Media and content industries

Transcription

1 Media and content industries Film industry case study Final workshop Sophie De Vinck & Sven Lindmark Sevilla, 27 October 2011

2 The research focus It s strengths and weaknesses The European film sector Going digital: opportunities and threats

3 Building blocks 4 Implications Strengths & Weaknesses Opportunities & Threats 2 The European film value network in a global perspective Digitisation across the value network 3 1 The film sector and its main economic/cultural, technological and policy features

4 I. Characteristics (1) economics of a cultural industry Economic value (job creation, VA, trade etc.) In EU: 75 firms, 60 bn sales, ca 20bn VA, 370 empl. Spill-over effetcs (creativity) Cultural value (social, aesthetic, etc.) policy and industry dynamics Particular economic characteristics Prototype (fixed vs. reproduction costs), strong economies of scale and scope, pricing (value largely not reflected in price), uncertain demand, semi-public goods, hit-driven Strategies for business control Portfolio approach, concentration & integration, formatting (stars, genres, sequels), versioning (release windows) Copyright

5 I. Characteristics (2) value network Four streams Multitude of players across the value network From individuals, SME, national companies specialized players, broadcasters etc. Hollywood majors Source: adapted from OECD

6 10 leading media groups based on AV-turnover Rank Companies Country Activities Movie subsidiary 2009 Sony Pictures, 1 Sony JP PROD, DIS, VG, REC Columbia Walt Disney US PROD, DIS, TV, VID, REC Walt Disney Studios Time Warner US PROD, DIS, TV, VID Warner Bros News 4 Corporation US PROD, DIS, TV, VID 20th Century Fox DirecTV Group 5 Inc. US TV / Vivendi FR PROD, DIS, TV, VG Canal + Group (Studio Canal) (and 20% stake in NBC Universal) Nintendo JP VG / NBC Universal US TV, PROD, DIS Universal Studios Paramount, 9 Viacom US TV, PROD, DIS Nickelodeon, MTV CBS Corp. US TV, RAD / Adapted from : European Audiovisual Observatory

7 I. Characteristics (3) Policy European tradition of public support: aimed at strengthening fragmented European (national) film industries vs. omnipresent Hollywood majors Total 2.1 bn. spend in funds of which > 1.9 billion by national (and sub-national) funds Almost 0.6 bn in France 69% to production (creation) of which 62% to feature films 20-25% (up to 60% of budget) of production publicly funded Increasing number of films, dependency on support. Less commercial orientation European level Support: Eurimages (co-productions) & MEDIA (not production) Harmonization, copyright, competition policy, and state-aid policy.

8 I. Characteristics (4) innovation Digital the latest in a series of major innovations Innovations affecting the film product Sound (1920s-1930s) Colour (1930s-1960s) Widescreen (1950s) 3D (1950s, now) Innovation affecting commercialisation Television (1950s-1960s) Home video (1970s-1980s) Long transition periods Sector traditionally reluctant vis-à-vis innovation Drivers of transition: costs, standards, audience response, content availability Hollywood on top after each transition period Digital (1990s-) affects all parts of the value network

9 Innovations often expanded the market Worldwide revenues, USD Billion source: MPA and (Epstein, s.a.)

10 II. The European film value network 1. Production (negative stream) 2. Distribution and marketing (P&A stream) 3. Exhibition (theatrical & non-theatrical) 4. Auxiliary activities

11 II. 1) Production Strengths Large and diverse range of companies and films Acclaimed strong creative (director) tradition ever more films

12 European film production evolution # films per year source: European Audiovisual Observatory (2009, 2010). Yearbook 2010 Online Premium Service.

