51212 Movie & Video Distribution in the US Industry Report

WWW.IBISWORLD.COM� Movie�&�Video�Distribution�in�the�US November 2010 1

IBISWorld Industry Report 51212Movie & Video Distribution in the USNovember�2010� Agata�Kaczanowska

The show goes on: Growing demand and new technologies drive revenue for distributors

2� About�this�Industry2 Industry Definition

2 Main Activities

2 Similar Industries

3 Additional Resources

4� Industry�at�a�Glance

5� Industry�Performance5 Executive Summary

5 Key External Drivers

6 Current Performance

9 Industry Outlook

11 Industry Life Cycle

13� Products�&�Markets13 Supply Chain

13 Products & Services

14 Demand Determinants

15 Major Markets

16 International Trade

17 Business Locations

19� Competitive�Landscape19 Market Share Concentration

19 Key Success Factors

19 Cost Structure Benchmarks

21 Basis of Competition

21 Barriers to Entry

21 Industry Globalization

23� Major�Companies

24� Operating�Conditions24 Structural Risk Index

24 Investment Requirements

25 Technology & Systems

26 Industry Volatility

27 Regulation & Policy

27 Industry Assistance

27 Taxation Issues

28� Key�Statistics28 Industry Data

28 Annual Change

28 Key Ratios

29 Historical Performance

30� Jargon�&�Glossary

www.ibisworld.com��|��1-800-330-3772��| ��[email protected]


This industry includes establishments that are primarily engaged in marketing and circulating audiovisual works to cinemas, television networks, other exhibitors and stores. The industry excludes movie and

television distributors that are also involved in production, retailers, rental stores, merchant wholesalers that distribute pre-recorded physical media and music distributors.

The�primary�activities�of�this�industry�are

Acquiring licenses and rights to distribute motion pictures and television programming

Marketing motion pictures and television programming

Distribution to television stations

Distribution to cinemas

33461 Recordable�Media�Manufacturing�in�the�USEstablishments primarily engaged in providing mass duplication and packaging of videotapes.

42169 Electronic�Parts�&�Miscellaneous�Wholesaling�in�the�USEstablishments primarily engaged in wholesaling videotapes and discs.

45122 Record�Stores�in�the�USEstablishments primarily engaged in selling pre-recorded videotapes and discs to the general public.

51211a Movie�&�Video�Production�in�the�USEstablishments primarily engaged in producing and distributing motion pictures and videotapes.

51211b Television�Production�in�the�USEstablishments primarily engaged in producing and distributing motion pictures and videotapes.

51219 Video�Postproduction�Services�in�the�USEstablishments primarily engaged in providing motion picture footage (via film libraries) to producers.

53223 DVD,�Game�&�Video�Rental�in�the�USEstablishments primarily engaged in renting videotapes and discs to the general public.

Industry�Definition

Main�Activities�

Similar�Industries

About�this�Industry

The�major�products�and�services�in�this�industry�are

Movies

Other audiovisual works

TV programming


About�this�Industry

Additional�Resources For�additional�information�on�this�industry

www.mpaa.org�Motion Picture Association of America

www.screendigest.com�Screen Digest

www.hollywoodreporter.com�The Hollywood Reporter

�IBISWorld writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com


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Downstream demand from movie theaters

SOURCE: WWW.IBISWORLD.COM

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Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2010)

59.2%Movies26.1%

TV programming

14.7%Other audiovisual works


Key�Statistics�Snapshot

Industry�at�a�GlanceMovie�&�Video�Distribution�in�2010

Industry�Structure Life Cycle Stage Growth

Revenue Volatility Low

Investment Requirements Low

Industry Assistance Low

Concentration Level Low

Regulation Level Light

Technology Change High

Barriers to Entry High

Industry Globalization Low

Competition Level High

Revenue

$2.0bnProfit

$72.3mExports

$287.1mBusinesses

409

Annual�Growth�10-15

3.3%Annual�Growth�05-10

3.5%

Key�External�DriversDownstream�demand�from�cable�networksDownstream�demand�from�movie�theatersDownstream�demand�from�retail�tradePer�capita�disposable�incomeYield�on�10-year�treasury�billsDownstream�demand�from�television�broadcasting

Market�ShareThere are no Major Players in this industry

p. 23

p. 5

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 28



Key�External�Drivers Downstream demand from cable networks The industry is affected by demand from cable networks for television programming and movies. This driver is expected to increase over the next year. This is a potential opportunity for the industry.

Downstream demand from movie theatersThe industry is affected by demand for movie product by cinemas. This driver is expected to increase slowly over the next year.

Downstream demand from retail tradeThe industry is affected by demand from retailers for pre-recorded DVDs and Blu-rays. This driver is expected to increase over the next year.

Per capita disposable incomeChanges in per capita disposable income may affect expenditure at movie theaters. This factor may affect the amount spent on making movies and videos, which will in turn affect the amount spent on distributing movies and videos. This driver is expected to increase slowly over the next year.

Executive�Summary

The Movie and Video Distribution industry’s growth has slowed in response to the development of streaming and social media, which has enabled production companies to distribute their own content with relatively low initial costs. Consumer demand for physical recordings is anticipated to propel industry revenue at an annual rate of 3.5% in the five years to 2010. Throughout this time, the industry

increasingly relied on existing libraries of content and independent productions to drive revenue as more content has been self-distributed by major studios. These trends represent high levels of external competition for firms in this industry.

Industry revenue is driven by increasing spending and investment in the movie and TV production industries, along with growing consumer demand for content. In 2010, revenue for the Movie and Video Distribution industry is expected to grow by 2.3% to total $2.0

billion. A transition to digital distribution by cinemas will occur in 2010 and the following years, as major players of that industry have contracts to install projectors and systems compatible with digital formats. This will cut distribution time and costs, potentially increasing industry profit margins through 2015.

The number of enterprises in the Movie and Video Distribution industry is also projected to expand to total 342 firms over the five years to 2015, an annual increase of 1.3%, in response to growing demand for distribution services. Employer and employee growth is expected to be slow because of the high barriers to entry and competition that this industry faces. However, growth and additional financing of the movie and TV production industries is anticipated to lead to additional content and outsourcing to the Movie and Video Distribution industry during this time. Demand for audiovisual content is projected to increase as mobile devices make it more convenient for consumers to access. Consequently, industry revenue is expected to grow at an average annual rate of 3.3% over the five years to 2015 to total $2.4 billion.

