Post on 17-Dec-2015
MOVIE INDUSTRYCAST
Justin Balcom
ZiHan Weng
Isara Patumanon
Hillary Pham
TABLE OF CONTENTS
Industry StructureBackgroundCompetitionOrganization
• Pricing StrategiesMovie TheatersDVDs, Blu-rayRentals/Television/VoD
Analysis/Recommendations
INDUSTRY STRUCTUREBACKGROUND
Definition: This industry produces and distributes motion pictures. It excludes third-party distributers and disc manufacturers as well as products aimed specifically towards television. (IbisWorld.com)
Brief History First full-length feature: The Story of the Kelly Gang, 1906,
Australia By 1910, movies were being produced outside of Australia. Movie Industry in the U.S.
Nectar Studios, Hollywood, CA, was the first production company in the U.S. (1911)
Movies were silent B&W until the late 1920’s. Sound was introduced.
1950’s – present: Cameras were now capable of shooting in color The quality of cinema is constantly evolving from new technology.
Camera Quality: 16mm 35mm Digital HD 3D Currently cheaper to invest in Digital/HD
INDUSTRY STRUCTUREBACKGROUND
Revenue: $29.7 Billion Profit: $1.5 Billion Annual Growth ‘05-’10: -0.8% Expected Annual Growth ’10-’15: 1.1% Exports: $4.3 Billion Businesses: 6,507
Key Statistics:
INDUSTRY STRUCTUREBACKGROUND
Revenue ($m) IVA ($m)
Establishments
Enterprises
Employment
Exports ($m)
Imports ($m)
Wages ($m)
Domestic Demand ($m)
Rental + Sell
Through Spending on Home Entertainment ($ billion)
2001 31,310.40 10,687.40 5,422 5,233 49,585 4,320.90 515.8 4,095.80 27,505.30 16.92002 31,860.30 10,560.60 5,600 5,406 43,836 4,046.30 486.5 3,940.00 28,300.50 192003 30,804.10 11,184.00 5,760 5,587 47,605 4,097.00 527.7 4,470.80 27,234.80 20.72004 31,576.80 11,899.70 6,014 5,837 62,544 4,705.00 553.9 4,652.10 27,425.70 21.82005 30,859.30 13,318.70 6,483 6,300 68,697 4,474.70 605.5 5,156.50 26,990.10 21.72006 30,674.30 14,386.40 6,525 6,349 74,250 4,693.20 569.4 5,340.40 26,550.50 21.62007 31,445.20 14,531.70 6,780 6,356 74,763 4,307.90 566 5,394.90 27,703.30 21.42008 31,546.70 15,947.30 6,991 6,739 79,402 4,138.90 625.4 5,759.10 28,033.20 212009 27,827.60 12,641.50 5,855 5,521 67,246 4,082.40 520.7 4,787.40 24,265.90 202010 29,726.80 14,513.60 6,507 6,009 73,990 4,250.90 592.1 5,425.60 26,068.00 22.72011 30,826.70 15,122.10 6,446 6,378 72,567 4,685.70 598.7 5,640.50 26,739.70 25.72012 30,641.70 15,218.00 6,433 6,259 73,141 4,228.50 622.8 5,780.70 27,036.00 22.32013 28,671.50 14,869.50 6,621 6,507 73,777 4,157.40 575 5,680.40 25,089.10 19.32014 30,641.70 15,917.00 6,949 6,567 77,077 4,259.20 634.2 6,087.80 27,016.70 21.92015 31,465.50 15,324.30 6,819 6,769 75,233 4,625.40 583.1 5,754.20 27,423.20 18.9
(Ibisworld.com)Industry Data
INDUSTRY STRUCTURECOMPETITION Concentration of industry – HHI = 1053.11
Viacom Inc. 12.1%
Paramount Pictures
DreamworksNickelodeonMTV Films
Sony Corp 12.4%
Sony Pictures Ent.
Columbia TristarScreen GemsImageworks
News Corp 13.7%
Fox Filmed Ent.Blue Sky
Time Warner Inc. 13.8%
Warner Bros.Warner Home VideoNew Line Cinema
Imprint Entertainment
Castle Rock Entertainment
NBC Universal 15.7%
Universal PicturesFocus
Features
Walt Disney 20.7%
Walt Disney Pictures
Touchstone Pictures
PixarMiramaxLifetimeMarvel
Hollywood Pictures
Other Players 11.6%Lions Gate Ent.
