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6.26.2015

CASE STUDY: What To Do As A Filmmaker With The PWC "Filmed Entertainment" 2015-2019 Data

In his Art of War, Sun Tzu wisely counseled, "Assess the advantages in taking advice, then structure your forces, accordingly to supplement extraordinary tactics." With that kernel of wisdom in mind, I looked at this year's Pricewaterhouse Coopers Global Entertainment and Media Outlook 2015-2019 and studied their summary of "Filmed Entertainment." Although I have not read the full report, the summary provides plenty food for thought so I asked myself what would I do with this data as a filmmaker? My answers are below labeled, "The Film Strategy tip." Let me know what you would do with that data.

Note, I have not purchased the full report and I am only basing this on the insights they published. But even those short insights are revealing.
  1. Growth around the world will boost filmed entertainment revenue. Global total filmed entertainment revenue will rise at a 4.1% CAGR (Compounded Annual Growth Rate) to 2019, reaching US$104.62bn. Particularly strong growth will be seen in China (14.5% CAGR) and in Latin America thanks to a 6.1% CAGR in Brazil and 11.5% CAGR in Argentina, but even global leader the US, with 33.0% of the total market in 2014, will see above-average growth of 4.6% CAGR.
    • The Film Strategy tip: In the next 5 years try to shoot a co-production in Latin America, China or Nigeria OR cast your film with well-known actors from Latin America, China or Nigeria. An international cast in a co-production can be a two-fer; 1) you might be able to get the actors at a good rate for the prestige of working on a US production and 2) with the possibility of production incentives and the expected growth, your film stands a decent chance of making money for you and your investors.
  2. Global box office will be driven by local films as well as Hollywood fare. Global box office revenue will rise at a CAGR of 5.7% to US$48.45bn in 2019, from US$36.70bn in 2014. But one trend noticeable everywhere from China to Western Europe is the significance of local films in boosting country box office revenue, and while Hollywood still dominates, local films will increasingly make an impact.
    • The Film Strategy tip: The good news is that a small film can go global. The bad news, if you can call it that, is that it will most likely be a genre film like horror or action with minimal dialogue to make it easy for audiences across different languages. On the other hand, again, consider co-productions again. A small film in the US might go nowhere beyond the film festival circuit. However, a small film co-produced in, say Colombia, might not only generate box office it could also gain a following as a "foreign film." I don't know why but movie audiences tend to more easily accept complexity in a film if it is "foreign" instead if it is domestic.
  3. China’s box office growth will see it pull ever nearer to the US. China’s box office revenue is forecast to rise at a 15.5% CAGR, its growth outstripping that of every other market surveyed. China’s box office revenue will thus move from US$4.31bn in 2014 to US$8.86bn in 2019 as its cinema-building boom continues and rising disposable incomes make the cinema more affordable.
    • The Film Strategy tip: As China continues to grow, it will continue to not only compete with Hollywood but also buy up Hollywood. Will this mean less piracy as China's studios tie up their finances with Hollywood? Does this mean branded entertainment that is globally recognizable like Marvel's comic books and Star Wars will continue to dominate the box office? Will this mean China's intellectual property will be ripe for use and development in the US the way Haim Saban took old Japanese stock footage and made the Mighty Morphin Power Rangers? Essentially all I have are questions but it means that if you're in the film industry you will read more about what China is doing and what China's audiences watch.
  4. Physical home video revenue continues on a downward trajectory. Global total physical home video revenue will decline from US$30.78bn in 2014 to US$22.81bn in 2019 at a -5.8% CAGR. With 52 of 54 territories recording a decline, the factors contributing to this—including the reduction in “bricks and mortar” video stores and the rise of electronic alternatives—only look set to strengthen.
    • The Film Strategy tip: You can not depend on DVD sales anymore. The physical disc is being relegated to use for the art video market (as a way to keep track of authorized artwork versions) and use as part of a merchandising package for well-known brands (think of a Star Wars set with the discs in a box shaped like Darth Vader's helmet). 
    • This is borne out by a Bloomberg report too. According to BloombergBusiness: "Online Video Revenue to Pass DVDs This Year, Theaters in 2017"
      Spending on movie downloads and video streaming subscriptions in the U.S. will surpass purchases and rentals of DVDs for the first time this year, according to a report Tuesday from Pricewaterhouse Coopers LLP. 
      Electronic home-video revenue will climb 13 percent to $9.5 billion this year, while physical sales drop to $7.8 billion, the consulting firm said. By 2017, the electronic revenue will reach $12 billion, at which point it will exceed the U.S. film box office, according to the report. 
      The accounting firm’s annual outlook for media and entertainment shows that while overall spending will continue to climb, technological shifts in the way content is delivered are creating winners and losers. 
      Music streaming, for example, will overtake the still relatively new business of digital purchases of songs by 2018. Digital revenue will account for 45 percent of all spending on books by that date. 
      Global media and entertainment revenue is predicted to rise at a 5.1 percent annual rate through 2019, reaching $2.23 trillion, the company said. 
  5. Electronic home video revenue will nearly double over the forecast period. Global electronic home video revenue is set to rise from US$15.28bn in 2014 to US$30.29bn in 2019. Total electronic home video OTT/streaming revenue in particular is seeing a CAGR of 19.0% as online video and streaming services are beginning to attain a significant foothold in many markets.
    • The Film Strategy tip: Pay attention to your contracts. What is your take of the internet streaming, home video OTT and VOD pie? Plan your movie to have a web and mobile  presence from the beginning so that you can capitalize on that later during distribution.
  6. Connected devices open up new video opportunities—and challenges. Smartphone connections are forecast to rise from 1.92bn in 2014 to 3.85bn in 2019. The proliferation of such connected devices among consumers will create both significant new opportunities and considerable challenges for companies creating and distributing filmed entertainment content.
    • The Film Strategy tip: Not only can you shoot a film with your phone (see Tangerine) but you can market and distribute your film using the phones and tablets. Study the market and pay attention to ways that filmmakers and others are using connected devices to get eyes on their works and build revenue.
Danny Jiminian is a producer and attorney who specializes in Entertainment Law, Intellectual Property, Business Law and Nonprofits and practices out of New York. For a free consultation, email him.

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