Money Out
Just as film-industry participants generate revenues through an array of sources, they must also spend money on various expenditures to provide the kinds of moviegoing experiences viewers want. Major expenditures include the following:
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Production—such as fees paid to stars, directors, and other personnel, and costs associated with special-effects technology, set design, and musical-score composition. In recent years, production costs amount to about 65 percent of the cost to make a movie.
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Marketing, advertising, and print costs. For typical Hollywood films, these expenses can amount to 35 percent of the movie’s overall cost3. Heavy advance promotion can double the cost of a commercial film.
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Postproduction activities such as film editing and sound recording.
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Distribution expenses; for example, screening a movie for prospective buyers representing theaters.
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Exhibition costs, such as the significant expenses involved in constructing theaters and purchasing projection equipment.
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Acquisitions. Many big studios buy up other media-related companies (such as firms making media equipment that consumers use in their homes or enterprises providing animation services) to gain the technologies and competencies needed to stay in business. For example, in 2006, Disney bought its animation partner, Pixar, and in 2009 signed a long-term distribution deal with Steven Spielberg’s DreamWorks Studios. Likewise, Time Warner’s purchase of basic and premium cable channels like TBS and HBO has enabled it to distribute its own films on cable channels for home viewing.
To cut costs, many professional filmmakers have begun seeking less expensive ways of producing movies. Digital video has become a major alternative to celluloid film, allowing filmmakers to replace expensive and bulky 16-mm and 35-mm film cameras with cheaper, lightweight digital-video cameras. Digital video also lets filmmakers see the results of their camera work immediately instead of having to wait until film is developed. Moreover, they can capture additional footage cheaply, compared with costlier film stock and processing expenses. In fact, few new film cameras are being manufactured in the United States as they recede in favor of the digital models.
With digital-video equipment and computer-based desktop editors, people can now make movies for just a few thousand dollars—a tiny fraction of what the cost would be on film. More and more films every year are made digitally. And nonprofessionals are jumping into the action—producing their own films through accessible tools such as FinalCutPro and posting them on venues such as YouTube and Vimeo.