Rich Fiscus
12 Nov 2007 22:55
According to a report from Global Media Intelligence, a division of media analysis firm Screen Digest, rising costs and falling revenue will cause studios to lose $1.9 billion on movies originally released in 2006. The report compares 2006 releases to those just two years earlier in 2004. Releases from that year reportedly earned profits of $2.2 billion.
So what's being blamed for turning profits into losses? The report points to the current trend toward lower DVD sales with no alternative revenue stream replacing those dollars. While studios are actively pursuing other revenue streams like Video on Demand (VoD) to make up for lower DVD returns, based on the report they're not meeting with much success so far.
"Some executives in the Hollywood studios are looking to the new technologies of video-on-demand and subscription-based TV to fill the gap left by DVD. However, GMI estimates that while vod will offer a superior share of the consumer dollar over traditional pay channels (60% versus 40%), it will not deliver at the lofty levels predicted in the early days of the industry and will not help the studios put old wine in new bottles," said Roger Smith, author of the report.
"Our analysis of the business of the Hollywood studios may come as a surprise to investors and even some people within the industry. We believe there is little chance of the negative revenue trend reversing in the coming years," Smith said. "New technology will not deliver anything like the revenue initially predicted, and as DVD sales continue to decline and the cost of making movies increases, the message is simple: the Hollywood studios must begin a serious attempt to reign in costs, like News Corp.'s Fox has done, if they are to survive."
Source: Video Business