Industry�PerformanceExecutive�Summary�� |�� Key�External�Drivers�� |�� Current�PerformanceIndustry�Outlook�� |�� Life�Cycle�Stage

� Growing demand for distribution services will encourage firms to enter the industry


Industry�Performance

Current�Performance

The Movie and Video Distribution industry is continuing to grow in response to high demand for content. Movie theaters, cable networks, broadcasting stations and retailers depend on distribution companies to provide them with content to program or sell to consumers, who have continued spending on motion picture and TV entertainment despite drops in disposable income during the recession. Consumers are also demanding increasing amounts of online content, especially as mobile devices grow in popularity. Lower distribution costs are being passed on to consumers, leading to higher sales volumes and increased exposure for existing content. The Movie and Video Distribution industry is relying more on existing libraries of content and independent productions

to drive revenue because production studios have expanded their in-house distribution arms. Yet these in-house distributors continue to contract out to independent distributors and thereby support the Movie and Video Distribution industry, despite posing a threat to its long-term viability.

The industry’s revenue is estimated to grow at an average annual rate of 3.5% over the last five years to total $2.0 billion in 2010. This includes only third-party distribution companies; producers that distribute films in-house are discussed in the Movie and Video Production industry report. Revenue for the Movie and Video Distribution industry is expected to grow 2.3% in 2010, propelled by increasing spending and investment in the movie and TV production

Key�External�Driverscontinued

Yield on 10-year treasury billsWhen real interest rates go up, the level of funding available to producers of movies and television decreases, which limits the availability of new content distributed by this industry. This driver is expected to increase over the next year. This is a potential threat for the industry.

Downstream demand from television broadcasting Audience viewing trends and the financing of TV stations and networks dictates their demand for movie and programming content. This driver is expected to increase over the next year.

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Downstream demand from retail trade


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Current�Performancecontinued

industries. Profit is expected to account for 3.6% of revenue in 2010 and has been driven down over the past five

years as a result of increased competition from major studios relying more on in-house distributors.

Recession�leads�to�vertical�integration

Movie and video distribution companies not only rely on content from major studios, but also sell rights to existing content from their libraries and distribute movies produced by independent cinematographers. Studios have further increased their reliance on in-house distributors in order to cut out the “middleman” and increase profit margins as a result. Decreased distribution costs and easier access to stores and cinemas online, combined with recessionary pressure to streamline operations, led to high levels of vertical integration in the five years to 2010. Simultaneously, high-speed internet-enabled streaming of audiovisual content further facilitated distribution. The shift to vertically

integrated distribution companies and a fall in funding for independent movies is leading to a drop in the number of enterprises in the Movie and Video Distribution industry, which is expected to decrease at an average annual rate of 5.5% to total 321 businesses in 2010. Vertical integration also resulted in a drop in revenue in 2008, and lower revenue growth rates thereafter.

Distribution�to�digital Since 2005, the rate of data transmission increased significantly, and has combined with new media file formats to revolutionize the way in which movies and TV programming are shared. The ability for many consumers to download full movies in an hour has developed during this time, and movie streaming was also made available in the five years to 2010 through websites such as YouTube (founded in 2005) and Hulu (established in 2007). Consumers are also accessing more content through online channels as a result of data plans and internet access on mobile devices, such as smartphones or the iPad. The convenience and instant availability of online content is slowly changing the way that consumers access media, altering the functions of the Movie and Video

Distribution industry. On one hand, the effect is positive since content can always be accessed and displayed, and an unlimited amount can be shared online. However, the internet is also facilitating distribution for studios and independent producers, decreasing the value of hiring a distribution company. As a result, companies in this industry are relying on content that they have acquired to distribute, decreasing reliance on new productions.

Digital and high-definition TV has simplified the work of distribution companies. More channels mean more opportunities for companies to get content shown on TV, but also for consumers to watch other broadcasts. As a result, distributor competition has shifted toward arranging for content to be shown on primetime and has

� Despite the recession, consumers continued to demand new TV and movie content



Distribution�to�digitalcontinued

increased the need for marketing content once it is scheduled to be shown. This has escalated the amount of time that distributors spend on each film, shifting distribution companies’ marketing emphasis from getting a spot to convincing audiences to tune in.

Digital distribution is now used between companies, and some cinemas are beginning to receive media via satellite link technology. Over the past five years, the 3D box office has gained popularity; in 2009, sales increased 375% year on year, according to the Motion Picture Association of America (MPAA). For instance, AMC, major theater chain, is in the midst of converting to digital projectors in order to improve film quality and enable 3D capabilities, and digital distribution is expected to follow. Technological developments have reduced the need for physical media, cutting industry costs and leading to increased sales as content has become convenient to access. Technology advances have led to an average annual increase of 4.5%

in wages paid to industry employees as superior skills are necessary to work with online applications, not only for actual file sharing but also for marketing. New technology has also cut the number of people necessary to run a distribution firm, and led to a 1.7% decrease in industry employment over the past five years.

Increased�competition

As a result of vertical integration and technological developments, the Movie and Video Distribution industry is facing increased competition. Vertical integration over the past five years has increased external competition from media studios that use internal distribution arms. Online streaming and digital TV have eased the distribution of

content. The increase in content available to consumers has increased the competition for an audience, since people now have a greater content selection. Social networking online has also made it easier for independent producers to market their own content, putting further pressure on distributors in this industry.

US�and�Canada�box�offi�ce�sales

YearBox�offi�ce�($ billion) (% change)

2000 7.5 N/C2001 8.1 8.02002 9.1 12.32003 9.2 1.12004 9.3 1.12005 8.8 -5.42006 9.2 4.52007 9.6 4.32008 9.6 0.02009 10.6 10.4

SOURCE: MOTION PICTURE ASSOCIATION OF AMERICA



Increased�wage�and�employment

Wages are expected to continue increasing over the next five years to 2015 at an average rate of 3.2% per year, but will remain at approximately 15.9% of industry revenue during this time. Advances in technology are decreasing the number of employees necessary to perform the basic tasks of each distribution company by simplifying networking and decreasing the need for packaging. Each employee is more productive and the average wage is, therefore, expected to continue to grow

over the next five years at an average annual rate of 2.5% to total $91,440 in 2015. Industry employment is also projected to increase, at an average annual rate of 0.6% to total 4,089 people in 2015. The anticipated growth in employment is a reflection of an increase in distribution companies as financing for the production and distribution of audiovisual content grows over this time. Companies that ramp up production are expected to outsource some distribution deals to this industry.

Technological�drivers The eruption of 3D’s popularity in 2010 and beyond is anticipated to drive more cinemas to switch to digital projectors, which not only play 3D movies but can also be hooked up to digital distribution technologies. Downloading cinema-format films via confidential satellite

links or online is a realistic option for retrofitted cinemas. Not only is the industry expected to directly benefit from this technology through cutting high shipping, storage and upkeep costs, but it will also be aided by nearly instantaneous digital distribution.