13 II. 1) Production Strengths Large and diverse range of companies and films Acclaimed strong creative (director) tradition Weaknesses Lack of resources into early development and selection -> less mature films go into production Lower investments Problematic financing (lack of private financing) Leading to a dependency on public support

14 Investment gap large and increasing Average budget per film 2008 Region ($M) North America Western Europe 6.13 All Europe 4.73 Far East 4.29 South America 2.86 C/E Europe 0.67 Asia 0.44 Source: Screen Digest Total film production levels investment levels

15 II. 2) Distribution and marketing Mirrors production Increasing share of costs

16 The importance of marketing Total production and P&A costs (in US$ million) for the average MPAA film

17 II. 2) Distribution and marketing Mirrors production Increasing share of costs Large # of films finds their way to distribution, but not across borders Distribution dominated by majors European distributors territorially fragmented Marketing weakness Strong film festival tradition main alternative A struggle to connect the glut of films with their audience

18 II. 3) Exhibition - Release window system Sequenced release Different times at different prices Typically (was) months Shortening (DVD, marketing and piracy)

19 II. 3) Exhibition Theatrical window Large and diverse exhibitor sector less screens/consumption than US Trend towards consolidation and multiplexes smaller cinemas at risk favoring US blockbusters US films dominate in Europe and outside Europe European films do export well outside their national home market European film consumption is nationally based, with only Hollywood as common factor

20 US movies dominate (increasingly) in Europe European theatrical market shares Region (prov) US 63.4% 62.6% 65.5% 66.9% 68.0% European films EUR inc/us coproductions 27.9% 28.1% 28.3% 26.8% 25.3% 5.6% 7.5% 4.4% 4.0% 5.4% Others 3.2% 1.8% 1.8% 2.3% 1.3% source: European Audiovisual Observatory (2011). Focus World Film Market Trends. Strasbourg: EAO.

21 ..and elsewhere Commission of the European Communities (2009). Commission staff working document. Accompanying document to the proposal for a decision of the European Parliament and of the Council establishing an audio-visual cooperation programme with third countries MEDIA Mundus. Impact assessment report (No. SEC (2009) 3098 final). Brussels: European Commission. Hollywood is common film culture in Europe and beyond

22 European films do not travel well other home market Admissions millions source: European Audiovisual Observatory (2010). Yearbook 2010 Online Premium Service.

23 II. 3) Exhibition Home video window Total VHS, DVD and Blu-ray sales ( million) Source of growth since the 1980s Driven in 2000s by DVD Shift from rental to retail Recent signs of decline Dominated by US films perhaps more than for theatrical movies despite early hopes for a long-tail Source: EAO

24 II. 3) Exhibition - TV Important investor in European films, but screen time reserved for Hollywood films 59% screen time of US films Prime-time probably higher

25 European strengths and weaknesses Value network Strengths Weaknesses Production Large and diverse number of companies and films Auteur cinema tradition Lack of integrated majors Lack of selection and development Low investment levels Lack of private funding Dependent on public support Distribution Exhibition Many films distributed Strong film festival tradition Large, mature and varied consumption Fragmented and concentrated market Lack of marketing tools Theatrical and non theatrical dominated by Hollywood Lack of cross border circulation

26 III. Digitisation across the value network (1) 3 decades of digital transition 1980s and 1990s Sound production Digital imaging (CGI computer generated imagery) Editing Digital cameras Digital sound systems (cinemas) DVD 2000s now D-cinema and 3D Digital Television (Blu ray) Internet retailing and rentailing Digital distribution VoD, sharing platforms etc.

27 III. Digitisation across the value network (2) affects whole value network Benefits Cost / efficiency Flexibility Quality improvements

28 III. Digitisation across the film value network 1. Production 2. Distribution and marketing 3. Commercialisation: impact on release windows 4. Exhibition: theatrical 5. Exhibition: non-theatrical

29 III. 1) Producing digitally Cost-efficiencies and increased flexibility, non-linear work processes Lower entry barriers Audience interaction and crowd sourcing Internationalization of production networks? BUT Rising costs for block-buster prod. Availability digital masters and division of costs European industry slower in digitising than US Digitisation of production archive Low cost country competetition? Producer-distributor relationship New players, incl. UGC and audience involvement

30 III. 2) Digital distribution and marketing Substantial cost-savings in reproduction and distribution (even for off-line) Easier customisation offers opportunities for transnational circulation Online and viral marketing strategies may help European sector BUT Hollywood benefits most from cost-savings blockbusterisation How to get attention in a world of abundance importance of branding, marketing reinforced Role distributor reconfigured New players specialised in online distribution and rights management