CentropolicWeinstein Company
INDUSTRY STRUCTURECOMPETITION
Top-Grossing Distributors 1995 to 2011 (thenumbers.com)
Distributer Movies Total GrossAverage
GrossMarket Share
1Warner Bros. 491 $25,912,522,239 $52,774,994 14.33%
2Walt Disney Pictures 432 $25,824,648,209 $59,779,278 14.28%
3Sony Pictures 508 $23,589,240,769 $46,435,513 13.05%
4Paramount Pictures 329 $21,163,365,975 $64,326,340 11.70%
520th Century Fox 343 $20,182,249,012 $58,840,376 11.16%
6Universal 321 $18,680,450,048 $58,194,548 10.33%
7New Line 203 $8,786,568,118 $43,283,587 4.86%
8Dreamworks SKG 77 $5,988,394,230 $77,771,354 3.31%
9Miramax 377 $5,621,533,555 $14,911,230 3.11%
10MGM 228 $5,059,084,987 $22,188,969 2.80%
INDUSTRY STRUCTURECOMPETITION
Key Success FactorsEffective cost controlsAccess to multi-skilled and flexible
workforceAbility to manage external (outsourcing)
contractsAbility to quickly adopt new technology
INDUSTRY STRUCTURECOMPETITION BARRIERS TO ENTRY
Major Studios: High Capital Knowledge Regulations Technology Reliability
Independent Studios: Low Technology (Monsters) Industry Assistance
Other independent film-makers Government supports the industry by covering some
costs to encourage the growth of small production companies.
INDUSTRY STRUCTURECOMPETITION Product Differentiation
Market Segmentation of Genres Top-Grossing Genres 1995 to 2011
Genre
(Markets)Movies Total Gross Average Gross
Market Share
1 Comedy 1,660 $43,538,067,918 $26,227,752 24.11%
2 Adventure 472 $35,095,187,467 $74,354,211 19.44%
3 Drama 2,906 $32,404,483,892 $11,150,889 17.95%
4 Action 521 $30,561,510,432 $58,659,329 16.93%
5 Thriller/Suspense
504 $13,659,510,110 $27,102,203 7.57%
6 Romantic Comedy
374 $10,705,447,670 $28,624,192 5.93%
7 Horror 302 $8,713,962,144 $28,854,179 4.83%
8 Documentary 932 $1,979,342,216 $2,123,758 1.10%
9 Musical 108 $1,701,736,306 $15,756,818 0.94%
10 Black Comedy 76 $745,408,050 $9,808,001 0.41%
(thenumbers.com)
INDUSTRY STRUCTURECOMPETITION
Survey Results• Production Differentiation of Genres
Action 14 38%Drama 18 22%Comedy 12 32%Horror 1 3%Others 2 5%Total 37
38%
22%
32%
3%5%
Action DramaComedy HorrorOthers
INDUSTRY STRUCTURECOMPETITION
Regulation and PoliciesLevel of regulation is relatively medium and
increasingMany people employed in the business are in
unions SAG, DGA, WGA
Copyright laws Insurance – Production companyMPAA
INDUSTRY STRUCTURECOMPETITION
Regulation: MPAA (World War Z) Top-Grossing MPAA Ratings 1995 to 2011 (thenumbers.com)
MPAA Rating
Movies Total GrossAverage
GrossMarket Share
1 PG-13 1,891 $80,647,232,294 $42,647,928 44.69%
2 R 3,374 $52,436,097,111 $15,541,226 29.05%
3 PG 918 $35,045,071,236 $38,175,459 19.42%
4 G 256 $10,020,528,179 $39,142,688 5.55%
5 Not Rated 2,278 $1,758,396,566 $771,904 0.97%
6 NC-17 19 $68,935,806 $3,628,200 0.04%
7 Open 5 $7,678,311 $1,535,662 0.00%
INDUSTRY STRUCTURECOMPETITION
0 1,000 2,000 3,000 4,000$0
$10,000,000,000
$20,000,000,000
$30,000,000,000
$40,000,000,000
$50,000,000,000
$60,000,000,000
$70,000,000,000
$80,000,000,000
$90,000,000,000
PG-13
R
PG
GNot RatedNC-17
Total Gross
Total Gross
Movies
INDUSTRY STRUCTURECOMPETITION
Seasonality
# Answer Response %
1 Winter 14 38%
2 Spring 6 16%
3 Summer 30 81%
4 Fall 10 27%
INDUSTRY STRUCTUREORGANIZATION
How does a movie get made?
