2. HOW HOLLYWOOD WORKS

3. Dominant companies have been around since 1930s  1990s saw major consolidations (Time and Warner, Disney & Capital Cities/ABC, Viacom/Paramount)

4. Oligopoly Market is dominated by small number of sellers Markets are characterized by interactivity Decisions of one firm influences - and are influenced by - the others

5. The Big Six 1. Warner Bros (AOL Time Warner) 2. Disney 3. Twentieth Century Fox (News Corp) 4. Colombia (Sony) 5. Paramount (Viacom) 6. Universal Studio (GE)

6. Release “windows” 1. Theaters 2. Video & DVD 3. Pay-per-view 4. Pay cable 5. Broadcast & basic cable

7. Box office & back end sales Box Office: $10 billion DVD/video sales, rentals: $23.8 b (5-6 months after release) Cable, pay-per-view: $2.2 b (7-8 months after release) Premium cable: $10.4 billion (a year after release)

8. Causes of Hollywood Oligopoly New contenders rarely survive, as they lack the advantages of the giants Cross-subsidization opportunities Privileged dealing with other units of the conglomerate Horizontal and, esp. vertical integration

9. Horizontal Integration Wide spectrum, including theme parks, music, print, etc.

10. Vertical Integration Controlling markets downstream Theater chains Cable TV TV stations TV networks Home video outlets

11. Theater release provides instantaneous national/international marketing outlets boosted by huge TV advertising Price discrimination (one pays less down the line of outlets) Importance of box office revenue falling (now down to 20%) due to home video, pay cable and other revenue sources.

12. Global Hollywood Strong international trade, protected by MPAA 18th most powerful Washington lobby Hollywood product dominates many foreign film markets Regular production of films encourages foreign buyers to deal with the majors International box office revenue increasing

13. “In bed” with the competition Market control is critical Studios often collude Keeps market closed Concern not with losing money, but with maximizing profits

14. Feature film production Average movie costs $60 million to produce $20 million to market

15. Feature film “cycle” Production Locations often subsidized Distribution Basis of Hollywood’s power Presentation Key is strong opening But most money made in aftermarket

16. Hollywood “Business Model” USA an Ideal Market Highly-populated “melting-pot” wealthy strong media systems many cinema screens (now 37,000) easily cover costs on national market sell aggressively overseas

17. Distribution/Exhibition Strategies “First weekend” fast, blanket release Selective openness to small-budget and international films Openness to “independent” producers and distributors (often have close ties to studios). International sales increasingly important (nearly 50% of rev) enhanced by co-productions, and increasing television outlets

18. Threats to Hollywood’s income Personal video recorders (skip commercials, subvert prime time, copy DVDs) DVD burners and recorders (no need to rent) Digital television (may intensify piracy) File-sharing services (undermine value of syndicated programs, sales of prerecorded shows and movies) Camcorders

19. Studio/Network Response Sue to prevent automatic ad-skipping and online sharing Recording devices that delete shows after a period of time Limit hard drives of recording devices Set-top boxes that make only one copy of cable/sat shows, and prevent copies of pay-per-view programs Suing customers of file-sharing networks

20. Provision of studio online subscription movie services “Watermarking” master copies so camcorders can’t work Pressure on wi-fi companies to go for streaming rather than downloading and transfer Offering movie products to the consumer much sooner