Film Industry Market Analysis - Report Example

Film Industry market analysis

• Market Overview

Film Market definition

The film market industry consists of both producers and distributors of movies/films of different formats. This market includes different segments including the movie box office segment and the home video segment, which covers sales of DVD, Blu-Ray, and VHS at end-user prices (MarketLine Advantage, 2015).

Gobal Film Market analysis

The global film market has been fluctuating during the last few years. The total revenues of the global movies and entertainment industry exceeded $70,472.6 million in 2014 (MarketLine Advantage, 2015). In terms of geographical segmentation, the global film market is dominated by the Americas markets that accounts for 42.4% of the total global market. The second place in terms of the market share in the global market is taken by Europe, with 31.9% share. The Asia-Pacific accounts for 24.3% of the global market share and the Middle East accounts only for 0.8%.

Global Film market value forecast

It is forecasted that the global market will continue to grow with an anticipated average growth rate of 2.6% over the period 2014-2019 (MarketLine Advantage, 2015). According to the estimates, the value of the global movies and entertainment market will reach a value of $102.2 billion by 2019 (MarketLine Advantage, 2015).

Film market in the UK

The UK accounts for nearly 24% of the European film market value. The United Kingdom film and entertainment declined by 0.9% in 2014 generating the total value of $5,143.4 million. Video is the largest segment of the movies segment, accounting for 66% of the total film market value, while Box Office accounts for the rest 33% of the total market value (MarketLine Advantage, 2015). The market is forecasted to decrease in total value within the period from 2014-2019 by -0.2% (MarketLine Advantage, 2015).

2) Market trends from 2014/15

Migration to pay-TV

With the development of Internet technology, consumers’ viewing habits are continuously evolving and changing. These changes are observed at two different levels: the types of programmes/films being watched and the devices/formats used for watching the content. One of the key trends relates to increasing popularity of pay-TV subscription (Davies, 2015). According to the estimates, by the end of 2014 about 1.7 million households in the UK signed up to this type of service (Davies, 2015).

TV anytime, anywhere, anyplace

In continuation to the previously discussed trend, it is important to add that nowadays, consumers increasingly use different devices (smartphones, tablets, laptops) for watching films. TV and cinemas are no longer so popular channels for viewing films due to technological breakthrough, continuous innovation of portable devices and accessibility of on demand TV serials (Davie, 2015). Film and other TV content producers adapt to this trend and make their content available on mobile devices. Thus, for example, in 2014 Amazon introduced HD streaming and offered its subscribers to stream via Wi-Fi (McGrath, 2015).

Increasing popularity of shared film content from friends

There is observed of increasing popularity of shared “media rooms” whereas both adults and children watch films shared from their friends (Gee, 2014). Good example is media room in Moshi Monsters, which enables kids to watch shared content. This trend is emerging and offers great opportunities for growth for film makers and brands (Gee, 2014). Moreover, users are increasingly using “click and connect” service to allow users watching TV separately to connect with their friends, relatives, etc. via social media, links, tweets, social status updates and thus, to share content with each other and facilitate active discussion and review exchanges.

3) Why you chose particular market?

I have chosen a particular market of film industry for analysis as this specific industry is very attractive and interesting. The main interest is driven by the continuous innovation in the industry, which deeply integrates the most recent developments of digital technology. Film industry is a highly-profitable industry that is challenged by the emerging trends and threats.

4) Growth potential and future expectations of film industry

Potential growth for online video aggregators

With the increasing popularity of online film watching, there is a growth potential for online video aggregators such as Rabbit TV and Pluto.TV (Davies, 2015). These platforms pull in films and other digital content from many different online sources and offer one playlist for consumers to watch strait on the website or via an app (Davies, 2015). This platform might be especially popular among those consumers willing to “kill time” by watching content on their smartphones. Therefore, demand for bite-sized video formats will more likely grow in the nearest future.

Dynamic pricing in cinemas

The concept of dynamic pricing in the cinemas has been recently tested via a mobile cinema app in the US. Consumer research indicate that the number of adults regularly going to cinema are interested in dynamic pricing opportunities (Oliver, 2016).In cinema industry, demand for some films varies during the day and frequency of releases. Dynamic pricing implies that the price directly depends on the demand for the tickets, whereas the prices are high during the peak times and low during less crowded days/times. Thus, cinemas might achieve greater economies of scales due to higher visitor attendance and assets utilization. On the one hand, this innovative approach to pricing in cinema industry might help to improve capacity utilization balancing peak and quitter times during the day and week, and thus, to maximize revenues from films (Oliver, 2016). On the other hand, the film makers and cinema operators face with a risk of not meeting the constraints on the minimum revenue set by film studios (Oliver, 2016). However, the trend is emerging and increasing number of film companies are considering the opportunity to test this concept.