Industry�Outlook

Over the five years to 2015, the Movie and Video Distribution industry’s revenue is forecast to increase at an average rate of 3.3% per year to total $2.4 billion. Expected growth and additional financing of the movie and TV production industries is anticipated to lead to additional content and outsourcing to the Movie and Video Distribution industry. Likewise, demand is projected to increase as mobile devices make TV and movie content more convenient for consumers to access. In 2011, the forecast is estimated to experience a 2.3% revenue increase to $2.1 billion.

Industry profit margins are anticipated to increase over the next five years as costs are cut further by enhancements to current digital distribution methods. This growth is expected to be gradual, however, because competition will continue to pressure distribution companies to advertise and cut prices.

The number of enterprises is also estimated to increase over the five years to 2015, as financing for content production becomes more readily available. Financing will become obtainable as consumer sentiment improves throughout this time. Additionally, movie theaters are projected to convert to digital distribution in the five years to 2015. The prevalence of increasing internet speeds, other download capabilities and higher-quality digital formats at an affordable price is expected to entice cinemas to upgrade their systems.

� As funding for content production becomes more available, the number of industry firms will grow



Technological�driverscontinued

This will allow distributors to make trailers and other commercials that respond to current events, or distribute popular films to additional cinemas in order to meet demand.

Distribution to consumers is also expected to change drastically over the five years to 2015. Technologies being released in 2010 include the Keychest and common format, which will allow users to access content anywhere and anytime. This access is supposed to be permanent, though it will not be able to be “rented” or “shared” between users. Consumer demand is also expected to continue escalating, especially as portable devices with sizeable screens, such as the iPad, gain popularity. However, such easy distribution is expected to have a

neutral effect on the industry because although distribution costs will be drastically lower to cinemas and TV studios on a global scale, producers will also have increased access to online distribution networks. As a result, distribution companies will be forced to focus on attaining rights to content and develop marketing strategies to entice producers to choose the third-party distributor over self-distribution tactics.

Facilitating�trade Over the next five years, imports and exports are also projected to gradually grow as a share of revenue. Digital cinema, digital TV and high-speed internet are becoming increasingly prevalent abroad. Each of these technologies facilitates and reduces the costs of international distribution. The industry stands to gain financially

from systems development as international digital licensing and advertising revenue grows as a response. In particular, the industry will experience revenue jumps for existing content because American classics, many of which distribution companies own the rights to, are increasing in popularity abroad.

� Demand will grow as portable devices with large screens, like the iPad, gain popularity


Industry�PerformanceLife�Cycle�Stage


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DeclineCrash or Grow?

Potential�Hidden�GemsFuture Industries

Quality�GrowthHigh growth in economic importance; weaker companies close down; developed technology and markets

Time�WastersHobby Industries

MaturityCompany consolidation;level of economic importance stable

Shake-out

Shake-out

Quantity�GrowthMany new companies; minor growth in economic importance; substantial technology change

Key�Features�of�a�Growth�Industry

Revenue grows faster than the economyMany new companies enter the marketRapid technology & process changeGrowing customer acceptance of productRapid introduction of products & brands

Recordable�Media�Manufacturing

Supermarkets�&�Grocery�Stores

Electronic�Parts�&�Miscellaneous�Wholesaling

Department�Stores

Movie�&�Video�Distribution

New avenues of demand for distributors are emerging

DVD formats increased in favor until late 2005, when growth slowed

Digital TV is expected to offer more demand for movie products

Movies may be able to be distributed in digital format via satellite



Industry�Life�Cycle Industry adaptation to new markets and technologies is resulting in growth. The Movie and Video Distribution industry is expected to achieve a 3.5% average annual revenue growth rate over the five years to 2010, which is well above the average growth rate of US GDP of 1.1% each year during this time. This growth has been the result of increasing consumer spending on home entertainment and in cinemas, despite the global recession.

Over the five years to 2015 the industry is projected to grow at a faster pace than US GDP, at an average annual rate of 3.3% per year. Industry growth is slightly curbed, however, by increased competition from movie production studios that brought distribution activities in-house in order to cut out

distribution fees. This, combined with the global recession’s adverse impact on consumer sentiment, has led to decreased financing for independent distribution companies, resulting in a decline of the number of companies in the industry.

Financing is expected to increase over the five years to 2015. The growing number of motion picture and television shows produced thanks to cheap, easier to use professional camera equipment, and the increased interest in independent movies, is boosting industry revenue. Technological advances have cut industry costs, as some cinemas and consumers switched to digital downloads. Such advances are projected to continue to lead to revenue growth over the five years to 2015.

�This industry is Growing


Products�&�Services

This industry distributes movie, television and other audiovisual works. Movies are estimated to be 59.2% of industry product in 2010. This share of revenue has increased over the past five

years as independent movie productions grew in popularity. This segment is projected to continue to grow over the five years to 2015 as spending on movie productions increases. Television

�Products�&�MarketsSupply�Chain�� |�� Products�&�Services�� |�� Demand�DeterminantsMajor�Markets�� |�� International�Trade�� |�� Business�Locations

KEY�BUYING�INDUSTRIES

44511� Supermarkets�&�Grocery�Stores�in�the�US�Sale of videotapes and DVDs

45211� Department�Stores�in�the�US�Sale of videotapes and DVDs

51213� Movie�Theaters�in�the�US�Demand from exhibition/theatres for film product

51312� Television�Broadcasting�in�the�US�Demand for film product

51321� Cable�Networks�in�the�US�Demand for film product

51322� Cable,�Internet�&�Telephone�Providers�in�the�US�Demand for film product

53223� DVD,�Game�&�Video�Rental�in�the�US�Rental of videotapes and DVDs

54181� Advertising�Agencies�in�the�US�Some demand for distribution of commercials

KEY�SELLING�INDUSTRIES

51211a� Movie�&�Video�Production�in�the�US�Provision of film product for distribution

51211b� Television�Production�in�the�US�Provision of film product for distribution

Supply�Chain

Products and services segmentation (2010)

Total $2.0bn

59.2%Movies26.1%

TV programming

14.7%Other audiovisual

works



Products�&�Markets

DemandDeterminants

Demand for movies, television and other audiovisual works has been increasing over the five years to 2010. Despite the recession, consumers have

continued to go to the movies, and subscribe to cable or satellite television. Increased availability of media content thanks to high speed internet and

Products�&�Servicescontinued

programming makes up approximately 26.1% of industry goods, and has been a decreasing part of the industry as production studios have switched to in-house distributors. This product segment is projected to stabilize over the five years to 2015, especially as spending on television production increases. Other audiovisual works include news segments and slide shows and are approximately 14.7% of the industry’s goods. This segment has stayed constant over the five years to 2010, and is expected to decrease in the next five years while movie distribution grows.

