Industry Opportunity Analysis · High concept films dominate the top grossing list for 2015....

QUEENSLAND UNIVERSITY OF TECHNOLOGY

Industry Opportunity Analysis

Film Industry

Tobias Weston – N8324352

8/28/2015

Word count – 1430

Tutor – Cameron Mackay

1 Tobias Weston – n8324352

Contents

Abstract. ........................................................................................................................................................ 2

1. Content Trending. ..................................................................................................................................... 3

2. Conduit and Consumption. ...................................................................................................................... 4

2.1 Experience in Theatre. ........................................................................................................................ 4

2.2 VOD (Video on Demand). .................................................................................................................... 4

2.3 How Netflix is relevant to Film Consumption. .................................................................................... 6

3. Key Opportunities. .................................................................................................................................... 7

3.1 Content Distribution ........................................................................................................................... 7

3.2 Instant Release .................................................................................................................................... 7

3.3 SWOT Table. ........................................................................................................................................ 8

4. Future Development. ................................................................................................................................ 8

4.1 Content Participation .......................................................................................................................... 8

4.2 Instant Release .................................................................................................................................... 8

5. Appendices ................................................................................................................................................ 9

6. Reference List. ......................................................................................................................................... 10


Abstract.

The objective of this report is to provide an analysis on the current trends in the film industry. This

analysis was based on the content, conduit, consumption and convergence factors in the industry.

Ultimately the analysis provided background information so that key opportunities in the industry could

be identified and future development could be suggested.

It was found that content adapted from super hero comic books has been successfully trending since

2008 and looks to be continuing for at least another 6 years. The report also discusses the relationship

between this content, tent pole films and television.

In terms of conduit, consumption and convergence Netflix was the primary focus. Netflix transitioned

from DVD to SVOD and is considered the top SVOD provider. Netflix also has licensing deals with Marvel

which tie it to the content trend as well.

This report also offers two suggestions for future development. The first being related to a merger of

content consumption where in the audience has to play through, interact or participate in some way to

receive further content. The second being, instant release for new films in VOD services.


1. Content Trending.

High concept films dominate the top grossing list for 2015. Jurassic World, Avengers and Fast and

Furious collectively made almost four and a half billion dollars globally (Box Office Mojo, 2015). The new

Star Wars and Hunger Games films are yet to release and can be expected to earn as well.

In 2008 just after the release of Iron Man 1, Marvel Studios announced they would produce four more

films based on their superhero characters and comic world. The stock price increased 9 percent that day

(Matthew Garrahan, 2008), today there are almost thirty comic book superhero movies set to be

released in the next six years (Rob Keyes, 2014).

The Marvel Avenger’s films are tent pole films which combine a huge amount of content from multiple

films and comics into a single experience. DC have announced the Justice League, Batman vs Superman

and Suicide Squad, all of which are attracting massive amounts underground attention with people

stalking sets and uploading leaked footage (Lewis, 2015). This trend of combining storylines and

characters seems to have been used by other big studios. Sacks (2014) predicted that the huge number

of blockbusters being released right now (USA Summer, 2015) will choke the market and films will

suffer.

Fantastic 4 which has just released by Fox (licensed from Marvel) is receiving some of the worst reviews

of any superhero movie. Phil Hoad (2015) from The Guardian, states, “After Sony’s abortive overhaul of

Spider-Man comes another lesson in the dangers of flogging superheroes until they drop.” Although he

is suggesting that the superhero based content trend has been over used, the success of all the other

Marvel and DC based films proves otherwise. The failure of Fantastic 4 simply shows that the films still

have to be entertaining in their delivery of the content rather than their equation of high concept.

Although there are other content trends in the industry the superhero content is undeniably the largest

of recent years.


2. Conduit and Consumption.

2.1 Experience in Theatre.

The traditional method of going to the movies for a “cinema experience” now has entirely different

meanings to the classic popcorn filled image imagined. According to McCalmont (2012) James

Cameron’s film, Avatar, started the wave in which cinemas began mass screenings of 3D movies.

However he believes that consequent movies after Avatar which were poorly received in 3D (due to

quality and extra ticket cost) have damaged the “3D cinema experience”. McCalmont suggests that the

actual viewing (consumption) of the 3D content detracts from experiencing the social aspect and

content viewed.

Contrino (2015) says “Modern 3D is heading toward a period of maturity. Distributors, exhibitors, and

filmmakers have learned what works and what doesn't. The polarizing aspect of 3D hasn't gone away,

but sometimes all it takes is one great film in 3D to change minds. We're betting that Gravity did just

that last year. As long as filmmakers with exciting visions continue to value 3D, we'll stay confident about

its potential.”

