Author: Gareth Wigan Vice Chairman, Columbia Tristar Motion Picture Group

Overview of the Studios

The main business of the seven major studios is distribution - not production. Essentially they only produce films to ensure that they have the right number of films to feed their distribution activities. Over many years, they have developed an expertise in production, but are not necessarily creative themselves. They understand the creative process and look to marry up their business sense with the creativity and passion of the filmmakers to deliver successful projects. In their long experience of production and distribution, they have encountered every conceivable problem and are able to bring this experience to the table when dealing with less experienced partners.

The studios have a dominant position in the US and international distribution markets due to a number of factors that are unlikely to be challenged by anyone in the foreseeable future. Their international distribution networks have taken decades to build and would be difficult to create from scratch. For one thing, there are too few experienced and talented executives out there capable of building and running such a network. The studios also have access to vast libraries of titles that can be exploited in the lucrative home entertainment market and sold to the ever-growing number of television stations hungry for content. Sony's library, for example, contains some 4000 titles, which would take a new studio more than around 100 years to create from scratch. Revenues from these libraries pay for a meaningful percentage of a studio's total overhead, easing the financial burden to be carried by the distribution of new titles.

"Studio Films"

The studios are, unashamedly, in the mass entertainment business, looking to reach the widest possible audience with their product. This means developing projects which appeal to the cinema going audience and ensuring that the resulting films are distributed widely enough to give the greatest possible number of people the chance to see them. This has led to massive changes in the way the business operates over the past thirty years. Whereas Jaws opened (in 1975) with just 200 prints, a major picture now would open on more than 3000 screens. The audience has also changed over the years as more screens have been built in multiplexes in or adjacent to shopping malls. These complexes tend to attract teenagers and, therefore, more films are made aimed at that younger audience. Studios tend not to make films aimed at niche markets because they would not cover their overheads - they need to distribute successful mass market films if they are to remain profitable. Furthermore, the studios recognise that they are not the best qualified people to handle small, quirky films, although most of them have now established (or bought) subsidiary production arms who are better able to work with these films.

Over the years, the studios have also developed vast amounts of research about their audiences and what sorts of films work best or are unlikely to work. They do not always interpret this information correctly and mistakes are made, but their decisions are based on objective judgements, not just on gut feeling. They also have more resources to expend on developing projects to make sure that they are right before they go before the cameras and are willing to invest more money in a project to give it the best possible chance of attracting an audience. Audiences want to reduce the risks of not getting value for money when they visit the cinema and will tend to go for familiar stories, cast etc. The studios are able to attract A-list cast, who might be reluctant to attach to a small independent production, to projects and thereby reduce the risk in the audiences' mind. And finally to provide coordinated world-wide marketing and distribution plans to maximize the impact, and the income, from a film theatrically and in all other forms of distribution.

What are the Studios Looking For?

The two main things that the studios are looking for are good ideas and good filmmakers with whom they can develop fruitful relationships. Independent producers are often closer to the zeitgeist about what people want than the studios can be and can help the studios react to changes in audience tastes. They are looking to develop relationships with producers who can work with them to build on these changing trends and develop material that can reach out to their audiences. At a practical level, they also need producers who can take responsibility and act with authority: in short, people who can deliver the goods.

Recent Changes in the Marketplace

The studios have to be able to move with the times and respond quickly to changing circumstances. Major recent changes in their operating environment have included:
The change in the audience demographic towards people aged between 16 and 22. The films they put into distribution and their marketing campaigns have to reflect this shift

• The increase in marketing spend needed to open a movie. Their average spend on prints and advertising is now running up as high at $50 million , 80% of which is then spent in the three weeks leading up to the opening date and through the first week of release.
• The change in the audience demographic towards people aged between 16 and 22. The films they put into distribution and their marketing campaigns have to reflect this shift.
• The pressures of working in the multiplex environment where, if a film doesn't perform well in its opening weekend, it will be shifted to a smaller screen for the rest of its run.
• The development of smaller "classics" operations within the studios to cater for non-mainstream tastes.
• The huge success of DVD which has enabled the studios to open up their libraries of old titles.
• The growth of the international market to the extent that it is now bigger than Domestic, which has encouraged the studios to focus on those elements of their films which will play well overseas.
• The move to more "Day and Date" releases internationally so that overseas audiences do not have to wait to see films that have already opened in the US, reducing the danger of pirated copies of films entering these markets
• The need to combat piracy which is growing very fast in almost every country by devising alternative methods of bringing films to the paying public.

Possible Future Trends

Despite the growth in the home entertainment market and the improvement in the hardware for watching films in the home, going to the cinema to see new films will remain an important activity, giving audiences the only opportunity to see films in the format for which they were created. Digital cinema will become a reality and when it does, cinemas will be put to more imaginative use, showing sporting and other important local or national events and making better use of time slots which have not traditionally been popular with moviegoers.

In terms of their production activities, the studios will develop their relationships with independent producers internationally to enable them to move more aggressively into other territories through participation in the local production sector.

Top Tips

• Cinema is a worldwide business but it is essentially run from Hollywood. To be successful, British producers must develop good relationships with the key people in Hollywood.
• The main business of the studios is distribution - they only produce films to ensure that they have enough good films to feed their distribution arm.
• The studios' competitive advantage in the distribution market is unlikely to be challenged. They have the infrastructure to support their international operations and have valuable libraries to generate significant income streams.
• The two main things that the studios are looking for are good ideas and good producers with whom they can develop fruitful relationships.
• Audiences want to reduce the risks of not getting value for money when they visit the cinema. Studios are able to attract A-list cast to projects and reduce the risk in the audience's mind.