Revenue streamsLicensing of domestic rights to distribute audiovisual work is 30.3% of industry revenue. More than 76.1% of this licensing revenue is generated by movies, while television licensing makes up 17.2% of domestic licensing revenue. Over the five years to 2015, the licensing of domestic television rights is projected to generate a growing share of revenue as spending on television show production increases because of the increasing consumption of television products as a result of easy access through mobile devices. Licensing of international distribution rights, on the other hand, generates 14.3% of industry revenue.

Sales of copies of audiovisual works to the wholesale, retail and rental markets make up 15.0% of industry revenue, while the outright sale of audiovisual works is 12.7% of industry revenue. Sales of copies have decreased since 2007, and are anticipated to continue to decline over the five years to 2015, as demand for

DVDs falls. DVD demand initially dropped as a result of decreased consumer sentiment in the recession but has continued to decline as Blu-rays and online streaming methods gain popularity. These other formats, however, do not generate enough revenue to compensate for the DVD demand decline. Movie distribution companies generate less than 1% of revenue from the outright sale of movies, because they generally build up libraries for continual distribution. Sales are generally of other audiovisual works, with outright television sales only 2.8% of total industry revenue.

Licensing of domestic rights to exhibit, broadcast or rent feature films is 7.0% of industry revenue. Meanwhile, television programming licensing for exhibition, broadcast or rental rights is 5.9% of industry revenue. These revenue streams are expected to increase as the industry relies progressively more on existing content. Other revenue sources include the rental of equipment for movie or television production, merchandise licensing, preproduction services and production support.

Movie�and�video�distribution�revenue�streams�(2010)�Source Revenue (%)

Licensing (domestic) 30.3Licensing (international) 14.3Sales of copies 15.0Sales of originals 12.7Other 27.7

SOURCE: US CENSUS BUREAU AND IBISWORLD



Major�Markets

Distribution companies make up almost half, 48.8%, of Movie and Video Distribution industry revenue. While some companies in the industry focus on distribution to cinemas, TV networks or retailers, others focus on amassing libraries of content for these distributors to distribute. Also, each distribution company operates in a niche market, meaning that multiple distribution companies can have rights to distribute a film owned by yet another company. This market segment is anticipated to decrease in the five years to 2010 as a result of a decrease in distribution companies, many of which closed in 2007

and 2008 in response to financing difficulties during the global recession.

Sales of movies and television shows to wholesale, retail and rental stores generate approximately 17.9% of distribution revenue. These stores then sell the content directly to consumers. Over the five years to 2010 this segment has decreased as a result of lower DVD sales bringing down sales revenue of stores. Nonetheless, this market is projected to remain a constant share of revenue over the next five years to 2015 as consumer spending picks up and as online sales grow.

IBISWorld estimates that sales of licensing and rights to domestic

DemandDeterminantscontinued

connectivity via mobile devices has led to a rise in its consumption. According to Neilson, people in 2010 are also watching movies and television on multiple screens more often than in 2005. Additionally, digital distribution rights for movies and television are now a vital part of posting TV and movies online, translating into another way for distribution companies to exploit their existing libraries of content. Demand for content is

expected to continue to increase over the five years to 2015 as more and more people use online tools to access it.

However, demand for pre-recorded physical media, has decreased as a result of these technological advances. The number of DVDs sold peaked in 2007, and has been on the decline ever since. As of 2010, revenue from distributing media for direct consumption, such as Blu-rays or online, has not made up for the decrease in DVD sales.

Major market segmentation (2010)

Total $2.0bn

48.8%Distribution companies

4.3%Foreign cinemas

17.9%Wholesale, retail and rental stores

1.8%Households 1.5%

Other

10%Foreign TV networks

8.8%TV networks

6.9%Cinemas




International�TradeThe US is the lead exporter of audiovisual content in the world. However, exporters include businesses not only in the Movie and Video Distribution industry, but also foreign distribution companies and firms in the Television and Movie and Video Production industries. Well over 60% of content shown on TV in the European Union was produced in the US. Foreign companies alter the majority of content before it is shown abroad in order to appeal to broader foreign audiences. Alterations are often done through dubbing and subtitles and can drastically change the original production to reflect local cultures and jokes. As a result, revenues can be difficult to track since they are accounted for by the international distribution divisions as well as the co-production companies abroad. Movies, for instance, are often considered co-produced by the original US producer and by the production company that adapts the content to be country-specific.

Likewise, imports are difficult to track as a result of the many diverse private

companies that dominate this industry. Imports of audiovisual content are often from the UK or other EU countries because they appeal more to a broad base of Americans. Content produced in India, and increasingly Hong Kong, is also a significant portion of these imports. Over the five years to 2015, imports and exports are projected to gradually grow as a share of revenue as high-speed internet facilitates and reduces costs of international distribution.

Major�Marketscontinued

television networks in 2010 will generate 8.8% of industry revenue. Meanwhile, domestic distribution of movies to cinemas will generate another 6.9% of total revenue. Foreign TV network purchases are expected to make up 10.0% of industry revenue while foreign cinemas are anticipated to purchase 4.3% of this industry’s sales. These market segments are not expected to shift significantly over the ten years from 2005 to 2015 because of the well established nature and gradual growth of the television and cinema industries.

The households market is chiefly comprised of renters, because some distribution companies have local rental

services established on the side. Other markets include businesses, such as law firms, which purchase products from this industry.

The total market for movie, video and television content is much larger than the Movie and Video Distribution industry’s reach. These markets are also supplied by the Motion Picture and Video Production industry (see IBISWorld’s reports: Movie and Video Production 51211a, and Television Production 51211b) and by the merchant wholesale distribution of prerecorded physical media. IBISWorld estimates that Movie and Video Production companies’ distribution subsidiaries generate over $10 billion annually.

Level�&�Trend��Exports in the industry are Medium and Steady

�Imports in the industry are Medium and Steady

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Exports Imports Balance

Industry trade balance



�Products�&�Markets

Business�Locations�2010

MO0.7

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

Great Lakes

VT0.2

MA2.2

RI0.0

NJ3.7

DE0.0

NH0.2

CT0.7

MD1.0

DC0.2

1

5

3

7

2

6

4

8 9

Additional�States�(as marked on map)

AZ0.7

CA39.4

NV0.2

OR0.0

WA1.2

MT0.2

NE0.0

MN1.0

IA0.2

OH2.0 VA

1.0

FL4.7

KS0.0

CO1.5

UT1.0

ID0.0

TX4.7

OK0.2

NC1.0

AK0.0

WY0.0

TN0.5

KY0.5

GA2.2

IL2.7

ME0.2

ND0.0

WI1.0 MI

1.0 PA2.2

WV0.0

SD0.0

NM0.5

AR0.7

MS0.0

AL0.2

SC0.5

LA0.7

HI0.5

IN0.5

NY18.1 5

67

8

321

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Mid- Atlantic

Establishments�(%)�

� Less�than�3%� 3%�to�less�than�10%� 10%�to�less�than�20%� 20%�or�more


�Products�&�Markets

Business�Locations California employs 36.2% the workers in the Movie and Video Distribution industry, yet houses 39.9% of industry establishments. Close proximity gives these companies the personal connection and quick service that allow them to better work with producers, which is a key factor in the distributors’ success. For similar reasons, 18.2% of establishments are in New York, which employ 17.5% of the industry workforce. Establishments are also concentrated in the Southeast, including Florida and Texas. Florida also employs 21.8% of the industry’s workers, so larger distribution companies are headquartered there. Only three establishments have over 500 employees, while 91.9% of industry firms employ fewer than 20 people. The geographic concentration of the Movie and Video Distribution industry is not expected to change over the five years to 2015 because distribution and production companies have been

centered in California for decades in order to take advantage of more predictable weather and a wide variety of landscapes close to each other.