Contrino also points out that 3D viewing is usually optional and 8 of the 10 top grossing films of 2014

were also screened in 3D meaning it’s still relevant and shouldn’t be completely unencouraged.

2.2 VOD (Video on Demand).

“The screen industry is in transition as distribution mechanisms converge and access points increasingly

fragment.” Screen Australia (2011).

This statement shows that four years ago Screen Australia recognized that the industry was in a serious

transition in terms of how films were accessed and consumed. Different forms of video on demand

have been accessible to Australians for many years (see below).


Figure 1. Different Forms of VOD in Australia (Screen Australia, 2014)

It wasn’t until March 2015 when Netflix started in Australia that VOD received a wide spread recognition

as an everyday way of accessing video content (Bodey, 2015).

Figure 2. Netflix in comparison with other Australian VOD services (Australian Business Review, 2015)

For the purpose of analyzing the trend on VOD in terms of Conduit and Consumption Netflix will be the

primary focus as it is considered the leader in VOD market penetration success (Gensler, 2015).

Netflix is a subscription based VOD service meaning audience are required to pay a monthly fee to

access content. Netflix is usually run through an app or program which is downloaded onto the viewing

device. If the device has a screen and internet connection chances are it will have access to Netflix.

Netflix also produces some of its own content and has exclusive rights to the rest. Peter Cohan a

contributor to Forbes magazine believes this combination of content and accessibility is the primary

reason for the Netflix success.


2.3 How Netflix is relevant to Film Consumption.

As the number of VOD subscribers increases the demand for hardcopy films in the form of DVD and

Bluray decreases. (Follows 2015)

“For the past decade, DVD revenue has been shrinking rather quickly, due to piracy and changing

consumer viewing habits. The industry is hoping that the new kid on the block, Video On Demand (VOD),

can fill this shortfall.” (Follows 2015)

Netflix itself started as an online DVD post service but began VOD services in the mid 2000s as it realized

potential for market monopoly. As seen below the increase/decrease over almost 3 years is substantial.

Figure 3. Clearly seen, the increase in online consumption and decrease of DVD (Follows, 2015)

“The home entertainment sector saw good results for 2014 with the consumer spend in key digital

categories growing at a double digit pace. Consumers embraced the convenience and accessibility of

purchasing and collecting digital content, while studios reaped higher margins from these digital sales.”

(Digital Entertainment Group, 2015)

The DEG report also showed a loss of almost 10 percent in the last quarter of 2014 for hard copy

product sales.

This information suggests audiences are moving into a digital phase for acquiring and consuming

entertainment. Netflix being the largest VOD providers stands to benefit from this transition.


3. Key Opportunities. In summary, the trends in this report which are currently happening are:

Superhero films are increasingly popular (Content)

Tent pole high concept films also popular (Content)

3d popularity has decreased however still relevant to certain genres (Consumption)

Digital access is increasing (Conduit/Consumption)

DVD sales are decreasing (Consumption)

Netflix / SVOD popularity high (Convergence/Consumption/Conduit)

As an entertainment brand the goal would to be achieve market penetration before competitors do

such as how Netflix has with SVOD.

3.1 Content Distribution One opportunity which has somewhat unsuccessfully been exploited is to work backwards from a tent

pole film and make other films based on the same content. This has already occurred with Marvel and

Agents of SHIELD and Agent Carter, however both shows have had limited success in television. Netflix

has had better success with Daredevil and Flash.

3.2 Instant Release Another opportunity exists in releasing films on VOD rather than through cinema. In 2014 Sony had a

messy release of The Interview due to hacking and threats of violence. The film which cost Sony 80

million to make made 15 million in the first weekend (Lynch, 2014). However it is expected the VOD

services will be the only companies to profit from the release. In 2015 Netflix is also releasing original

content movies as well however it isn’t confirmed if it will be solely a VOD or box office release yet

(McCown, 2015).


3.3 SWOT Table.

Strengths Weakness Threats

Backwards Producing

More content for audience

More connected product to sell

More cost

More individual film risks

Risking entire brand by watering down weakness

VOD Release

Audience can receive faster

Broader connection via devices

Can’t charge as much

Loss of cinema experience

Piracy

4. Future Development.

4.1 Content Participation

I think both these opportunities combined would work well in terms of a single entertainment

experience. Producing films and releasing them on VOD services exclusively, based on content from

other high concept films isn’t currently happening in the market. It would attract the audience not only

for the content but for the convenience as well. Allowing audiences to choose which way the content is

consumed also allows for the content to be customized in various unseen ways. For example, the film

could have interactive components if accessed on a game console or phone. This convergence of

technology has been used recently in the Telltale games, where the gamer is effectively playing through

the story of which ever show he or she is watching. These are more or less still a gaming experience

though.

