The Economics Of Movies

July 1, 2012 in Daily Bulletin

Adam Davidson explored several facets of the economics of movies and those that produce them. Highlights include:

  • Men In Black 3 has made over half a billion dollars world-wide yet it has just barely broken even. Why is an industry which requires such large margins still alive? For half a billion dollars the film studios could’ve worked on other projects with a much higher rate of return.
  • Uncertainty is built into the movie business. Executives try to guess the latest fad such as 3-D or vampires.
  • The movie industry continues to function because it has found innovative ways to make money. Tie-in video games, amusement park rides and TV rights all help revenue streams. And the big hits pay for a lot of flops.
  • The main players – Columbia, Disney, Paramount, Warner Brothers etc. have remained remarkably stable. This is partly because of their expertise in getting disparate independent agents to collaborate together, but also because potential challengers could get much better returns in other industries.
  • Yet rich people continue to invest in movie studios because of the very public glamour that it brings, which helps their other businesses.

To read more about how people explain the success of The Hunger Games, how they predict that The Amazing Spider-Man will do, why the matters are even more complicated than they appear, and why the movie industry might soon come to an end – and what will kill it – click here.

Source: The New York Times