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Distribution of establishments vs. population



Cost�Structure�Benchmarks

The Movie and Video Distribution industry’s profit is expected to average 3.6% of revenue in 2010. It has been driven down over the past five years as a result of increased competition from major studios relying increasingly on in-house distributors. However, average industry profit is expected to grow in the five years to 2015 as a result of falling distribution costs associated with the move toward digital technology.

Industry purchases are a majority of industry costs, making up 52.7% of revenue in 2010. Major purchases include licensing and programming fees and their amortization, which is approximately 32.4% of total industry revenue and is on a declining trend as studios bargain to retain rights to the

movies and TV they produce. Meanwhile royalties paid to studios are increasing as studios have mounting bargaining leverage due to the establishment of in-house distribution departments, and are about 14.0% of industry revenue. Packaging materials make up the remaining industry purchases, totaling an estimated 6.5% of revenue in 2010. Packaging costs are projected to fall over the next five years as more distribution is done digitally.

Marketing, calculated under “other,” is approximately 16.3% of industry revenue in 2010. Movie and video distribution companies advertise the content they distribute by approaching cinemas, TV networks and retailers. Marketing costs have been steadily

Key�Success�Factors Must have licenseEnsure all movie related licensing and copyright rights are in place and enforced.

Having a wide and expanding product rangeHave a range of new and previously released content to meet demand.

Having marketing expertiseHaving marketing expertise related to content release strategies.

Control of distribution arrangementsAbility to negotiate contracts with movie producers/library holders regarding distribution rights with a variety of end users, such as cinemas.

Development of new productsTo have a close working relationship with producers developing new content, possibly investing in production in order to guarantee initial distribution rights.

Market�Share�Concentration

The top four players in this industry are estimated to generate less than 9.0% of industry revenue in 2010. This low level of industry concentration is because of the fragmented and private nature of distributors that rely on industry contacts in niche and local markets. Distributors are heavily dependent on content produced by movie and television studios, and must establish long term contacts in cinema, television

broadcasting and retail industries in order to make sales. The personal nature of these contacts combined with the costs of acquiring content limits distribution companies to a specific region or to a specific genre of content. In addition, the establishment and increased reliance on in-house distributors of major movie and television studios have further limited the content available to independent distribution companies.

Competitive�LandscapeMarket�Share�Concentration�� |�� Key�Success�Factors�� |�� Cost�Structure�BenchmarksBasis�of�Competition�� |�� Barriers�to�Entry�� |�� Industry�Globalization

Level��Concentration in this industry is Low

�IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:


Competitive�Landscape

Cost�Structure�Benchmarkscontinued

increasing over the past five years, and are expected to continue to rise over the next five years to 2015.

Industry wages are expected to make up 15.9% of revenue. The industry is expected to employ 3,961 people in 2010. Industry employment decreased at an average annual rate of 1.7% over the past five years as a result of a contracting number of enterprises that did not have financing to continue business through the recession. Wages, however, increased because those employed are specialists with movie and TV company contacts or have the necessary computer skills to set

up and maintain digital distribution channels. Wages are expected to continue increasing over the next five years to 2015 at an average rate of 3.2% per year, but will continue to be approximately 15.9% of industry revenue during this time.

Other costs that the Movie and Video Distribution industry incurs include administrative costs, rent, utilities and depreciation. All of these costs, when combined, are estimated total 11.5% of industry revenue in 2010. These costs are not expected to change over the five years to 2015.

Industry�Costs�and�Average�Sector�Costs■�Profi�t■�Rent■�Utilities■�Depreciation■�Other■�Wages■�Purchases

Industry�Costs�(2010)�

Average�Costs�of�all�Industries�in�sector�(2010)�

3.6Profit

52.715.923.31.5

35.031.217.45.0

4.0

INDUSTRY�CODE�AND�TITLE� 2005-2010� 2011-2015

51211a� Movie�&�Video�Production� −� •51211b� Television�Production� −� •Costs for operators in the Movie & Video Distribution industry are affected by the price of goods and services from supplier industries. IBISWorld has estimated the trends of key input prices over the previous fi ve years and for the coming fi ve years. − is good news for this industry as IBISWorld expects the price of key inputs to fall; • shows where this industry is negatively affected as IBISWorld expects the price of key inputs to rise; - means price changes will not be a key issue for the industry.



0 100%2.2

2.05.4Profit

0.8



Industry�Globalization

The level of foreign ownership in this industry is minimal since it is fragmented and primarily privately owned. Exports are estimated to total 14.3% of industry revenue in 2010, and are expected to remain around the same proportion of revenue over the five years to 2015. Most

industry exports are broadcasting agreements to European countries. Imports are projected to fulfill approximately 8.3% of industry demand in 2010. The level of imports is also expected to stay at a low level over the five years to 2015.

Barriers�to�Entry There are significant barriers to entry in this industry, which include initial costs and access to trade networks. Distribution companies invest heavily in the content they distribute, both during its production and in purchasing rights to license and program it. Therefore, initial costs are extremely high in order to purchase a library of content to distribute. Likewise, the industry is ever more reliant on established trade agreements as in-house distributors are increasingly utilized by studios and, therefore, limit

the content available to independent distribution companies.

Basis�of�Competition Motion picture distribution companies compete for content. They compete to purchase content at a reasonable price, but must bid against each other. At this stage, distribution companies compete for advertising space, cinema screens and shelf space in stores. Although some of this is done based on long term contracts with retailers or theaters, most of this competition is also price-based. The development of high speed internet and digital television channels in the five years to 2010 has increased the amount of content shown and demanded. This has decreased the

competition for contracts, but increased competition for exposure because consumers now have more choices of where and when to view content. This has also lowered the price of content delivered directly to households.

Additionally, this industry is threatened by the increasing prevalence of studios establishing in-house distribution segments. For instance, Disney products are mainly distributed by the Disney-owned Buena Vista International distribution arm. This limits the content available to distribution companies.