4.2 Instant Release

I think there is a market for allowing people to have access to new films at home when they release at

the box office. Currently people will download poor quality camera recorded digital files of new movies

and watch them. By doing this both the cinema and production company’s lose. By streaming the

movie or selling a 1 watch file for a premium price, production companies have another point at which

to connect with audiences.


5. Appendices

PESTLE Analysis based on current film industry trends

Political Economic

Taxation of digital content Pricing of SVOD is around 12 dollars a month

Average movie price 8 dollars a movie (US)

Social Technology

Target audience 18 -24

Cinema experience relatively unchanging in regular cinimas

SVOD available on almost every internet connectable device

Legal Environment

Licensing of content to other production companies

Decline of hardcopy content positive to environmental factors


6. Reference List.

Bodey. (2015). Netflix leaves online rivals in its wake. The Australian Business Review. Retrieved August

14, 2015, from http://www.theaustralian.com.au/business/media/netflix-leaves-online-rivals-in-its-

wake/story-fna03wxu-1227349526039

Box Office Mojo. (2015). 2015 World Wide Grosses. Retrieved August 14, 2015, from

http://www.boxofficemojo.com/yearly/chart/?view2=worldwide&yr=2015

Cohen. (2013). How Netflix Reinvented Itself. Forbes. Retrieved August 14, 2015, from

http://www.forbes.com/sites/petercohan/2013/04/23/how-netflix-reinvented-itself/

Contrino, P. (2015). 3D: WHAT TO EXPECT THIS YEAR. Chicago, Ill: Boxoffice Media LP.

Digital Entertainment Group. (2015). DEG 2014 Year End Home Entertainment Report Abstract.

Retrieved August 14, 2015, from http://degonline.org/resource/deg-2014-year-end-home-

entertainment-report/

Follows. (2015). The economics of Netflix. Retrieved August 14, 2015, from

http://stephenfollows.com/the-economics-of-netflix/

Gensler. (2015). Netflix Soars On Subscriber Growth. Forbes. Retrieved August 14, 2015, from

http://www.forbes.com/sites/laurengensler/2015/01/20/netflix-soars-on-subscriber-growth/

Hoad. (2015). Fantastic Four flop: the biggest superhero disaster since Catwoman. Retrieved August 14,

2015, from http://www.theguardian.com/film/2015/aug/11/global-box-office-fantastic-four-trainwreck-

monster-hunt-man-from-uncle

Keyes. (2014). Over 40 DC & Marvel Movies Will Hit Theaters In The Next 6 Years. Retrieved August 14,

2015, from http://screenrant.com/dc-marvel-movie-schedule-2015-2020/

Lewis. (2015). The Hollywood Reporter. Trailer Report: 'Suicide Squad' Tops 'Batman v. Superman'.

Retrieved August 14, 2015, from http://www.hollywoodreporter.com/heat-vision/suicide-squad-trailer-

tops-batman-810020

Lynch. (2015). “The Interview” was a $15+ million online hit—but more for Google than for Sony.

Retrieved August 14, 2015, from http://qz.com/318618/the-interview-was-a-huge-online-success-but-

more-for-google-than-for-sony/

Matthew Garrahan in Los Angeles. (2008). Superhero films lift marvel 9. FT.Com

McCalmont’s. (2012). What is the So-Called Cinematic Experience?. Retrieved August 14, 2015, from

http://ruthlessculture.com/2012/04/13/what-is-the-so-called-cinematic-experience/

McGown. (2015). A.V Club. Here are the release dates for those Netflix original movies you’ve heard

about. Retrieved August 14, 2015, from http://www.avclub.com/article/here-are-release-dates-those-

netflix-original-movi-221864


Sacks. (2014). 2015 shaping up to be biggest box office year of all time, with 'Hunger Games:

Mockingjay, Part 2,' 'Star Wars: Episode VII' and 'Avengers: Age of Ultron' vying for ticket-buyers'

attention. Retrieved August 14, 2015, from http://www.nydailynews.com/entertainment/tv-

movies/2015-shaping-crowded-tent-pole-movie-slate-article-1.1525084

Screen Australia. (2014). Online and on demand, Trends in Australian online video use. Retrieved August

14, 2015, from http://www.screenaustralia.gov.au/getmedia/d61a7c4b-3abf-444c-9367-

aa8dc8b1b8f6/OnlineOnDemand_2014.pdf

Screen Australia. (2011). Beyond the Box Office. Retrieved August 14, 2015, from

http://www.screenaustralia.gov.au/getmedia/511b73c6-5276-4701-828c-

46916e74f29d/Rpt_BeyondBoxOffice.pdf

Industry Opportunity Analysis · High concept films dominate the top grossing list for 2015....

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