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DVD threatens film economics

October 22, 2009 Research concern SNL Kagan predicts in a new study that packaged media "sell-through revenue will drop 13% to $12.86 billion in 2009 as VOD technologies begin to erode market share."

Through the first three quarters of the year, sell-through is running down about 16%, so if it ended the year off 13%, that would mean an improvement in the fourth quarter. Many industry execs think that the improvement is going to happen.

The SNL Kagan study, "Economics of Motion Pictures," is not so much about home entertainment, however, as the total profit picture for major studio films. The study analyzes all films released on more than 1,000 screens from 2004 to 2008, and finds that films with the largest budgets actually do generally return the biggest profit. 

For instance, films with budgets greater than $100 million averaged almost $250 million in net profit under a major studio distribution fee structure, followed by the $90 million to $100 million budget range with a $118 million average net profit. 

The average for all films was $51 million in net profit. 

But, Kagan notes, declining packaged media sales could put the studios' largest revenue source in jeopardy. Almost seems a little behind the times.  

If sell-through ended the year off 13%, that would me

Posted by Marcy Magiera on October 22, 2009 | Comments (0)