market
Defining Studios by Their Distribution Infrastructure
What Does Distribution Really Mean?
Range of Activities—Distribution Encompasses Many Markets
Relative Size of Distribution Revenue Streams
Demise of Historic Joint Ventures
Branding and Scale Needs: Online Giving Rise to a New Era of Joint Ventures?
Studios as Defined by Range of Product
Range of Labels and Relationships
Brand Creation versus Brand Extension
Windows and Film Ultimates: Life-Cycle Management of Intellectual Property Assets
Film: Primary Distribution Windows
Television: Channels Defined by Range and Quantity of Product Plus Reach and Specialization
Defining Networks by Product, Reach, and Range of Budgets
Product Portfolio Strategy: Brand Extension versus Brand Creation
Television Windows and Life-Cycle Revenues
Internet and Other Digital Access Points
Development in the Context of Distribution
Marketing Ideas (aka Pitching)
Rhythm of the Story, Walk Me Through the Story
Protecting Content: Copyright, Piracy, and Related Issues
Streaming Live TV—the Threat of Enabling Cord-Cutting
Piracy and Fighting Illegal Copying and Downloads
3 Financing Production: Studios and Networks as Venture Capitalists
Principal Methods of Financing Films
Principal Methods of Financing Online Production
Challenge Exacerbated in Selecting which Product to Produce
Classic Production–Financing–Distribution Deal
Studio Financing of Production Slate; Studio Coproductions
Third-Party Credit—Banks, Angels, and a Mix of Private Equity
Rent-a-Distributor: When a Producer Rises to Studio-Like Clout
Reduced Distribution Fees are Key to the Deal
Funding Ensures Tapping into 100 Percent of Revenue Streams
Television: How and Why Does it Differ?
Network, Cable, and Pay TV Financing
TV and Online’s Relatively Lower-Risk Profile
Case A: A Party Invests in Production in Return for an Equity Stake
Case B: A Party Invests in a Production in Return for Distribution Rights
Online’s Relatively Low Coproduction Quotient
Theatrical Release as a Loss-Leader
Basic Definitions and the Uneasy Tension between Distribution and Production
The Theatrical Release Challenge—Locomotive for Awareness While Profits Remain Downstream
Hedging Bets and Profiling Release Patterns
Consent Decrees, Block Booking, and Blind Bidding
Multiplexes and Bankruptcies of Major Chains
The Digital Divide and Digital Cinema
Distributor–Exhibitor Splits/Deals
Aggregates: Alternative to 90/10 Deals with House Nut
The Online and Digital Speed Factor
Records Are Not What They Used to Be—Dissecting Opening Weekends
Locations, Types of Runs, Length of Runs, Frenzy of Booking
Decay Curves and Drop-Offs—Managing the Release
Boom International Markets Driving Increase in International B.O.
History and Growth of the Video Business
Early Roots: Format Wars and Seminal Legal Wrangling
The Betamax Decision: Universal v. Sony
The Early Retail Environment: The Rental Video Store
The Emergence of and Transition to DVDs
Beyond an Ancillary Market: Emergence of the Made-for-Video Market
Next-Generation DVDs: Blu-Ray versus HD-DVD—Format War Redux
Maturation of the DVD Market and Growing Complexity of Retail Marketing
Peaking of the DVD Curve and Compressed Sales Cycle
Expansion of Retail Mass-Market Chains: Walmart, Best Buy, Target, etc.
E-Tailers and Next-Generation Retail
Netflix and the Growth of Subscription Rental
Netflix’s Next Big Challenge: The Cost of Content
Physical Disc Inventory Management and Impact on Pricing and Profits
Pricing, Price Reductions, and Price Protection
Release Timing and Development of Market
Video Economics and Why Video Revenues are Uniquely Profitable to Studios
Video Royalty Theory and Influence on Cash Flow
Free Television (United States)
Free Television Market Segmentation
Free Video-on-Demand and Internet Access—What Does Free TV Mean?
Metrics and Monetization Challenges
Economics and Pattern of Licensing Feature Films for TV Broadcast
Online Services Now Changing the Dynamics
Impact of Elimination of Fin/Syn Rules and Growth of Cable
Upfront Markets, Mechanics of Advertising Sales, and Ratings
Internet Intersection—Live + What?
