Wednesday, January 6, 2010

The Secret Numbers

Up until 2008, the six major studios supplied their revenue numbers to their trade association, the MPAA. They included a detailed breakdown of the money they received from all sources– movie theaters, DVDs, television licensing, and pay television, and from every market in the world. The MPAA aggregated the data and then published it its privately-circulated "All Media Revenue Reports." Although secret from the public, these reports were provided to the top executives at the six major studios, who used them to gauge how their studio was performing vis-a-vis the other studios. Unlike retail sales reports, which at best are measures how much consumers spent buying tickets and DVDs, the MPAA numbers report much the studios actually received in revenue.
The story these numbers tell is how Hollywood's business moved from movie theaters to homes. As Table 1 shows, ticket sales from theaters provided 100 percent of the studios' revenues in 1948. In 2007, the last full year reported by the studios, theaters accounted for less than 21 percent of the studios’ revenue and home entertainment– a category that did not exist in 1948– accounted for 79 percent of their revenues. What made home entertainment even more important to their earnings is the profits margins are much higher on DVDs and television licensing than theaters. The couch potato is now king.