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The Director’s Chair Issue #30 – Oct. 31, 2002 (Movie Industry Analysis)

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THE DIRECTOR’S CHAIR
Free Monthly Ezine for Film and Television Directors

October 31, 2002          Scene 3 – Take 10
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Published once a month.

Publisher: Peter D. Marshall
Email: mailto:pdm@actioncutprint.com
Web Site: http://www.actioncutprint.com

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CONTENTS
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1.  Introduction
2.  FREE Bonus for Subscribers
3.  Action-Cut-Print!
4.  Feature Article – Movie Industry Analysis
5.  Back Issues of The Director’s Chair
6.  Quote of the Month
7.  Out Takes –  Goofs from Spider-Man (2002)
8.  Share This Ezine
9.  Suggestions & Comments
10. Subscribe & Unsubscribe Information
11. Copyright Information

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1. INTRODUCTION
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Welcome to Issue #30 of The Director’s Chair (October 31, 2002).

1) This month’s article explains why the Movie Industry is one of
the most exciting and informative businesses in the world, a
business where the revenue of a single feature film can approach
or exceed $1 billion.

2) VOLUNTEERS NEEDED – If you would like to contribute articles,
tips, links of interest, industry news, interviews, special event
dates or other resources to The Director’s Chair please email:
mailto:pdm@actioncutprint.com

—–

Enjoy.

Peter D. Marshall

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4. FEATURE ARTICLE – The Movie Industry Analysis
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Introduction

The Movie Industry is one of the most exciting and informative
business in the world, a business where the revenue of a single
feature film can approach or exceed $1 billion. In 1994, U.S.
consumers spent over $6 billion on movie tickets and another $34
billion on cable TV and video purchases and rentals. In 1996,
worldwide gross revenues generated by motion pictures in all
territories and media (including music and ancillaries) amounted
to over $40 billion.

These figures were only a fraction of total entertainment outlays
worldwide, spent mostly on American-made movies. Over 70% of the
population rents or goes to movies regularly, this accounts for
over 1.5 billion movie attendance’s each year in the United
States.

Strategic Issues:

1) “Blockbuster-ability”, or the ability to consistently produce
a wide variety of popular films at a profit;

2) Expanding distribution channels into the ancillary markets
where profit margins are higher; and 3) The value and depth of
film libraries, which extend a film’s life cycle and generate
revenues far into the future.

Key Problems

Cost – Film profits are rare and difficult to measure. There are
high promotional and marketing costs which include fees paid to
exhibitors, distributions fees, overheads, interest and expenses
( paid usually to studios distributors). These combined costs
greatly reduce the revenue stream flowing to the producer and net
profit participants. In addition, certain management decisions
made in the beginning, whether or not to hire “star” talent as
opposed to an unknown can be quite costly, although this sort of
decision may guarantee box office success of the movie.

Diversification & Integration – The ability to exploit a movie in
many markets diminishes investment risk and increases earning
potential. Diversification and integration into ancillary markets
can turn a movie that has lost money theatrically into a video
market winner. Unfortunately, if the studio is a small
independent it may cost prohibitive to diversify. If the studio
is a “major” that is not already diversified, the competition and
cost to do so would be significant factor.

Barriers to entry for independents – The most obvious barrier to
entry is the high cost of acquisition. Larger studios owe their
survival to ample resources, which afford them the ability to
weather box office disasters. Small studios would not necessarily
be able to survive box office failures.

Major studios also have an advantage in their ability to maintain
distribution networks across the country and in foreign markets.
This ensures that their films get to theaters and television
screens.

Competition – Thousands of screenplays are in development at any
given time but only 450 to 500 actually become motion pictures.
Of those, approximately 173 are actually released to the
theaters. Even then, the success at the box office is not
guaranteed because that success is always subject to public
preference.

Historical trends in the industry – Feature motion pictures have
historically had one major source of revenue in the United States
and abroad,”The movie theater.” Industry statistics reveal that
in the past ten years there has been an overall increase of at
least 30% in many ancillary markets and over 200% in the case of
home video.  Today much of the world is undergoing a mass
communications revolution; hence, new movie markets such as home
video, cable and pay-per-view have been growing so rapidly that
they are no longer just ancillary markets to the basic theatrical
market but have become basic markets in themselves.

The latest technological frontier for motion picture companies
was in direct-access TV through telephone lines.

With the advent of the new computer-based technologies, “cable”
markets and direct digital-delivery of motion pictures via
satellite and the Internet are expected to increase dramatically
over the next five years, creating an accelerated demand for
original and re-run motion pictures.

DATA ANALYSIS

What is the competitive environment? There are thousands of
screenplays in development at any given time, however each year
only 450 to 500 of these are produced into motion pictures.
Although the majority undergo principal photography in the United
States, approximately 60 to 80 are shot offshore (including
Mexico and Canada).  Of these approximately one-third come from
the majors (Disney, Sony, (Columbia-Tristar), Warner Brothers,
Universal, Paramount and Twentieth Century Fox) and approximately
two-thirds from the “independents”.

