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Which is the Savvier Industry: Music or Film?

Posted By Barry Ritholtz On December 13, 2005 @ 7:43 am In Film,Finance,Intellectual Property,Music | Comments Disabled

I have long stated my belief that the Film Industry is much savvier than the Music Recording Industry. While they may be just as ethically sleazy, as their accounting shenanigans [1] demonstrate, their business smarts just seem better.

As a Business, film seems to outmarket, outmonetize and outsmart the music recording industry on a regular basis. They are the "Survivor" [2] of the Arts & Intellectual Property industry. 

The most significant and notable difference shows up in the economics of product pricing. The film industry seems shrewder, they understand how to grab a marginal purchaser [3], they price their wares dynamically [4].

Of course, they have a different business models: their products cost much more to produce (than music) and are far less numerous in number.

Even as their theatrical distributors (movie theaters [5]) are having a rough go of it, the film industry, by most measures, is doing well [6]. Yes, DVD sales may be growing more slowly [7] — but that’s an inevitable function of full adaptation by consumers. DVD sales remain robust [8].

Growing more slowly is better than shrinking.
 

The strength in the industry was outlined in a Sunday NYT article on "Hollywood’s non-slump [9]" (somewhat reminscent of a similar Register column [10] from August). As this more recent column implies, the key difference between the Film and Music industries is their ready adaptability to new technologies:

"American moviegoers are increasingly passing up the chance to hoot and holler in the dark with hundreds of strangers if the films are not big events or smaller genre ones. The number of movies in the $100 million to $200 million box-office range has fallen dramatically the last two years. As a result, executives at the major studios are more closely scrutinizing midrange films – those with budgets from $50 million to $75 million.

In addition, domestic DVD sales have slowed from their gangbusters growth rate of a few years ago. But the slack has been taken up by the surprisingly strong performance of television DVD’s like "Seinfeld" and straight-to-DVD movies like "Lion King 1½." And most of the money made off of these DVD’s goes to the same entertainment conglomerates that own the movie studios.

To Ms. Snider and others in the film industry, the possibilities of the on-demand world – one perfectly customized to a viewer’s life – offer Hollywood the next big leap forward. Videocassette recorders did not, as feared, become the Boston Strangler of the movie studios. And while VHS may be near death’s door, the rise of the DVD has more than made up for that disappearing revenue. "There’s always been something to replace it that’s groovier," Ms. Snider said. "Portable, wireless devices are pretty irresistible."

The Times Art department has been quite busy also; Some nice graphics from the column:

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Slide1 [11]

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Slide2 [12]

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Slide3 [13]

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Slide4 [14]

 

Source:
Doing the Hollywood Math: What Slump? [9]
By LORNE MANLY
December 11, 2005
http://www.nytimes.com/2005/12/11/movies/11manl.html

The Hollywood crisis that isn’t [10]
By Andrew Orlowski in San Francisco
The Register, Tuesday 4th October 2005 20:31 GMT
http://www.theregister.co.uk/2005/10/04/hollywood_crisis_no_crisis/


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/12/which-is-the-savvier-industry-music-or-film/

URLs in this post:

[1] accounting shenanigans: http://en.wikipedia.org/wiki/Hollywood_accounting

[2] "Survivor": http://www.cbs.com/primetime/survivor11/

[3] marginal purchaser: http://bigpicture.typepad.com/comments/2005/04/file_sharing_cd.html

[4] dynamically: http://bigpicture.typepad.com/comments/2005/03/dynamic_pricing.html

[5] movie theaters: http://bigpicture.typepad.com/comments/2005/07/declining_movie.html

[6] doing well: http://bigpicture.typepad.com/comments/2005/10/revenge_of_the_.html

[7] growing more slowly: http://bigpicture.typepad.com/comments/2005/07/dvd_sales_slowi.html

[8] robust: http://bigpicture.typepad.com/comments/2005/02/dvd_sales_boom.html

[9] Hollywood’s non-slump: http://www.nytimes.com/2005/12/11/movies/11manl.html?ex=1291957200&en=9e9e4243b74a2199&ei=5090&partner=rssuserland&emc=rss

[10] Register column: http://www.theregister.co.uk/2005/10/04/hollywood_crisis_no_crisis/

[11] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/slide1.gif

[12] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/slide2.gif

[13] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/slide3.gif

[14] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/slide4.gif

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