5) Market Risks

Increasing pressure on traditional video content providers

While development of digital video channel has offered numerous opportunities for online movie distributors and sellers, it has posed significant market risks to industry operators offering traditional channels of seeing movies in cinemas and purchasing physical Blu-ray copies and DVDs (Chao and Zhao, 2013). Thus, for example, the traditional disk rental and video tape company Blockbuster has become a bankrupt. Such key traditional movie rental giants as Hollywood, Movie Gallery are under significant pressure, while digital content providers such as Netflix, Amazon.com, and Apple benefit from increased customer inflow and profits (Chao and Zhao, 2013). This trend will continue to progress, pushing out the traditional video suppliers by streaming content providers. Cinemas also face with increasing risks of sales decline as many consumers demonstrate shift in their purchasing behavior from traditional cinemas to at-home viewership (IBISWorld Report, 2016). While the interest in watching films in cinemas is still popular entertainment activities, cinemas and film makers have to add value to the service by offering unique experience to the customers.

Illegal Online Piracy of Copyrighted Films

With the development of online video channels as alternative distribution channel in film industry, many film makers faced with a piracy risks. There exist high risks that the premiere of a specific movie might leak onto the Internet even before the scheduled movie release in cinemas (IBISWorld Report, 2016). Unfinished, false, and counterfeit copies of the movies might appear online and be watched by thousands of people for free, breaking up the film premiere. Thus, as Chao and Zhao (2013:24) explain, “piracy (leakage) that violates the intellectual property right, would make the movie industry hesitate to put movie online for streaming”. Therefore, piracy poses significant risks to intellectual property rights as reduce the industry profitability in two key ways. On the one hand, illegal online copies cause film production and distribution companies to lose money of the sales of cinema tickets. On the other hand, they diminish the sale of legal digital downloads and physical media such as Blu-ray and DVDs (IBISWorld, 2016).

6) Transaction Opportunities in Market

Reduced costs for digital content distributors

The future of the film market is inevitable associated and closely interrelated with the development of technology for film production and distribution purposes Digital distribution will continue to grow, posing more challenges to traditional distributors and market opportunities for film streaming platforms (IBISWorld, 2016). Digital distribution could help the companies to reduce the costs not only on physical film distribution but also on reproduction of master copies of films. In terms of cost transaction opportunities, digital distributors save 90% of the price of a 35-millimetre print and almost 100% of costs for distribution (IBISWorld, 2016).

Combined approach to traditional and digital channels

Some film distributors have focused on innovating in the traditional fil distribution channels. Thus, for example, the Blu-ray Disc Association declared about its completion of the Ultra HD Blu-ray that will allow delivering ultra HD content to the users of Ultra HD televisions (IBISWorld, 2016). Ultra-HD Blu-ray format enables to keep 100 gigabytes of data, which is twice greater storage capacity compared to the ordinary Blu-ray. Moreover, the resolution of films will be four time higher than the resolution of typical Blu-ray. Thus, filmmakers have a great opportunity to offer its customers film review at very high quality (IBISWorld, 2016).

Online platforms enhance advertising/promotion opportunities

With the development of Information Technology, filmmakers and distributors have numerous opportunities for developing effective and innovative advertising campaigns. By utilizing the global search system and personal information of each individual user, companies may target specific segment of customers based on their preferences in films (IBIS World, 2016). Advertising on popular social media sites, thematic forums and blogs allow the film distributors to reduce marketing budgets but increase overall efficiency due to individualised/personalised approach.

7) Investment considerations of market chosen

Market share concentration in the Film and Video distribution is relatively limited, even though the market is dominated by the six key film studios, including: Disney, Warner Bros, Universal, Twentieth Century Fox, Paramount, Columbia, ITV, and BBC (IBISWorld, 2016). The four largest players made up a joint market share of nearly 30% in 2015-2016: BBC WorldWide Limited (9,5%), Warner Brosers Entertainment UK (7.7%), Universal Studios International (7,5%), and Twentieth Century Fox Film Company (5,1%) (IBIS World, 2016). Private investors interested in investing in the film industry might consider shares of these specific players as the dominant players generating the highest revenues in the industry. However, it is important to understand also that the online channels and video streaming offer much cheaper channels for distributors posing thus profitability risks to the companies.

In terms of corporate investment opportunities in the film industry, the traditional film makers and producers should seek for the opportunities to invest into online/digital platforms development. This might be a company’s corporate investment into new project or project expansion, or it might be an acquisition of already existing company that possesses required skills, knowledge, expertise, capabilities, etc. For providing more specific recommendations related to the topic there should be carried out a detailed financial analysis of the investment opportunities, with proper analysis of potential profitability, risks and return on investment.