“Independents” are those companies engaged in the production
and/or distribution worldwide in all media of all motion picture
and television programs that are not generated by the recognized
major studios.  It includes those independent productions, even
those distributed by a major studio, in which the producer
retains a significant ownership interest and is at risk for a
significant portion of the production cost.

Of the 450 to 500 feature films produced each year, only 155 were
given a theatrical release in 1994, 169 in 1995 and 195 in 1996.
Thus a significant number of features do not get a theatrical
release but are released directly to home video and other media.

Producing and/or financing these movies are approximately 6 major
studios, 50 to 80 major independent production companies and over
1,200 smaller independent production companies.  The domestic
market share is evenly distributed.

Any major changes in the market?

*** (The Movie Industry by James Jaeger).  Increased foreign
demand for U.S movies is reflected in the fact that recent export
sales to foreign markets hit an all time high in 1997.  The
European foreign market accounts for 56% of global revenues
generated by English language.

One of the most attractive markets is centered around the Far
East, Japan being the largest.  Focus on Asian themes has
produced many movies that clearly reflect this trend.

Generally speaking, if an English-language film made for U.S.
release does well domestically, it becomes popular in foreign
markets, particularly in Europe.

All of this popularity and success internationally has not come
without a price.  Some countries began to complain about the
spread of American culture due to the movie industry.  In order
to soothe these complaints, Disney and Miramax announced in
October 1994 the creation of a company to promote the
distribution of French films in the United States and increased
funding to French filmmakers.

Relaxed enforcement of the 1948 antitrust decree under Reagan
administration which allowed Universal, Paramount, and Columbia
to acquire interests in various theater chains.

Rapidly changing demographics.  Shrinking population of 13 to 25
year olds who would traditionally see as many as 12 films per
year.  Real growth audiences were becoming both younger and
older.  The older group (40-49) appreciated mature themes; those
with children were also attracted to family oriented movies.

Distribution media is dynamic.  Beginning in the late 1980’s,
ancillary markets (videos, TV, cable, or pay per view) began to
emerge as the high-growth segment in the industry.  This growth
had a negative impact on box office sales as ticket growth was
limited by the relatively inexpensive availability of movies
outside the traditional theater.

Key Industry Financial Statistics: *  Admission Revenues *
Average Cost per Film *  Profitability (by Operating Margin
Percentage)

Results of past marketing strategies and current marketing
strategies –

Control and expansion of distribution channels has always been a
primary objective of major studios.  In 1950, many theaters were
owned by major movie studios.  This represented a trend toward
vertical integration into theaters.  This risk-reduction strategy
combines the production, distribution, and exhibition functions
under the studio’s control.

The distribution pattern seen in theaters was reproduced in
ancillary markets.  As with theater exhibition, films in the
motion picture industry began to vertically integrate into these
media, owning cable stations, TV networks, and video chains.

Even more recently, technology has improved to include such state
of the art viewing options as Pay-Per-View, Digital Video Disc
(DVD’s), satellite television, and Home Theater (surround sound).
Interactive Video and computer games are another huge new market
that is rapidly expanding.

Ancillary markets have proven to be invaluable sources of revenue
as in the case of Star Wars and Jurassic Park.  There were such
spin-offs as toys, games, T-shirts and novelty items.  These
spin-off sales may eventually be as significant as revenues the
picture has already earned in various other markets.

Significant socio/economic trends

*** (Entertainment Industry and the Environment – Internet) Many
studios and production facilities have developed comprehensive
environmental policies.  Many studios have organized task forces
made up of various department heads to oversee the implementation
of these policies.  They began recycling programs and then closed
the loop by purchasing recycled products, including office paper,
tissue products, towels and toner cartridges.

The movie industry has proven they are in tune with consumer
preferences when between 1991 and 1993, movie companies cleaned
up their films by increasing the number of G rated movies.

Works Cited:

1.  Gunther, Marc.  “The Rules According to Rupert.”
Fortune October 26, 1998 issue

2.  Family Motion Pictures – Industry Statistics
http://www.familymotionpictures.com/merch/

3.  Jaeger, James.  “The Movie Industry.”
http://www.mecfilms.com/moviepubs/memos/moviein.htm

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5.  BACK ISSUES OF “THE DIRECTOR’S CHAIR”
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To read back issues of The Director’s Chair, visit:
http://www.actioncutprint.com/ezine.html

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6. QUOTE OF THE MONTH
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“There are two sides to every question: my side and the wrong
side.” Oscar Levant

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7. OUT TAKES – Goofs from Spider-Man (2002)
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(From http://us.imdb.com/Sections/Goofs/)

Continuity: While Norman Osborn is in the chamber, the electrode
wires jump about between shots.

Continuity: Mary Jane’s jacket collar changes when she’s talking
to Peter outside the diner the first time.

Factual Errors: We hear a dial tone coming from Harry’s cell
phone after Mary Jane hangs up. Cell phone systems have no dial
tone.

