There’s a school of thought that holds fast to the belief that all industries can be fixed by consolidation. The Wall Street Journal lays out the case for Hollywood getting smaller via mergers and uses the music industry as an exemplar its promise.
The music industry? Really? The one that still has every big release pirated, is essentially a hostage to iTunes and still hasn’t caught on to this whole web video thing?
Admittedly Hollywood is fragmented much like the music industry was a decade ago. The four remaining music labels—Universal, Sony/BMG, Warner and EMI—don’t feel much healthier or forward-looking than they were back then. They may be working towards it, but so far, eh.
WSJ makes the point that “market leaders such as Warner have close to 20%, laggards such as General Electric’s Universal Studios and Sony are nearer 10% to 12%.”
Hollywood’s problems come less from fragmentation, however, than the fact that the cost of movies is rising and, like very other corner of the media-industrial complex, the value of their distribution is in question.
Tinseltown’s ills, in short:
•Studios are forced to plow untold millions into a handful of tentpole movies because a franchise release is the only sure-fire way to break-even these days and cash in bigger globally and through other product tie-ins. When one of these flops, it sets a studio back several seasons. Don’t believe us: Check out Disney’s quarter.
•Box office revenues are rising, but so are movie theatre ticket prices. Again, people mostly go to see the blockbusters.
•DVD revenues are evaporating and studios haven’t begun to figure out a way to replace that revenue. Pay television isn’t paying anymore, either, because HBO and Showtime are producing more of their own shows instead of running big movies.
•Talent salaries are too far out of whack, and no one has really sent that memo to the talent.
•There hasn’t been a new idea, in terms of management, in 50 years. No one’s leverages technology for distribution, only embracing it to jack up production costs by five or six zeroes.
•Wall Street’s woes and the global recession have cut into flows of capital to make movies. Waiting for that big check from China? Don’t bet on it.
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