Level�&�Trend��Competition in this industry is High and the trend is Steady

Level�&�Trend��Barriers to Entry in this industry are High and Steady

Barriers�to�Entry�checklist� Level

Competition HighConcentration LowLife Cycle Stage GrowthInvestment Requirements LowTechnology Change HighRegulation & Policy LightIndustry Assistance Low


Level�&�Trend��Globalization in this industry is Low and the trend is Steady



Industry�Globalizationcontinued


Trade�Globalization Going�Global:�Movie�&�Video�Distribution�1998-2010

Expo

rts/

Reve

nue

Expo

rts/

Reve

nue

200

150

100

50

0

200

150

100

50

0

Imports/Domestic�Demand Imports/Domestic�Demand0 040 4080 80120 120160 160

International trade is a major determinant of an industry’s level of globalization.

Exports offer growth opportunities for fi rms. However there are legal, economic and political risks associated with dealing in foreign countries.

Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local fi rms would otherwise supply.

Export ExportGlobal Global

ImportLocal ImportLocal

Movie�&�Video�Distribution 1998

2010


Other�Companies Image EntertainmentEstimated market share: 4.7%Image Entertainment is an American media distribution company, headquartered in Chatsworth, CA. The company has undergone major restructuring changes over the past five years, and cancelled two successive mergers that were in their final stages in 2009 and 2010. As a result, the company incurred significant costs that have exceeded revenue. Restructuring has included trade renegotiations, a series of reductions in employees (over 20.0% total) and reductions of existing personnel’s benefits, and cuts in marketing expenditure. The company is estimated to employ 108 people in 2010. Additionally, Image Entertainment revenue is hurt by decreasing demand for DVDs, at first a result of decreased discretionary spending due to lower

personal income of consumers during the recession, but now prolonged by a trend toward digital sales, which are not offsetting losses from lower DVD revenue. IBISWorld estimates that 95.9% of total company revenue is generated by US operations, while 99.5% of its revenue is from the distribution of movie, video and TV recordings.

RAC Entertainment GroupEstimated market share: 2.0%This private company is primarily involved in distributing motion pictures to cinemas and retailers. It has a single office in Alhambra, CA and employs less than 90 people.

Dkp 70 Mm Inc.Estimated market share: 1.2%Dkp 70 Mm Inc. is a private company that is headquartered in Culver City, CA.

�Major�CompaniesThere�are�no�Major�Players�in�this�industry�� |�� Other�Companies

Image�Entertainment�(motion�picture�distribution�segment)��–�fi�nancial�performance

Year*Revenue�($ ‘000) (% change)

Operating�Income�($ ‘000) (% change)

2004-05 112,466 N/C 60 N/C2005-06 106,609 -5.2 4 -93.32006-07 95,186 -10.7 -58 N/C2007-08 91,801 -3.6 -38 34.52008-09 124,836 36.0 -18 52.62009-10 94,292 -24.5 -14 22.2

*Year�end�March�31SOURCE: ANNUAL REPORT AND IBISWORLD


InvestmentRequirements

The industry has a high degree of labor intensity. It also has high costs associated with acquiring original audiovisual works. The industry requires a significant labor input in all areas from negotiation of content distribution rights with producers, to actually distributing multiple copies of movies to theaters or to stores. Labor costs account for about 15.9% of total revenue, while depreciation accounts for about 1.5%. This is not expected to change over the next five years to 2015. For every dollar spent on wages, an additional 11 cents is spent on the use of and replacing supporting buildings and equipment.

�Operating�ConditionsStructural�Risk�Index�� |�� Investment�Requirements�� |�� Technology�&�SystemsIndustry�Volatility�� |�� Regulation�&�Policy�� |�� Industry�Assistance�� |�� Taxation�Issues

IBISWorld has scored key elements of industry structure on a scale of 1 to 9 – the higher the figure, the greater the risks to businesses operating in the industry.

Operating conditions in the Movie & Video Distribution industry are less risky than in other industries in the

Information division. The industry structural risk index totals 47.6 points compared to 54.0 points for the Information division as a whole (100 points equates to extremely poor operating conditions).

Movie�&�Video�Distribution Information

Re

venu

e Vola

tility

Barriers to Entry Com

petition Exports

Life Cycle Stage Levels of Assistance Imports


Structural�Risk�Index

Industry�Relax�PointsBarriers�to�EntryExportsLife�Cycle�StageRevenue�Volatility

Industry�Pressure�PointsCompetitionLevels�of�Assistance

54.0Score

Re

venu

e Vola

tility

Barriers to Entry Com

petition Exports

Life Cycle Stage Levels of Assistance Imports

47.6Score

Level��The level of investment required is Low

Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4

SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit

Movie & Video Distribution

InformationEconomy


Operating�Conditions

InvestmentRequirementscontinued

Satellite link technology is being phased into theaters, especially to theaters with digital projectors. Cinema investments in digital projectors are being propelled by the popularity of 3D movies in 2010. The new technologies are

expected to reduce distribution costs over the next five years to 2015. Library costs fell over the past five years as master copies of films can now be stored digitally on a company’s servers, eliminating some storage and transportation costs.

Tools�of�the�Trade:�Growth�Strategies�for�Success


Labo

r�Int

ensi

veCapital�Intensive

Change�in�Share�of�the�Economy

New�Age�Economy

Recreation,�Personal�Services,�Health�and�Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.

Traditional�Service�Economy

Wholesale�and�Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.

Old�Economy

Agriculture�and�Manufacturing.�Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.

Investment�Economy

Information,�Communications,�Mining,�Finance�and�Real�Estate.�To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Recordable�Media�Manufacturing

Supermarkets�&�Grocery�Stores

Electronic�Parts�&�Miscellaneous�Wholesaling

Department�Stores

Record�Stores


Technology&�Systems

Digital distributionDistribution to movie theaters is changing rapidly. Over the five years to 2010, confidential satellite link technology was refined for use by cinemas to access high-quality digital video downloads. As cinemas phase in this technology, which they began to do in late 2009, distribution costs are decreasing to this market segment.

This reduction in costs is likely to increase industry profits over the five years to 2015.

Marketing, online, TVDistribution companies also market the content they own rights to in order to increase sales. They market primarily to their major clients, such as other distribution companies, stores, TV

Level��The level of Technology Change is High



Revenue�Volatility Revenue volatility tends to be low since the industry has an array of existing and emerging areas seeking audiovisual content. However, the past five years to 2010 have been unusually volatile as a result of up and downswings in the

financing available to distributors and producers of movie, television and video content. Over the five years to 2015, slow revenue growth is projected because the industry will benefit from increasing content production levels.