Social Media Driving New Changes
Basis for License Fees: Calculation of Runs
Beyond Multiplexing—Apps and Pay TV On the Go
Original Programming Now the Cornerstone of Pay TV
Aggregators Positioned for the Future
Flexible Pay TV: Subscription Video-on-Demand
Deal Term Overview (Pay and Free TV)
Crowdsourcing as Mechanism to Reduce Costs
International Pay Television and Need for Scale
A New Landscape—Impact of DVRs, VOD, and Hardware
Not Very Old History—The New Millennium’s Wave of Changes in Consuming Video Content
Rationalizing the Burst of Convergence
Fear Factor I: Panic to Avoid the Fate of the Music Industry
Netflix, YouTube, Hulu, and Amazon Shift Gears
Traditional Search Engines and Everyone Else Creating Online Originals
Cord-Cutting: Over-the-Top, Apps, and Other Modes of Access
Multipurpose Boxes—Living Room Convergence and Home Network Hubs
Integrated Televisions: Internet Access Embedded within Your TV
Growth of the App Economy—Access via Tablets and Smartphones
Internet-Enabled Streaming Services: Amazon, Netflix, Hulu, and Beyond
Amazon: Digital Lockers, Remote Streaming Access, Downloads, and Bundled Subscription Streaming
Channel Streaming Apps (as Opposed to Accessing a Single Piece of Content) and Murky Legal Ground
Cloud Services and Networks Enabling Everything, Everywhere
International Leaders Leveraging Apps and Providing Content Anytime
Short-Term Renaissance for TV Programming Sales
Bypassing Everyone: Direct from the Creator
Limited Studio Attempts to Make the Download Market
Physical Retailers Offering Competitive Online Solutions
Revenue Models and Economics: Multiple Systems Coexist, Just Like the Offline World
Streaming: Fundamentals of Monetizing Internet Advertising
Differentiating between Tiers of Content: Cable Bundle Pricing Goes Online
Internet Viewing and Immediacy of Content—the YouTube Generation and the Studios Conundrum
How Online and Download Revenues Became the Focus of Hollywood Guild Negotiations and Strikes
As Risky and Lucrative as the Film Business
What Properties Can Spawn Successful Merchandising Programs?
Economics: Minimum Guarantees/Advances
Mega Deals: Star Wars and Spider-Man
Coming Full Circle: Toys Spawn Films Spawn Toys
Toys and the Internet—Growing Crossover with Avatars and Virtual Worlds
Extending the Franchise: Video Games, Books, etc.
Growth of Social Games and Importance of Data Analytics
Additional Ancillary Revenue Streams: Books, Film Clips, Music, Live Stage, etc.
PPV (Cable) and Transactional VOD Roots
Residential VOD: The Virtual Video Store
Timing, Seasonality, and Influencing External and Internal Factors
Third-Party Help: Talent and Promotional Partners’ Role in Creating Demand
Commercials (Creating) and Creative Execution
Social Networking—Sites and Microblogs
Net Sum and Rise in Historical Marketing Costs
Macro-Level Spending/Media Plan and Allocation
Press, PR, and Third-Party Promotions
Commercials and Opportunity Costs
Use of Programming Schedules/Lead-Ins
Online Marketing: Expanding the Toolset
Case Study: Marketing a Mega-Film
Pre-Release Window: Period Leading Up to Time Approximately 30 Days Pre-Release
Release Window: Approximately 30 Days Pre-Release Through First Two Weeks Post-Release
Post-Release Window: Approximately 30 Days Post-Release Through DVD and More
Profit Participation Accounting
Celebrity Lawsuits Spotlight Accounting Practices
Why So Complicated—Endemic to the Talent System?
Gross and Net Profits: How are They Defined and Calculated?
Included and Excluded Revenues
Distribution Costs and Expenses
Gross Participations, Deferments, and Advances as Cost Items
Imputed Costs: Production and Advertising Overhead, Interest
Phantom Revenues: Allocating Taxes and Other Non-Picture-Specific Items
Net Profits: An Artificial Break-Even Point and Moving Target
Impact of Categorizing Costs as Production versus Distribution Costs
Online Accounting: Simple Revenue Sharing and the Net Profits Divide
Gross is Gross and Net is Net—Sort of