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Introduction The Movie Industry is one of the most exciting and informative business in the world a business where the revenue of a single feature film can approach or exceed 1 billion In 1994 US consumers spent over 6 billion on movie tickets and another 34 billion on cable TV and video purchases and rentals In 1996 worldwide gross revenues generated by motion pictures in all territories and media including music and ancillaries amounted to over 40 billion These figures were only a fraction of total entertainment outlays worldwide spent mostly on American-made movies Over 70 of the population rents or goes to movies regularly this accounts for over 15 billion movie attendances each year in the United States Strategic Issues 1 Blockbuster-ability or the ability to consistently produce a wide variety of popular films at a profit 2 Expanding distribution channels into the ancillary markets where profit margins are higher and 3 The value and depth of film libraries which extend a films life cycle and gererate revenues far into the future Key Problems Cost- Film profits are rare and difficult to measure There are high promotional and marketing costs which include fees paid to exhibitors distributions fees overheads interset and expenses paid usually to studios distributors These combined costs greatly reduce the revenue sream flowing to the producer and net profit participants In addition certain management decisions made in the beginning whether or not to hire star talent as opposed to an unknown can be quite costly although this sort of decision may guarentee box office success of the movie Diversification Integration- The ability to exploit a movie in many markets diminishes investment risk and increases earning potential Diversification and integration into ancillary markets can turn a movie that has lost money theatrically into a video market winner Unfortunately if the studio is a small independent it may cost prohibitive to
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