Pre-production
Production Post-production
Methods of Consumptio
nConsumer
INDUSTRY STRUCTUREORGANIZATION What happens after production?
Movie Theaters
DVD
Rental
Retailers
Purchase
ToD/Television
Pay Cable Networks
Basic Cable Networks
Regular Cable Networks
INDUSTRY STRUCTURE
Movie Theater Industry
MAJOR PLAYERS IN THE U.S. MOVIE THEATER INDUSTRY
Regal Entertainment Group-Brand Names: Regal Cinemas, United Artists, Edwards Theaters, Regal CineMedia, Hoyts Cinemas
AMC Entertainment Inc.-Brand Names: Loews, General Cinema, Kerasotes
Carmike Cinemas Inc.
HHI Regal Entertainment Group-Market Share: 23.5% AMC Entertainment Inc.-Market Share: 20.0% Carmike Cinemas Inc.-Market Share: 4.1%
MEASURE OF CONCENTRATION
Firm Rank Market Share (%) Squared Market Share
1. Regal Entertainment Group
23.5 552.25
2. AMC Entertainment Inc.
20.0 400
3. Carmike Cinemas Inc.
4.3 18.49
Concentration Index CR3 H=970.74
Median concentrationSource: www.ibisworld.com
REVENUES OF REGAL ENTERTAINMENT GROUP V.S. AMC ENTERTAINMENT INC.
Year
Regal Entertainment Group Revenue ($ million)
AMC Entertainment Inc. Revenue ($ million)
2006 2,598 1,5972007 2,661 2,2112008 2,771 2,2402009 2,893 2,1752010 2,919 2,3212011 2,969 2,533
Source: ibisworld.com
REVENUES OF REGAL ENTERTAINMENT GROUP V.S. AMC ENTERTAINMENT INC.
2005 2006 2007 2008 2009 2010 2011 20120
500
1,000
1,500
2,000
2,500
3,000
3,500
Regal Entertainment Group Revenue ($ million)AMC Entertainment Inc. Revenue ($ million)
Source: ibisworld.comYear
PriceIn million
PRICING STRATEGIES
Uniform Pricing: The majority of moviegoers pay one price for all movie tickets, regardless of the popularity of the movie, the day of the week, and the time of the year (Since 1970s)
Two puzzling dimensions of the uniform pricing strategy
1) The movie puzzle: every moviegoer pays for the same price, no matter what time the movie shows, how long the movie is, and how popular the movie is.
2) The show time puzzle: lack of price differentiation between weekdays and weekends or seasons or holidays.
WHY UNIFORM PRICING?
