Chapter 9: Hollywood International This multimedia product and its contents are protected under copyright law. The following are prohibited by law: any public performance or display, including transmission of any image over a network; preparation of any derivative work, including the extraction, in whole or in part, of any images; any rental, lease, or lending of the program. Copyright © Allyn and Bacon 2007

The Hollywood Majors ä Columbia—Tri-Star ä Disney ä Paramount ä 20 th Century Fox ä Warner Bros. ä Universal Copyright © Allyn and Bacon 2007

The Falling Box Office ä Overseas market increasingly important ä Box office revenue in the U.S. falls off almost immediately ä Ex. Star Wars Episode III: The Revenge of the Sith ä Box office revenue has been sagging for years ä revenues remained flat at 9.5 billion ä Halfway through 2005: overall decline in earnings that was the most sustained since 1982 ä Box office must compete with video games online gaming, and home viewing Copyright © Allyn and Bacon 2007

Factoring Costs ä Gross vs. rental ä Negative cost – all costs incurred by a film production ä Salaries for talent ä Pay for technical crew, costs of set design, etc. ä Lab costs ä Publicity and promotion ä ‘Points’ ä Percentage of box office gross taken by top directors, stars, investors. ä Percentage of DVD revenue taken by top directors, stars, investors. Copyright © Allyn and Bacon 2007

Factoring Costs ä Returns due profit participants ä Distribution fee ä Split with exhibitors ä By late 1990s, average neg cost was $60 million ä Average production cost in 2004 was $64 million ä Average cost for advertising in 2004 was $34 million Copyright © Allyn and Bacon 2007

Ancillary Markets ä Home video ä DVD, VHS ä Pay cable, pay-per-view ä Broadcast television ä Product licensing ä Product tie-ins Copyright © Allyn and Bacon 2007

Diversification: Time Warner ä Creates Media programming and controls distribution ä Keeps in-house all revenues from products ä Media operations in five core areas ä Entertainment ä Film and television production ä Broadcasting ä Records ä Music publishing ä Cable Network Programming ä Cable Television Systems ä AOL ä Publishing ä Books ä Magazines ä Direct marketing Copyright © Allyn and Bacon 2007

Product Tie-Ins ä Studios license hit films/characters for promotional campaigns related to a film ä WHO FRAMED ROGER RABBIT: ä $12 million in ads by McDonald’s ä $10 million in ads by Coca-Cola ä These ads featured the animated characters from the movie ä Tie-ins help defray a studio’s marketing costs ä Product licensing revenue in 2001: $70 Billion Copyright © Allyn and Bacon 2007

Center for the Study of Commercialism, 1990 study ä TOTAL RECALL: 55 references to 28 brand name products ä GHOST: 23 references to 16 brand name products ä PRETTY WOMAN: 20 references to 18 brand name products Copyright © Allyn and Bacon 2007

Product Placement Studios derive revenue from on-screen placements Placement agencies (e.g., Associated Film Promotions) negotiate deals for clients with studios Result: Film is an advertising medium Copyright © Allyn and Bacon 2007

THE INDUSTRY TODAY ä The Major Studios are Subsidiaries of Large Communications Empires ä Film Production Feeds the Ancillary Markets ä Synergy: All Revenue Streams In-House ä BUT production costs are high and profit margins are low ä Film Becomes Software for Interactive and Home Entertainment Systems Copyright © Allyn and Bacon 2007

International Influence of Hollywood ä Adoption of Hollywood style by foreign filmmakers ä Emigration of foreign filmmakers to the American industry ä Remakes of foreign films ä The Vanishing (1988, 1993) Copyright © Allyn and Bacon 2007