Technology&�Systemscontinued

networks and cinemas. Online advertising has increased the exposure of old movies, increasing potential earnings from older content. Similarly, the switch to digital has increased the number of TV channels available to viewers, and has therefore led to higher demand for content. This increased demand for content is driving revenue growth for the Movie and Video Distribution industry.

Phase-out of physical mediaThe decrease in household consumption of physical media, such as DVDs, is slowing industry growth. DVD and other disc products were cheap to manufacture and distribute, and consumers were willing to pay a high price for the high-quality content encoded on them. Over the past five years to 2010, however, increased internet speeds and new video file formats have enabled users to stream and download high-quality content

directly to PCs, TVs and mobile devices. Users are not willing to pay as much for this content, and ad-support is weaker than on TV because advertising companies do not pay as much for online exposure. The rising popularity of direct access to content online is also leading to a decrease in demand for distributors, as big and small content production companies are increasingly likely to distribute their own content through online channels. This is expected to slow industry growth, though increased sales volumes due to the convenience of online access are projected to begin to make up for physical media losses over the five years to 2015.

� New channels for movie distribution are driving slow revenue growth


Volatility�vs�Growth

Reve

nue�

vola

tility

*�(%

)�

1000

100

10

1

0.1

Five�year�annualized�revenue�growth�(%)�–30 –10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue�Chip

* Axis is in logarithmic scale


A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.

When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Level��The level of Volatility is Low



Taxation�Issues There are no industry-specific taxes.

Industry�Assistance There is no direct government assistance to the Movie and Video Distribution industry. Assistance to movie and television production companies in the form of tax breaks and grants does

increase the amount of content produced, part of which is distributed by this industry (see 51211a and 51211b, the Movie and Video Production, and Television Production industries, respectively).

Regulation�&�Policy There are no industry-specific regulations. Copyright, licensing and royalty restrictions do apply.

Level�&�Trend��The level of Regulation is Light and the trend is Steady

Level�&�Trend��The level of Industry Assistance is Low and the trend is Steady

Level��The level of Tax Burden is Low


�Key�StatisticsRevenue�

($m)

Industry�Value�Added�

($m)Establish-

ments Enterprises EmploymentExports�

($m)Imports�

($m)Wages�($m)

Domestic�Demand

Spending�on�Home�Ent.�

($b)2001 1,215.2 269.1 537 512 5,870 167.7 91.1 206.6 1,138.6 16.92002 1,387.0 283.2 541 508 5,311 176.1 99.9 211.9 1,310.8 19.02003 1,501.0 275.3 449 418 3,504 199.6 109.6 198.1 1,411.0 20.72004 1,498.0 290.9 452 419 3,449 223.2 110.8 213.8 1,385.6 21.82005 1,691.1 344.2 457 425 4,305 245.2 128.5 257.2 1,574.4 21.72006 1,823.0 364.1 442 391 4,597 278.9 127.6 270.3 1,671.7 21.62007 2,009.2 416.4 434 343 4,263 275.3 142.7 313.0 1,876.6 21.42008 1,866.2 413.5 425 301 4,182 244.8 136.2 317.5 1,757.6 21.02009 1,963.0 412.1 416 296 3,989 288.0 151.2 311.1 1,826.2 20.02010 2,007.9 423.2 409 321 3,961 287.1 156.6 319.9 1,877.4 22.22011 2,054.7 434.9 404 317 3,985 312.3 157.6 329.2 1,900.0 23.02012 2,141.1 449.8 388 319 3,916 295.5 173.4 347.7 2,019.0 21.02013 2,235.1 468.3 401 329 4,041 324.1 176.6 350.6 2,087.6 19.42014 2,307.2 480.5 441 336 4,055 320.7 189.4 371.8 2,175.9 21.42015 2,356.2 495.0 424 342 4,089 346.4 186.1 373.9 2,195.9 22.5Sector�Rank 26/30 27/30 30/30 29/30 29/30 5/5 4/5 27/30 5/5 N/AEconomy�Rank 642/690 668/690 615/689 606/686 675/690 203/239 208/234 643/689 222/234 N/A

IVA/Revenue�(%)

Imports/�Demand�

(%)Exports/Revenue�

(%)

Revenue�per�Employee�

($’000)Wages/Revenue�

(%)Employees�

per�Est.Average�Wage�

($)

Share�of�the�Economy�

(%)2001 22.14 8.00 13.80 207.02 17.00 10.93 35,195.91 0.002002 20.42 7.62 12.70 261.16 15.28 9.82 39,898.32 0.002003 18.34 7.77 13.30 428.37 13.20 7.80 56,535.39 0.002004 19.42 8.00 14.90 434.33 14.27 7.63 61,988.98 0.002005 20.35 8.16 14.50 392.82 15.21 9.42 59,744.48 0.002006 19.97 7.63 15.30 396.56 14.83 10.40 58,799.22 0.002007 20.72 7.60 13.70 471.31 15.58 9.82 73,422.47 0.002008 22.16 7.75 13.12 446.25 17.01 9.84 75,920.61 0.002009 20.99 8.28 14.67 492.10 15.85 9.59 77,989.47 0.002010 21.08 8.34 14.30 506.92 15.93 9.68 80,762.43 0.002011 21.17 8.29 15.20 515.61 16.02 9.86 82,609.79 0.002012 21.01 8.59 13.80 546.76 16.24 10.09 88,789.58 0.002013 20.95 8.46 14.50 553.11 15.69 10.08 86,760.70 0.002014 20.83 8.70 13.90 568.98 16.11 9.20 91,689.27 0.002015 21.01 8.47 14.70 576.23 15.87 9.64 91,440.45 0.00Sector�Rank 28/30 1/5 4/5 9/30 20/30 24/30 7/30 27/30Economy�Rank 533/690 150/234 115/239 168/690 378/689 402/689 55/689 668/690

Figures are inflation-adjusted 2010 dollars. Rank refers to 2010 data.