Prevent unfairness
Moviegoers would perceive the price as a quality signal which could cause demand unstable
Demand uncertainty: Producers may be unable to predict the demand for specific movies
Variable pricing and menu costs are complicated
PRICE VARIATION
Price variation across theaters: admission prices in certain cities are three time higher than in other cities
The range of a movie ticket price is between $6.5-$13.5 (estimate)
Price variation exists across theaters within the same geographic area, according to their location, design, physical conditions, and other factors
MOVIE TICKET PRICE OF MOST AFFORDABLE U.S. CITIESMost Affordable U.S. Cities Adult/low Child/low Senior/lowNew London, Conn $10.00 $7.50 $7.00Baltimore, OH $9.00 $7.00 $6.50Huntsville, Ala. $6.00 $6.00 $6.00Tulsa, Okla $8.50 $6.00 $7.50Rock Island, Ill. $7.50 $7.00 $7.00Troy, N.Y. $10.00 $7.00 $7.00Corpus Christi, Texas $7.50 $6.00 $6.00Schenectedy, N.Y. $10.75 $7.50 $7.50Las Vegas, Nev $10.00 $6.75 $6.75
Source: www.movie.com
MOVIE TICKET PRICE OF MOST EXPENSIVE U.S. CITIESMost Expensive U.S. Cities Adult/high Child/high Senior/highNew York City $13 $9.5 $9.5San Francisco $10.75 $8.00 $8.25Stamford, conn. $11.00 $8.00 $6.00San Jose $10.25 $7.50 $7.50San Diego $11.50 $8.00 $8.00Santa Barbara $10.50 $8.00 $8.00Bakersfield, Calif. $8.50 $7.00 $7.00Fresno, Calif. $11.00 $7.50 $7.50Los Angeles $12.50 $9.25 $9.25Boston $11.50 $8.55 $6.00
Source: www.movie.com
1 2 3 4 5 6 7 8 90
2
4
6
8
10
12
14
Adult
Adult/lowAdult/high
1 2 3 4 5 6 7 8 90123456789
10
Child
Child/lowChild/high
1 2 3 4 5 6 7 8 90123456789
10
Senior
Senior/lowSenior/high
Movie Ticket Price between different cities
Price variation exists across
theaters within the same
geographic area, according
to their location,
design, physical conditions, and other factors
Source: www.movie.com
Cities
Cities
Year
Cities
Price
Price
THIRD- DEGREE PRICE DISCRIMINATION
Based on Time Day & Night Matinee Rate Weekday Weekend Monday : Featured Candy $2 Tuesday: Small Popcorn $2 or $3 per ticket (in
some areas)
THIRD- DEGREE PRICE DISCRIMINATION
Based on income and time (Typical movies) Evening: After 6 P.M.
Day Evening
Adult $8.00 $10.50
Child $7.50 $7.50
Senior $7.00 $7.00
Student $8.00 $9.00
Veteran $7.50 $7.50
Source: Ithaca Regal Cinema
Adult Child Senior Student Veteran$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
DayEvening
THIRD- DEGREE PRICE DISCRIMINATION
Based on Quality : 3D movies
Day Evening
Adult $12.00 $14.50
Child $11.50 $11.50
Senior $11.00 $11.00
Student $12.00 $13.00
veteran $11.50 $11.50
Source: Ithaca Regal Cinema
WEEKDAY PASSES
Less common Offer moviegoers packages of several tickets
that they can use on weekdays but not during the first week in which a movie plays
Target specific audiences with peculiar characteristics and sensitivities
CREATE CUSTOMER LOYALTY
Membership card Reward Card Gift card For example: Regal Crown Club 1. Earn 1 credit for every dollar spent on
movie admissions. Maximum of 20 box office credits per card, per day.
REGAL CROWN CLUB
Earn 4 credits for any concession purchase or 8 credit for promotional purchases
50 Credits 1 Free Small Popcorn
100 Credits 1 Free Small Soft Drink
150 Credits 1 Free Movie Ticket
Source: Ithaca Regal Cinema
MOVIE THEATER TICKET COMMISSION
Most of the money that a theater takes in from ticket sales goes back to the movie studio
In the first couple of weeks the film shows in the theater, the theater itself only gets to keep about 20%-25% of the ticket sales
Say if you buy a movie ticket for $12, the movie theater keeps between $2.4 and $3.00
The movie theater keeps from 45%-55% into the second and third weeks of release
After the fourth week, the movie theater could keep more than 80% or better of the ticket sales
AVERAGE U.S. TICKET PRICES
Source: NATO
Source: NATO (The National Association of Theatre Owners)
GRAPH: AVERAGE U.S. TICKET PRICES
1940 1950 1960 1970 1980 1990 2000 2010 2020 $-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
Average U.S. Ticket Prices
Adjusted Inflation(2007Base)
Year
Price$
Source: NATO
AVERAGE OF A MOVIE TICKET PRICE
On average, movie tickets have increased more slowly than the rate of inflation.
The average ticket price in 1971 was $ 1.22
That same ticket would cost $7.84 in 2007 dollars
In 2009, the average ticket price was $7.50.
