That's a lot of cash in play, and a perfectly good reason, from an objective standpoint, for the studios to go bugnuts when they sense new distribution methods may be a threat. They bitch and whinge about piracy with movies, but the real heat is in the television battle, as that's the form most likely to be impacted by downloaded entertainment.
But the studios' real El Dorado is television. What makes television licensing, both at home and abroad, especially profitable for the studios is that virtually all the expenses required to market a television program, including tapes and advertising, are borne by the licensee. The studios only have to pay the residuals to the guilds and unions, which varies between movies and TV and average roughly 10 percent. The studios get to keep the other 90 percent. In 2004, this amounted to slightly more than $15.9 billion, making it the studios' single-richest source of profits.
This El Dorado comes from many tiers of the television industry. (Click here to see a table of this data.) In 2004, studios made $3.9 billion from licensing their films, shorts, and TV series to the American broadcast networks—all of which are now owned by the corporate parents of the studios, creating a cozy, not to say incestuous, relationship. Another $4 billion came from licensing studio films to pay-per-view TV. All the studios have an "output" arrangement with pay-per-view TV channels to sell them an entire slate of films at fixed prices. Warner Bros., for example, sells all its films to its corporate sibling HBO, and Paramount sells all its films to its corporate sibling Showtime. Overseas, almost all the main pay-per-view TV outlets are owned or controlled by the studios' corporate parents. Finally, $9.8 billion comes from so-called library sales, through which the studios license their movies and TV programs over and over again to cable networks, local stations, and foreign broadcasters. Fifty-nine percent of this immense $17.7 billion of revenue from television licensing comes from America, which is not surprising, considering that on an average day fewer than 2 percent of Americans go to movie theaters, while more than 90 percent watch something at home on TV. And without these profits from TV, no Hollywood studio could survive.
Tuesday, July 31, 2007
What Profit a Man ...
It's an older article, 2005 but useful for those of you who dabble -- a breakdown of Hollywood's Profits, Demystified.