Continuity: Mary Jane’s hand disappears briefly from Peter’s face
at the cemetery.

Continuity: The hole which Spider-Man punches in the roof of a
car disappears and reappears between shots.

Continuity: Although Spider-Man is supposed to have perfect
vision after his bite, Tobey Maguire’s contact lenses are visible
at various points throughout the movie. Perhaps Peter Parker took
to wearing “blank” contact lenses to account for the fact that he
no longer needs to wear glasses. But perhaps not.

Continuity: A blonde woman walks past twice in the same direction
when Peter finds out from Mary Jane that she is dating his best
friend.

Continuity: Norman’s hand jumps on and off Peter’s shoulder
during the graduation ceremony.

Continuity: The Green Goblin’s arms are up, down, then up again
between shots when he calls his jet glider.

Continuity: The morning after the field trip, as Peter is
following Mary Jane, we see the car that is going to pick her up
drive past Peter. When we switch to Peter’s point of view, the
car is nowhere to be seen. Then we go back to Peter, the bus
drives up, and the car suddenly appears.

Revealing mistakes: When Peter wakes up after getting bitten he
puts on his glasses and the entire screen become blurred not just
the part looking through the glasses.

Continuity: When Peter is in the newspaper office talking to the
secretary, his camera disappears and reappears between shots.

Errors in geography: An establishing shot shows us that the
wrestling match is the Armory on 26th Street at Park Avenue
South. The carjacking happened near the NY Public Library on 41st
and 5th Avenue. The robber apparently ran nearly mile before
committing a carjacking, only to drive downtown again.

Continuity: When Peter is talking with his uncle in the car the
background is completely different than when he gets out of the
car.

Continuity: When Peter is talking to Mary Jane outside the diner,
cars and a motorcycle that we see drive behind Mary Jane
disappear when the shot cuts to Peter.

Continuity: During the Thanksgiving dinner when everyone is
seated at the table, MJ’s arms jump about between shots.

Audio/visual unsynchronised: In several scenes, the Green
Goblin’s mouth (which is clearly visible through the mesh in the
“mouth” of his mask) does not move while he is talking.

Continuity: The right-handed Peter Parker always used an average
right-handed camera, but in one take during the balcony scene, we
see a reversed image of the scene and it appears that he is
holding a left-handed camera.

Continuity: Peter is learning how to shoot his web in his bedroom
and he breaks the green lamp. His Aunt comes to the door roused
by the noise. Then when the conversation between them is over,
Peter closes the door and the lamp is fixed. Later it disappears
altogether.

Continuity: When Peter is visiting Aunt May in the hospital, the
sweater on the back of his chair changes position.

Continuity: When Peter leaves for school we see him put on his
backpack. Outside he’s about to talk to MJ and you see him from
the front – there are no backpack straps.

Revealing mistakes: When smashing the Green Goblin against a wall
during the final fight scene, the brick wall flexes noticeably.

Revealing mistakes: When Mary Jane is trapped on the balcony you
can clearly see the metal mechanical supports that hold the wall.

Boom mike visible: After Parker wakes up the morning after
getting bitten, a boom mike is seen at the top of the mirror as
he is looking at himself.

Revealing mistakes: When Spider-Man first rescues Mary Jane at
the Unity festival and swings her to safety, they are moving to
the right but her hair is flowing that way, too, instead of
blowing in Spider-Man’s face.

Continuity: When the Green Goblin is menacing him, Spider-Man’s
left eye cover, which had been torn off earlier in the fight,
momentarily (re)appears, then is gone in the next shot.

Audio/visual unsynchronised: On the Bridge when Spider-man
screams “Don’t do it, Goblin!” We are shown a shot of his head
that is perfectly still, without any sign of speaking let alone
screaming.

Continuity: The extras at Columbia University are wearing cold
weather clothing, appropriate for the seasonal setting. Students
in the background wearing shorts and t-shirts blow the illusion
and reveal that the scene was shot on a warm day.

Continuity: While Mary Jane is talking to Peter Parker behind her
parents’ house, her trousers repeatedly move up, then down, then
up again, hiding, then revealing her underwear.

Factual Errors: The General’s medal ribbons are in the wrong
order and are missing devices that should be placed on some of
them.

Revealing mistakes: When the Green Goblin is trying to stab
Spider-Man with his Trident, one of its points bends.

Audio/visual unsynchronised: When Flash comes by to show MJ his
new car, we clearly see it is a Plymouth Prowler. The sound used
for the car is that of a V8 engine from a ’60s or ’70s muscle
car.

Continuity: Harry Osborne is whacked on the left side of his head
by falling debris. However, during the scene following this,
Harry has a bandage on the right side of his head.

Errors in geography: The tropical orange flowers behind Peter and
Norman at the graduation scene are native to California and
couldn’t possibly survive in New York.

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11. COPYRIGHT INFORMATION
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Copyright (c) 2000-2002
www.actioncutprint.com
Peter D. Marshall
All Rights Reserved

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