Focal firms and SMEs in Global Value Chains (GVC) A film in a cinema
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1 Focal firms and SMEs in Global Value Chains (GVC) Prof. Paul H. Dembinski A film in a cinema 1 Agenda Introduction The cinema Industry USA Differencies in the cinema industry USA/EU and market share Value chain Focal firm in cinema industry: Lionsgate/ VA calculation Des hommes et des Dieux Conclusion 2
2 Introduction Expanding medias (the Internet, home video, and cable TV) together with new opportunities of selling and marketing movies and new technologies, especially digital technology contributed to the development of such a great film industry Throughout the 20th century, the movie industry has moved from a regional studio factory into a global industry. 3 The cinema industry in USA The movie industry is considered as an oligopoly, where larger players dominate the market. The six major companies control 70% of the market. Rank Distributor Market Share Total Gross 1 Universal 15.3% $ Paramount 14.5% $ Sony / Columbia 13.9% $ Warner Bros. 10.8% $ Buena Vista 9.7% $ th Century Fox 9.4% $275.0 Source: Box Office Mojo (2011): Studio Market Share 4
3 Differencies in the cinema industry USA/EU and market share 6,8% Source: Focus (2009),World Film Market Trend 5 Value chain D I R E C T Marketing Development Production Distribution Exhibition & Exploitation Consumption Director Cast/ actors Camera men Editor/ stuff Special effects Location /studios Screen play Contract talent Secure financing Cinema release Home video Broadcast licensing INDIRECT Suppliers TV and other advertisement Freight transport Food&Beverage Manufacturing Equipment Retail goods Computers/electronics Business services Publicity Legal Financial services Source:The Film Industry: Küng et al. 2008, pg 143; and Küng 2008, pg 71. ; The Economic Impact of the UK Film Industry (2010) 6
4 The value chain depends on the kind of film produced and shown Blockbuster Titanic : mass consumption, high production cost, high level of promotion, importance of special effects. (USA) Medium product: medium cost production, importance of the actors playing. Cultural product Des hommes et des Dieux : niche product, a low budget (because of the problem of funding), with in most of case a limited number of spectators (EU and elsewhere) 7 The Value added of a typical blockbuster film in a cinema: The total company sales (= the price at which the products are sold) less the value of all the inputs used (= the bought-in goods). Source: 8
5 Lionsgate Entertainment(USA): a focal firm in the cinema industry "Lionsgate is a leading global entertainment company with a strong and diversified presence in motion picture production and distribution". Studio market share(usa, January 1 May 15, 2011): rank 8, 3.4% market share, $112,800,000 total gross. The Expandables, 2010, Genre Action, Distributor: Lions Gate, Production Budget: $80 million, Domestic Total Gross: $103,068,524, Worldwide: $274,470,394. Source: VA calculation, Lionsgate Entertainment(USA) Source: LIONS GATE ENTERTAINMENT CORP. AR
6 Cultural film Des hommes et des Dieux (France, 2010) Directed by Xavier Beauvois, produced by Pascal Caucheteux and Etienne Comar, written by Etienne Comar and Xavier Beauvois (written, directed, produced). Studio Why Not Productions, France 3 Cinéma and Armada Films. Distributed by Mars Distribution(France). Production budget: $ 5 million, was the most productive film of 2010 (229% more of the production cost) Total lifetime grosses worldwide: $ 41,611,284. Winner of he Cannes Film Festival's Grand Prix and more. 11 Conclusion There are different ticket prices in each country and different % of amounts to be payed for screening a film, to the productors, to the distributors and to the institutions that are responsible for the mediation in the management of its members copyrights and authorizations to use the works under protection. There are different arrangements between a theater owner and a distributor Focal firms in the USA dominate the worldwide market. In Europe, film companies are predominantly small and medium-sized enterprises. Sometimes, the studio is the distribution company, and in many cases, the studio owns a distribution company. For example, Disney (the studio) owns Buena Vista (the distribution company). This is one of the most important differences in the value chain between the cinema industry in USA and Europe. 12
7 Conclusion the value added of a film is a continuos flow of sales bought-in-goods : nevertheless, in actuality a film can be seen or bought in different formats, places and times through different channels. Additional channels become possible once a film has come out at the cinema, 13 14
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