Worldwide, people are watching more films than ever — and investors are watching filmmakers too, betting more than $10 billion in private equity on studio profitability between 2004 and 2007. Soaring costs and tightening consumer budgets have been pinching margins but new growth from the emergence of Blu-Ray as the dominant high-definition disc format combined with continued expansion of new revenue streams, such as electronic distribution and rental kiosks are easing that crunch — according to Film Entertainment Worldwide: The Private Equity Era, a new management report from Adams Media Research and Screen Digest.
Total worldwide feature film revenue for major U.S. studios is expected to soar from $34.9 billion in 2007 to $41.6 billion by the end of 2011 — with the U.S. contributing nearly half of that, or $20.4 billion in revenue. Growth over that time will be driven by electronic sales and rentals, which will average 14.6% growth annually from their current small base. Growth in sales of physical media will be more important since they represent more than 50% of total film revenue.
“When DVD hit the scene in 2007 it changed the way studios made their money,” said AMR president Tom Adams, “Blu-Ray won’t have the same impact but, this time around, studios — and those invested in them — have a greatly expanded universe from which to draw revenue. Although we expect continued revenue expansion the market won’t be returning to DVD-era growth anytime soon so it’s crucial that studios pare down expanding costs and wisely manage upcoming film slates to maximize their profitability.”
The average film budget for Motion Picture Association (MPA) members — once the new private equity money is factored in — grew from $46.9 million to $63.2 million between 2004 and 2007, inflating total MPA film expenses from $9.7 billion to nearly $13.2 billion over that time, an average of about 10% annually. Meanwhile, worldwide revenue from those films shrank from $36.6 billion in 2004 to $34.9 billion in 2007. With worldwide revenue only set to grow at about 6% annually between 2007 and 2011 it is clear that studios cannot keep increasing spending at the rates they have over the past few years.
About Film Entertainment Worldwide
AMR’s Film Entertainment Worldwide: The Private Equity Era is 80 pages long and includes 47 charts and tables. Published in April ’08, it provides historical revenue and projections to 2011 for all film entertainment revenue streams: theatrical, packaged media retail, packaged media rental, cable/DBS/telco & Internet VOD, pay TV, and free TV. It also includes a database of all the private equity production funding deals since 2004 and an analysis of their impact on the business. Also included is a discussion of recent initiatives in markets and technologies by pipeline and the impact on sequential window revenue.
Film Entertainment Worldwide is available for immediate purchase and download via the company’s web site at www.adamsmediaresearch.com.
About Adams Media Research
AMR compiles and analyzes financial and U.S. market data on film entertainment and related media markets, and analyzes new digital media technologies and their likely impact on the industry. The Company is a division of Screen Digest, Ltd. in London, the leader in global media intelligence.