31 III. 3) Exhibition - release windows Industry, pricing and copyrights aligned to old system Trend to shorter windows: Piracy (and legal online) Marketing effects for smaller titles reinforced by cumulative release Arguments against shorter windows: Cannibalisation effects Hit and run character of blockbuster

32 Piracy Rose with the growth of home video market DVD in particular Put aside because of growth of legal DVD market Online augmented piracy (increased supply and demand) to levels where it begins to be a (perceived) threat Un-nuanced partly ideological doom-gloom debate Real direct (substituting) and indirect negative impact - threat

33 III. 4) Theatrical exhibition Better, more consistent quality Cost savings (mainly for distributors), Flexible programming strategies opportunities to diversify the theatrical experience BUT Costly and difficult roll-out (for exhibitors) Smaller art-houses even more at risk Emergence of third parties to facilitate roll-out Relationship distributor-exhibitor

34 Evolution of digital screens and sites in Europe Source: European Audiovisual Observatory (2010). Yearbook 2010 Online Premium Service. Transition behind but in full swing, driven by: DCI standard Business model innovations, 3 rd party integrators VPF 3D boom

35 III. 5) Non-theatrical digital exhibition Dematerialisation impacts on consumption (cost and time of delivery, time and place shifting, linearity of consumption) VoD offers opportunities for growth Opportunities of long tail Cross-border circulation facilitated BUT Slow-down physical home entertainment (DVD) not compensated by VoD (or blu-ray) Continued dominance Hollywood films and other (new) US players Multi-territory licensing not taken up by sector New VoD players (Netflix, Apple, Microsoft, etc.) Relations between theatrical and non-theatrical Illegal marketplace

36 Online revenue small, but growing Source: KEA European Affairs, & MINES ParisTech Cerna (2010). Multi-territory licensing of audiovisual works in the European Union. Brussels: European Union.

37 Online revenue: forecasts Total European consumer spending on physical and online home entertainment ( forecasts) (figure from (Gunnarsson, 2010)) Note: Digital movies contain both rental and retail; while TV Vod comprises movies but also TV shows and sports. Therefore the actual size of the movie market is somewhat lower.

38 EU online landscape Poorly documented Large and growing number of companies (200?) offering a large and growing number of services (1000?) Ranging from broadcasters, to Telco and cable operators, to content aggregators, and HW manufacturers Major players include Apple, Microsoft, Google, (Netflix) Over a variety of platforms, delivery and business models

39 Looking for business models pay for films download-to-own (electronic sellthrough) pay per stream pay per download subscription models advertising-based model free models sharing model

40 An online European single market? Comparison of (consumption) market shares for films in theatrical, video and VoD (France, based on 2008 CNC data) (KEA European Affairs & MINES ParisTech Cerna, 2010, p. 94)

41 Summing up opportunities and challenges Value network Opportunities Challenges Production Stronger audience ties Flexible and more costefficient production networks Digital source masters availability Back catalogue digitisation Increased (global) competition Distribution Exhibition Content customisation Cost savings and flexibility Online and viral marketing Flexibility and differentiated theatrical programming VoD potential Long tail Increased buzz for smaller titles in shorter release window context Blockbuster driven character of distribution increases Difficult to draw attention in a world of abundance ( Digital cinema roll out) Slow down home entertainment market Lack of strong pan European VoD players Online licensing problems Piracy

42 V. Conclusions: SWOT Digital opportunities and European S/W: a potentially good fit Could foster cross-border reach of European film industries BUT Signs of reinforced fragmentation Global dominant power players remain in control

43 V. Conclusion Policy and sector challenges Preserving a diverse offer: art-house d-cinema, viable VoD offer as alt. to piracy Fostering networking and exchange Developing market financing opportunities and ensure multiterritory licensing viability Connecting supply and demand: audience literacy, subtitles. What role for the European policy? A logical partner already taking initiatives A contested role (by MS, stakeholders) perceiving the coomon market as a threat A brake on their action radius

44 Thank you! Suggestions? Questions?