MOVIE THEATER INDUSTRY REVENUE
Profitability is forecast to rise, but it will depend on the industry attaining high growth in attendance, ticket prices and high margin concession sales.
CONCESSION
CONCESSION
Small Median Large
Soda $4.75 $5.25 $5.75
Popcorn $5.25 $7.00 $8.00
Combo
#1 A Median Soda & A Median Popcorn
$12.25
#2 Two Large Sodas & A Large Popcorn
$18.5
Source: Ithaca Regal CinemaA movie ticket price = Price of
Concession
SURVEY
# Answer
Response %
1 Every time 4 11%
2 Occasionally 18 49%
3Never (Please skip the next question)
15 41%
Total 37100%
How often do you buy food (e.g. popcorn) and beverage when you go to a movie theater?
IF YOU BUY, DO YOU BUY FOOD AND BEVERAGE IN BUNDLE OR SEPERATELY?
# Answer Response %
1 Bundle
624%
2 Separately
832%
3Depends on circumstances
11
44%
Total 25100%
ARE YOU WILLING TO PAY MORE FOR BETTER QUALITY SEATS (E.G. LUXURIOUS SEATS) AND SERVICES IN MOVIE THEATERS?
# Answer
Response %
1 Yes
0 0%
2 No
2773%
3 Maybe
1027%
Total 37100%
PRICING STRATEGIESFor Physical Formats
WHO IS INVOLVED?
Movie Distributors
Retails
Rental Stores(Both physical and online)
MOVIE DISTRIBUTORS
FORMATTING
The average cost of Blu-ray players were
TODAY$500 $1332006
Source: Mintel Group
REVENUE FROM BLU-RAY PLAYERS
TODAY2006$65M $1.6B
Revenue from DVD players
$2.2B $1.2B
Source: Mintel Group
DO DISTRIBUTORS AND RETAILERS SET PRICE BASED ON MOVIE BUDGET OR POPULARITY?
Movie Name
Bestbuy Amazon Average
Netflix ratingBudget in
millionOriginal
priceCurrent
PriceOriginal
priceCurrent
PriceOriginal
priceCurrent
Price
Cloudy with a achance of meatballs 3.8 $ 100.00
$ 19.94
$ 14.99
$ 19.94
$ 11.49
$ 19.94
$ 13.24
The final destination 3 $ 40.00
$ 14.98
$ 9.99
$ 14.98
$ 9.99
$ 14.98
$ 9.99
The hurt locker 3.9 $ 15.00
$ 26.99
$ 9.99
$ 26.99
$ 19.49
$ 26.99
$ 14.74
The invention of lying 3.1 $ 18.50
$ 12.98
$ 9.99
$ 12.98
$ 8.49
$ 12.98
$ 9.24
Surrogates 3.4 $ 80.00
$ 14.99
$ 9.99
$ 14.99
$ 12.49
$ 14.99
$ 11.24
Saw 6 3.5 $ 11.00
$ 14.98
$ 14.99
$ 14.98
$ 13.49
$ 14.98
$ 14.24
Zombieland 4.1 $ 23.60
$ 19.94
$ 14.99
$ 19.94
$ 13.49
$ 19.94
$ 14.24
law abiding citizen 4.1 $ 53.00
$ 29.98
$ 19.99
$ 29.98
$ 10.69
$ 29.98
$ 15.34
2012 3.4 $ 200.00
$ 19.94
$ 14.99
$ 19.94
$ 11.99
$ 19.94
$ 13.49
Where the wild things are 2.9 $ 100.00
$ 19.98
$ 14.99
$ 19.98
$ 7.69
$ 19.98
$ 11.34
Planet 51 3.6 $ 70.00
$ 19.94
$ 14.99
$ 19.94
$ 10.33
$ 19.94
$ 12.66
hachi: a dog's tale 4.1 $ 16.00
$ 19.94
$ 14.99
$ 19.94
$ 10.99
$ 19.94
$ 12.99
The princess and the frog 3.9 $ 105.00
$ 29.99
$ 19.99
$ 29.99
$ 15.49
$ 29.99
$ 17.74
ninja assassin 3.6 $ 40.00
$ 19.98
$ 14.99
$ 19.98
$ 14.19
$ 19.98
$ 14.59
astro boy 3.8 $ 65.00
$ 19.99
$ 14.99
$ 19.99
$ 13.99
$ 19.99
$ 14.49
Alvin and the chipmunks the squeakquel 3.6 $ 75.00
$ 19.98
$ 14.99
$ 19.98
$ 11.49
$ 19.98
$ 13.24
Sherlock Holmes 3.8 $ 90.00
$ 19.98
$ 14.99
$ 19.98
