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The movie business has seen production budgets soar and attendance decline.
Download Hollywood_Statistics.pdf
These are terrible trends when combined, not only for the losses induced, but also because they show that the traditional Hollywood playbook (bigger movies, with bigger special effects and bigger stars) is no longer working. No wonder movie producer and theater owner Mark Cuban is looking for a miracle. (No wonder he didn't get one.)
Here's one big reason why:
DVD players have become commonplace in recent years, with penetration of more than 75% of households. Coupled with home theater systems, more consumers are staying home for their movies.
This got me to thinking about some typical warning signs seen as industries are disrupted:
- Profit margins rise on flat-to-down sales as you cater to best customers or, in the case of Hollywood, as smaller producers are squeezed out;
- Industry fragments;
- New and sometimes strange entrants gain toeholds in the market, often with marginal customers;
- Expertise no longer required;
- Commoditized pricing;
- Management playbook fails;
- Growth gap opens;
- Management seeks a miracle. (This last stage is often when mergers are trotted out.)
More detail on some of these warning signs was published today in the Financial Post.
** Other Views **
Information Week published a quick list of business warning signs compiled by Gary Sutton, author of Corporate Canaries: Avoid Business Disasters with a Coalminer's Secrets. On the list: Growing sales but weak profit; excessive debt; sloppy controls; fuzzy leadership; and a disappearing market. If more than a few of these show up it may already be too late.
BE Magazine listed 12 Red Flags for failing business compiled by Coopers & Lybrand, although, again many seem to be compiled at post-mortem and may not be useful for for prevention. Number 7 stands out: Do you have essentially a one-person management team?
The Hollywood Economist (and the smartest guy on the subject) Edward Jay Epstein explains how box office losses matter a lot less to major studios than they once did. TV licensing is the big ticket.
The Big Picture looks at the specific causes of the decline in movie attendance.
Ben Trevino's Movie Theater Research Central looks at a variety of issues and technologies related to Hollywood.
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