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Chapter 8

Chapter 8. 8.1 Entertainment Profits. The Profit Makers. For more than a decade, movie ticket sales in the United States have increased each year. However, movie studios continue to struggle for earnings, with less than 50 percent of movies making a profit.

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Chapter 8

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  1. Chapter 8 8.1 Entertainment Profits

  2. The Profit Makers • For more than a decade, movie ticket sales in the United States have increased each year. • However, movie studios continue to struggle for earnings, with less than 50 percent of movies making a profit. • As revenue from ticket sales increases, cost of production and marketing increase even more. • Home Video and international box-office sales are sometimes larger sources of income than U.S. ticket sales. • Some movies are made for direct release into the home video market, bypassing the costs of distribution to theaters.

  3. Is Big Best? • Large studios have taken on the role of financial manager in an effort to spread the economic risk of making a movie. • Studios seek out partnerships with rival studios to help produce, promote, and distribute films.

  4. Cost-cutting Strategies • To control distribution costs, major studios regulate the release of movies. • A wide release is a movie released in more than 2,000 theaters at one time. • The time of day a movie is first shown also has an effect on the box-office take. • A preview is the release of a movie the evening before its official opening. • Previews of high-profile movies are promoted to attract an audience that wants to be the first to see the new movie. • Matinees also called pre-evening shows, generally have less audience and lower-priced tickets.

  5. Low-budget movies, generally a movie costing less than 250,000 to produce, have low advertising budgets. • Texas Chainsaw Massacre (1974) • Eraserhead (1977 – David Lynch) • Clerks (1994) • Blair Witch Project (1999) • Paranormal Activity (2007) • Finding ways to attract audience attention without spending a lot of money is a challenge for the movie studio. • One successful method of promoting low-budget movies is showings at film festivals like the Sundance Film Festival.

  6. Profit and Opportunity • A film’s profit is the money left after all bills have been paid. • Profit from an American film depends largely on its popularity overseas. • To figure profits, moviemakers look at several elements of the film process. They look at: • the ratio of tickets sold to the cost of production • income from licensed merchandise, soundtracks, relationships to theme parks • and domestic and foreign ticket sales. • Most films generate less than 25 percent of their final income form U.S. domestic ticket sales. • International ticket sales of the wildly successful Harry Potter films more than doubled domestic ticket sales.

  7. Fast Money • The difference between entertainment and sports is determined by the viewer. • Movies are definitely entertainment. However, some people consider stock car racing to be entertainment. • Stock car racers face the same financial problems that film producers do. • Racing groups use two primary ways of securing the financing for their expensive form of entertainment. • Mutual funds • Variation on the traditional sponsorship style

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