·What exactly is a distribution company?
·Where do Distribution Companies get their finances?
·Where is the power of the industry concentrated and what are its sources?
are the Distribution Companyís shares of the market?
Viacom is a $12.86 billion corporation and one of the worldís largest entertainment companies. Its operations include Blockbuster, MTV networks, Paramount Pictures, Paramount Television, Spelling Television, Paramount Parks, Showtime Networks, Simon & Schuster, 19 television stations, and international theatrical exhibition operations. They own half-interests in the Comedy Central cable channel, the UPN (United Paramount Network) television network and UCI, an international theatrical exhibition chain. National Amusments, Inc. operates 1,300 motion picture screens in the U.S., the U.K. and South America, and is the parent company of Viacom.
Paramount Pictures is one of the first major motion picture studios, tracing its roots back to 1912. With more than 2,500 titles such as The Ten Commandments, Forrest Gump, The Godfather, and many more in its collection, Paramount has established itself as one of the leading production and distribution companies worldwide. Paramount chooses to capitalize on the creative resources available at other Viacom divisions. For example, with Nickelodeon Pictures, Paramount has released Snow Day and with MTV, such titles as Dead Man on Campus, Beavis & Butt-head Do America, and Varsity Blues remain as blockbusters. In order to reduce financial risks, Paramount has formed strategic production partnerships with other companies, such as Buena Vista, DreamWorks, and 20th Century Fox. The domestic theatrical distribution of Paramountís films is handled internally, however its international distribution is usually handled by United International Pictures (UIP), which releases to over 60 territories around the globe. Viacom has a 33% interest in UIP.
Viacom has recently announced that they plan to acquire
CBS Corp., a stock swap valued at more than $30 billion and will be completed
sometime this year. This will bring together a wide array of assets including
everything from Viacomís Paramount Movie Studios and its MTV cable television
network to CBSís TV network and extensive radio station businesses.
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Time Warner Inc.
Time Warner is one of the nationís largest entertainment conglomerations, with divisions in cable networks, publishing, filmed entertainment, music, and cable systems. Under the filmed entertainment subset of Time Warner are Warner Brothers and New Line Cinema, two of the leading motion picture distribution companies existing today.
Founded more than 75 years ago, Warner Brothers has become a fully integrated global entertainment company with businesses ranging from film, television productions, and product licensing, to international theatres and broadcast television networks. They possess a vast collection of over 5,700 films. Last year alone, they generated box office revenues of $1.04 billion, surpassing the $1 billion mark for the first time.
Complementing this older Time Warner subset is New Line Cinema, formed in 1967, it is a much younger distributor, dealing mostly with independent and foreign films. It licenses its motion pictures to ancillary distribution channels such as cable and broadcast television as well as international venues. New Line has several distinct divisions including in house theatrical distribution, marketing, home video, television, international acquisitions, production, licensing and merchandising units. In 1998, New Line increased its domestic ticket sales by 42% because of the production of four of the 26 top grossing films at the box office which were Rush Hour, The Wedding Singer, Blade, and Lost in Space. The 1999 release of Austin Powers: The Spy Who Shagged Me grossed more than $300 million worldwide, and is the 26th highest domestic grossing motion picture in history.
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Fox Entertainment Group
The Fox Entertainment Group is one of the nationís largest entertainment corporations worth over $17.2 billion. Fox, 83% of which is owned by The News Corporation Limited, is involved in the development, production, and worldwide distribution of feature films and television programs, television broadcasting and cable network programming. During the fiscal 1998, Fox grossed $730.2 million in the box office. Last November, Fox entered a new stage in its existence when News Corporation, its parent company, sold 18.6% of the entertainment group to the public. Because of this change, ever business sector within the company reported double digit revenue growth.
One of FEGís subsets, Twentieth Century Fox Film, was first at the domestic box office for the year, after such blockbusters as Star Wars Episode I: The Phantom Menace, Thereís Something About Mary, and Entrapment. The Phantom Menace was the first at the box office and added another Fox release to the five already in the top ten movies of all time. It accumulated more than $350 million at the end of the fiscal year and became the first film in history to reach $100 million domestically in five days. Thereís Something About Mary generated worldwide box office revenues of more than $360 million, an enormous result which was even more remarkable due to its low production costs. Fox Filmed Entertainment released 22 films in the U.S. in 1999, 14 of which were produced by Foxís three mainstream units: 20th Century Fox, Fox 2000, and Fox Animation Studios and 8 were produced and released by Fox Searchlight Pictures.
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The Walt Disney Company
Buena Vista International (BVI) is responsible for distributing all Disney films outside North America and as of 1998 it was the worldís top ranked international distributor of motion pictures. These incredible results occurred as a result of almost 40 films grossing over $100 million overseas.
Buena Vista has released such enormous blockbusters as Pulp Fiction, Jackie Brown, Armageddon, Die Hard with a Vengeance, The English Patient, Life is Beautiful, and the Sixth Sense. Other BVI films have done rather well for example, Ransom led with a gross of $146.3 million for the year, 101 Dalmations followed with a gross of $144.5 million for the year, and finally Con Air finished the year with a profit of $114 million, creating a huge fiscal profit.