Revenue�(%)

Industry�Value�Added�

(%)

Establish-ments�

(%)Enterprises�

(%)Employment�

(%)Exports�

(%)Imports�

(%)Wages�

(%)

Domestic�Demand�

(%)

Spending�on�Home�Ent.�

(%)2002 14.1 5.2 0.7 -0.8 -9.5 5.0 9.7 2.6 15.1 12.42003 8.2 -2.8 -17.0 -17.7 -34.0 13.3 9.7 -6.5 7.6 8.92004 -0.2 5.7 0.7 0.2 -1.6 11.8 1.1 7.9 -1.8 5.32005 12.9 18.3 1.1 1.4 24.8 9.9 16.0 20.3 13.6 -0.52006 7.8 5.8 -3.3 -8.0 6.8 13.7 -0.7 5.1 6.2 -0.52007 10.2 14.4 -1.8 -12.3 -7.3 -1.3 11.8 15.8 12.3 -0.92008 -7.1 -0.7 -2.1 -12.2 -1.9 -11.1 -4.6 1.4 -6.3 -1.92009 5.2 -0.3 -2.1 -1.7 -4.6 17.6 11.0 -2.0 3.9 -4.82010 2.3 2.7 -1.7 8.4 -0.7 -0.3 3.6 2.8 2.8 11.02011 2.3 2.8 -1.2 -1.2 0.6 8.8 0.6 2.9 1.2 3.62012 4.2 3.4 -4.0 0.6 -1.7 -5.4 10.0 5.6 6.3 -8.72013 4.4 4.1 3.4 3.1 3.2 9.7 1.8 0.8 3.4 -7.62014 3.2 2.6 10.0 2.1 0.3 -1.0 7.2 6.0 4.2 10.32015 2.1 3.0 -3.9 1.8 0.8 8.0 -1.7 0.6 0.9 5.1Sector�Rank 8/30 11/30 14/30 2/30 15/30 4/5 3/5 4/30 3/5 N/AEconomy�Rank 228/690 223/690 489/689 5/686 376/690 172/239 101/234 93/689 75/234 N/A

Annual�Change

Key�Ratios

Industry�Data



Key�Statistics

HistoricalPerformance

For decades, celluloid film reels have been used to distribute movies to cinemas. Each reel costs over $1,000 to produce and up to five reels are needed to store a full-length movie. Not only are they expensive to produce and store, but shipping costs are high and they need to be cleaned every six showings and replaced often. This has been a major industry cost.

The industry continued to achieve robust (but slower) revenue growth, although with reduced profit growth. This largely resulted from strong DVD sales. The industry was adversely affected by the increased interest rates throughout 2005, as well as the high gas prices, which impeded growth in household disposable income. This affected both consumer expenditures and sentiment levels. The industry was estimated to have experienced significant real revenue growth and profitability in the early 2000s. The performance of individual operators varied according to their slate of new films that can be released to theaters and on DVD (and to their successes), as well as the demand from TV and cable TV for new and ongoing productions.

From 1993 to 1998, growth was attributed to the combination of significantly increased box office receipts (caused mainly by real increases in ticket prices rather than any significant increase in admissions) and from increased demand from TV networks, particularly cable networks. Over this period, the penetration into households of cable TV, beyond just the basic service, increased and networks strived to expand the number of channels on offer. Basic cable subscriber households

increased from 55 million in 1990 to 67 million in 1998 (an increase of 22.0%), but pay cable subscriber households increased from 27 million to 39 million (or 44.0%) over the same period.

Between 1990 and 1998, the VCR penetration rate of US households also increased from 65% to 84%. With this came an increased desire to purchase videos. Figures from the MPAA indicated that rentals of videotapes increased from 32 million in 1990 to 44.5 million in 1998 (or by 39.0%). However, the sell through of videotapes increased far more dramatically, from 210 million to 658 million in 1998 (or by 213.0%).

While industry revenue rose over this period, so did costs, and this was reflected in profitability and changes in value-added. This was confirmed by figures released by the MPAA, which indicated that the average marketing cost (print and advertising) for their members for new feature films also increased. While the average cost per feature was $14 million in 1993, this rose to an average of $25 million in 1998 (or 79.0%). Most of this increase resulted from increased advertising costs, with a heavier emphasis being placed on TV and more on direct promotional activities against print advertising. This period also witnessed a significant expansion of multiplex cinemas and screens which meant more prints had to be distributed. The international demand for film product also increased due to extensions to cable and pay-TV operations overseas and increased demand related to release of blockbuster film releases, which followed the same pattern as in the domestic market.


Jargon�&�Glossary

BARRIERS�TO�ENTRY Barriers to entry can be High, Medium or Low. High means new companies struggle to enter an industry, while Low means it is easy for a firm to enter an industry.

CAPITAL/LABOR�INTENSITY An indicator of how much capital is used in production as opposed to labor. Level is stated as High, Medium or Low. High is a ratio of less than $3 of wage costs for every $1 of depreciation; Medium is $3 – $8 of wage costs to $1 of depreciation; Low is greater than $8 of wage costs for every $1 of depreciation.

DOMESTIC�DEMAND The use of goods and services within the US; the sum of imports and domestic production minus exports.

EMPLOYMENT The number of working proprietors, partners, permanent, part-time, temporary and casual employees, and managerial and executive employees.

ENTERPRISE A division that is separately managed and keeps management accounts. The most relevant measure of the number of firms in an industry.

ESTABLISHMENT The smallest type of accounting unit within an Enterprise; usually consists of one or more locations in a state or territory of the country in which it operates.

EXPORTS The total sales and transfers of goods produced by an industry that are exported.

IMPORTS The value of goods and services imported with the amount payable to non-residents.

INDUSTRY�CONCENTRATION IBISWorld bases concentration on the top four firms. Concentration is identified as High, Medium or Low. High means the top four players account for over 70% of revenue; Medium is 40 –70% of revenue; Low is less than 40%.

INDUSTRY�REVENUE The total sales revenue of the industry, including sales (exclusive of excise and sales tax) of goods and services; plus transfers to other firms of the same business; plus subsidies on production; plus all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); plus capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY�VALUE�ADDED The market value of goods and services produced by an industry minus the cost of goods and services used in the production process, which leaves the gross product of the industry (also called its Value Added).

INTERNATIONAL�TRADE The level is determined by: Exports/Revenue: Low is 0 –5%; Medium is 5 –20%; High is over 20%. Imports/Domestic Demand: Low is 0 –5%; Medium is 5 –35%; and High is over 35%.

LIFE�CYCLE All industries go through periods of Growth, Maturity and Decline. An average life cycle lasts 70 years. Maturity is the longest stage at 40 years with Growth and Decline at 15 years each.

NON-EMPLOYING�ESTABLISHMENT Businesses with no paid employment and payroll are known as non-employing establishments. These are mostly set-up by self employed individuals.

VOLATILITY The level of volatility is determined by the percentage change in revenue over the past five years. Volatility levels: Very High is greater than ±20%; High Volatility is between ±10% and ±20%; Moderate Volatility is between ±3% and ±10%; and Low Volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees of the establishment.

Industry�Jargon

IBISWorld�Glossary

AUDIOVISUAL�WORK�(AV)� A series of images accompanied by sound that is created to be shown in a particular order using a machine, such as a projector.

BLU-RAY High-definition disc format.

MOTION�PICTURES Recorded visual entertainment that includes movies and videos, but excludes TV programming, advertisements and music videos.

PIRACY Illegal downloads and distribution of motion pictures in breach of a film owner’s copyright.

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Documents

51212 Movie & Video Distribution in the US Industry Report