$ 8.99
$ 19.98
$ 11.99
alice in wonderland 3.7 $ 175.00
$ 19.99
$ 14.99
$ 19.99
$ 10.49
$ 19.99
$ 12.74
Avatar 4.2 $ 237.00
$ 29.98
$ 19.99
$ 29.98
$ 20.99
$ 29.98
$ 20.49
It is complicated 3.7 $ 85.00
$ 19.98
$ 14.99
$ 19.98
$ 13.49
$ 19.98
$ 14.24
Leap year 3.4 $ 19.00
$ 14.98
$ 9.99
$ 14.98
$ 11.49
$ 14.98
$ 10.74
Valentine's day 3.4 $ 52.00
$ 19.94
$ 14.99
$ 19.94
$ 9.99
$ 19.94
$ 12.49
Invictus 3.8 $ 50.00
$ 14.99
$ 19.94
$ 19.94
$ 9.49
$ 17.47
$ 14.72
Hot Tub Time machine 3.5 $ 36.00
$ 19.99
$ 19.99
$ 29.98
$ 18.99
$ 24.99
$ 19.49
The bounty hunter 3.4 $ 40.00
$ 19.94
$ 14.99
$ 19.94
$ 10.79
$ 19.94
$ 12.89
Date night 3.6 $ 55.00
$ 19.98
$ 14.99
$ 19.98
$ 12.16
$ 19.98
$ 13.58
Source: BestBuy, Amazon, Netflix, IMDB
The Effect of movie budget, and Netflix Viewer Ratings on DVD Pricing
2.8 3 3.2 3.4 3.6 3.8 4 4.2 4.4 $-
$10.00
$20.00
$30.00
$40.00
Netflix Viewer Ratings/Original price
2.8 3 3.2 3.4 3.6 3.8 4 4.2 4.4 $-
$5.00
$10.00
$15.00
$20.00
$25.00
Netflix Viewer Rat-ings/Current Price
$- $50.00 $100.00 $150.00 $200.00 $250.00 $-
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
BUDGET/Original Price
$- $50.00 $100.00 $150.00 $200.00 $250.00 $-
$5.00
$10.00
$15.00
$20.00
$25.00
Budget/Current price
Budget(in m)
DVD PriceDVD Price
DVD Price DVD Price
Rating
TAKE A CLOSER LOOK
Coefficien
tsStandard
Error t Stat P-valueLower 95%
Upper 95%
Lower 95.0%
Upper 95.0%
Intercept -27.6359 125.8572 -0.21958 0.828054 -287.392 232.1206 -287.392 232.1206X Variable 1 27.24955 34.56108 0.788446 0.438155 -44.081 98.58011 -44.081 98.58011
Budget/Original
Budget/Current Price
Netflix Viewer Ratings /Original Price
Netflix Viewer Ratings /Current Price
Coefficien
tsStandard
Error t Stat P-valueLower 95%
Upper 95%
Lower 95.0%
Upper 95.0%
Intercept 12.6522 0.786531 16.08607 2.35E-14 11.02888 14.27552 11.02888 14.27552X Variable 1 0.014701 0.008684 1.692876 0.103422 -0.00322 0.032624 -0.00322 0.032624
Coefficie
ntsStandard
Error t Stat P-valueLower 95%
Upper 95%
Lower 95.0%
Upper 95.0%
Intercept -10.632 7.991688 -1.33039 0.195895 -27.1261 5.862011 -27.1261 5.862011X Variable 1 8.570229 2.194562 3.905211 0.000669 4.040875 13.09958 4.040875 13.09958
Coefficien
tsStandard
Error t Stat P-valueLower 95%
Upper 95%
Lower 95.0%
Upper 95.0%
Intercept -3.60865 4.510037 -0.80014 0.43148 -12.9169 5.699608 -12.9169 5.699608X Variable 1 4.77195 1.238481 3.853066 0.000763 2.215851 7.32805 2.215851 7.32805
Popularity
DISTRIBUTORS Retail Stores
SET PRICE: OPTIMAL PROFIT
Source: BestBuy.com
$0-$3.99 $4-$6.99 $7-$9.99 $10-$14.99 $15-$24.77 $25-$49.99 $50 and up0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
0.86%
10.25%
16.87%
34.93%
25.11%
9.41%
2.57%0.00% 0.19%
3.02%
20.99%
43.36%
26.88%
5.57%
Price of DVD and Blu-ray at Bestbuy Online Store
DVDBlu-ray
SURVEY
How much are you willing to pay for your must-watched Blu-ray movies?