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Universal Studios Group
Universal Studios Group is one of the largest entertainment companies in the nation with a wide array of divisions including motion pictures, music, television, theme parks, and many more. Universal Studios Group is majority-owned by Seagram Company a larger less differentiated company. Universal Pictures is the subset of Universal Studios that is responsible for much of the motion picture distribution. Universal Pictures often works closely with Jersey Films as well as Imagine Entertainment which have brought such blockbusters as Skulls, Erin Brockovich, The Hurricane, Snow Falling on Cedars, The Man on the Moon, End of Days, The Bone Collector, The Mummy, and Jurassic Parkís The Lost World. Universal Pictures has recently done rather well with two of their latest box office hits: Erin Brockovich, starring Julia Roberts which grossed almost $56 million dollars as well as The Hurrican grossing over $50 million.
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The Sony Corporation, one of the worldís largest international corporations, has a vast array of divisions inside of it including motion pictures, television, video and dvd, cable networks, music, and obviously electronics. The motion picture subset of the large corporation is represented by Sony Pictures Entertainment (SPE) which is in close association with Columbia Pictures and Tri-Star Pictures (both owned by Sony Corporation). As of 1998, Sony Pictures Entertainment grossed $748.5 million at the box office
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What is a Distribution Company?
The motion picture industry is very much dominated by large and very diversified conglomerates, such as The Walt Disney Co., News Corp., Sony Corp., Time Warner Inc., and Viacom Inc. which finance the development of new products, in this case motion pictures, own vast libraries of older products, and often own distribution channels for bringing these new products to the public. Sometimes the distributor will finance the movie from beginning to end and other times, they provide a portion of the finances and subsequently receive a cut of the profits.
According to the Motion Picture Association of America (MPAA), films financed by major distributors cost $53 million in 1998, almost triple the price tag of 10 years ago. Some films such as Titanic may cost in the range of $100 million while others, such as The Blair Witch Project, may be produced for $15 million or less, especially when they generate box office sales of nearly $140 million as this one did.
Where do Distribution Companies get their finances?
According to Standard & Poorís, 20% is derived from domestic theater rentals (the movie theater renting a copy of the film of a new movie), 20% coming from foreign theaters, 40% from home video, and television provides the remaining 20%. The distributorís portion of the theater rentals usually comes to about 50% of the box office total.
They consolidate their costs by taking on the marketing functions for more films produced by other companies. However, they also may have a lower payoff if the movie should have extraordinary success.
Where is the power of the industry concentrated and what are its sources?
The power of the industry is very much dominated in the distribution
companies, for the product, the film, can not be completely produced without
the finances and influence of the distribution company. These vast entertainment
conglomerates very much dominate the industry because they do have more
clout with theater owners and TV networks, if they do not own their own
subset within the very conglomerate. They can offer brand name recognition
to the viewer, and have more connections to the creative talent and experience
with effective management. Having copyrights to any popular characters
or brand names may seriously affect the success and thus the power of the
distribution company, as seen in MTV, CNNís Larry King Live, and of course
Walt Disney. Access to capital is also a very significant factor in a distributorís
potential power. By examining the operating cash flow and the severity
of debt as well as the ease with which the company may repay its debt is
often an indicator of possible power.
DOMESTIC BOX OFFICE MARKET SHARES(In percent)
Distributor 1993 1994 1995 1996 1997 1998 (MIL. $)
Columbia(1) 11.2 ... ... ... ... ... ...
Disney16.3 19.3 19.0 20.9 14.3 16.0 1,103.3
Dream Works... ... ... ... NA 6.9 473.3
Fox(2) 10.7 9.4 7.6 12.5 11.2(7)10.6 730.2
MGM/UA1.8 2.8 6.2 5.1 2.5 2.9 201.4
Miramax(3) 2.9 3.8 3.5 4.3 6.7 5.9 403.6
New Line(4) 3.4 6.2 6.6 5.0 6.2 7.8 539.1
Paramount9.3 13.9 10.0 12.6 11.8 15.8 1,084.4
Sony(5) ... 9.2 12.8 11.1 20.4 10.9 748.5
Tri-Star(1) 6.3 ... ... ... ... ... ...
Universal(6) 13.9 12.5 12.5 8.4 9.9 5.5 377.2
Warner18.5 16.1 16.3 15.7 10.9 10.9 749.7
Total 94.3 93.2
94.5 95.6 93.9 93.2 6,410.7
NA-Not available. (1) Currently owned by Sony Corp. (2) Currently owned by News Corp. (3) Currently owned by Disney. (4) Currently owned by Time-Warner. (5) Sony's Columbia and Tri-Star businesses noted separately prior to 1994. (6) Currently about 92%-owned by
Seagram Co. (7) Includes 0.8 share ($49.4 million) from Fox Searchlight.