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Economic Analysis for the Motion Picture Industry - Term Paper Example
This very brief report presented a discussion about the economics of the motion picture industry to conclude that box-office revenues for motion pictures exhibit a Levy stable process that is asymptotically Pareto-distributed with infinite variance…
Thus, content is still king and that which appeals to the audience will earn more in an economy with higher levels of affluence and more leisure time. Fixed costs for a movie production house accrue from a need to maintain staff, equipment and stage as well as props in readiness for the shooting and production of a movie. A single movie cannot sustain a production house forever and this means that a successful movie production house is constantly investigating movie concepts, financing, shooting, editing and making deals for marketing and distribution. Variable costs accrue when the shooting of a new movie commences, requiring new stars, talent, equipment or on location shooting. However, after establishing a motion picture production house, the total cost curve and the marginal cost curve for motion picture production will present an L-shaped curve because acquisition of most of the equipment for making movies and stage as well as props etc. is complete at the time of production of the first movie.
Products presented by the motion picture industry represent high levels of artistic innovation that revolve around the product rather than the firm that produces the movie (Vogel, 2007, Pp. 65 – 66). However, although many people think that making movies is fun and highly lucrative, nothing could be further from the truth. Product and demand uncertainty are a part of the movie making business and on the average, out of every ten movies produced, six or seven present unprofitable returns. ...