Average: $20.32Given DVD price at $19.99
Average: $23.88Given DVD price at $9.99
Average: $15.73
DVD LIFE-CYCLE
1 2 3 4 $-
$10,000,000.00
$20,000,000.00
$30,000,000.00
$40,000,000.00
$50,000,000.00
$60,000,000.00
$70,000,000.00
Revenue from DVD sales by weeks
MegamindDue DateRedBevery Hills Chihuahua 2Avarta
Source: Nash Information Service, LLC
VERSIONING
BUNDLING
Source: Walmart.com
PRICING STRATEGIES IN RETAILS
VersioningBundling
RENTAL STORES
Physical(Ummmm..is there any?) Online(Netflix) Hybrid(Blockbuster)
NETFLIX VS. BLOCKBUSTER OVERVIEW COMPARISON
FREE TRIAL
NETFLIX: DO WE ALWAYS GET WHAT WE WANT?
“In determining priority for shipping and inventory allocation, we may utilize many different factors…For example, if all other factors are the same, we give priority to those members who receive the fewest DVDs through our service…Also…[the service you experience] may be different from the service we provide to other members on the same membership plan.”
Source: Economics. 2nd Edition. P. 518
Terms of Use
PRISONER DILEMMA
Online stores price war
Blockbuster
Netflix High Low
High High, High Low, High
Low High, Low Low, Low
TWO-PART TARIFF
COLLUSION?
Netflix and Wal-Mart “Corporation.”
Video on Demand
Netflix vs. Blockbuster
Cable network
BUNDLING
PRICING
TWO-PART TARIFF
Television Broadcasting
TV Syndication
Exception
Lower Expectation
100-episode rule
Syndicated Reality Shows
ANALYSIS AND RECOMMENDATIONS
Investment – how would you evaluate the industry from the perspective of a venture capitalist or stock-market analyst?
ANALYSIS AND RECOMMENDATIONS
Pricing Strategies Would this industry be a suitable industry to invest in
from the perspective of a: Venture Capitalist? Stock-market analyst?
REFERENCES http://www.the-numbers.com/market/ http://books.google.com/books?id=BfyFFCyRvX0C&lpg=PR19&ots=
M1pagip27K&dq=film%20industry%20entry%20barriers&lr&pg=PA15#v=onepage&q=entry%20barriers&f=false
http://motherjones.com/files/legacy/news/feature/2007/03/and_then_there_were_eight.pdf
http://www.ibisworld.com/industryus/default.aspx?indid=1245
OTHER INTERESTING INFORMATION
SUGGESTED RETAIL PRICE
Set high sell low “Hey, that is a good deal.”
PIRACY
CLOSING GAP BETWEEN THEATRICAL RELEASE AND DVD/BLU-RAY RELEASE
1988
58.14 days
2005
27.93 days
Source: “The Impact of Early DVD release on Box Office Revenue”
MARKET EXPERIMENT: DETERMINING THE PRICE ELASTICITY OF DEMAND FOR DVDS
Film DVD PRICE VHS PRICE
Rugrat in Paris $22.46 $22.99
The Mummy Returns $26.98 $22.98
Miss Congeniality $16.69 $22.98
The Perfect Storm $24.98 $22.99
Blu-ray $34.99 or $35.99
Economics 2nd Edition. P186