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Molly Ellison

melliso1@terpmail.umd.edu
Media, Self & Society
Communication (PR track), Government & Politics
Spring 2014 CPSP 359S, Dr. Eubanks
How have distribution methods in Hollywood evolved since the film industrys conception and what are the
financial implications of these changes?
The financial models used in Hollywood
are unlike those in most American
industries. Since film is considered a
creative industry, there is an inevitable
uncertainty of the financial success of a
project. In fact, Hollywood struggles to
break even. The average studio film
costs $71 million to make and $36
million to market. Much of a films
financial success rests on how the film
is distributed and marketed. Film
distribution is how the film is presented
to the public. The window of release is
when and how long a movie is made
available.
The Evolution of Hollywood
Distribution Methods
Introduction
In 1930, 65 percent of the US
population went to the movies weekly.
In 2007, only 9.7 percent of Americans
did so. Even so, the 2012 domestic box
office hit a record high with $10.8 billion
in revenue. The theatrical release is still
seen as the first and most exclusive
window of release. Until the advent of
television in the 1950s, this was the
sole distribution platform for movies.
Home video and DVD popularity grew
during the 1980s and 90s. In 1986,
home video revenues exceeded
theatrical revenues. Digital distribution
platforms such as Netflix and Hulu are
currently changing the face of the
industry. These entities are growing
faster than any distribution methods that
came before them. From 2012 to 2013,
Netflixs net income saw a 655.3
percent increase.
Financial Implications
1900s nickelodeons, the first
movie theatres, were established.
1920s with the introduction of
sound, cinemas had to adapt to new
technology. Many smaller theatres
could not afford to do so and went
out of business.
1930s the major studios
monopolized film distribution. They
owned and operated all major
theatre chains across the country.
1950s the prevalence of television
threatened movie theatres and
studios panicked.
1980s to 90s the home video and
DVD markets expanded, which
increased studio revenue.
2000s the introduction of online
distribution created an entirely new
platform to watch movies (and for
studios to make money).
Distribution Over the Years
Theatrical
28%
Home Video
30%
Pay TV
11%
Free, Cable
&
Syndicated
TV
15%
Licensing
(Merchandis
e)
7%
Digital
5%
PPV/Other
4%
Studio Revenue Breakdown, 2012
(Ulin)
The rise of digital distribution platforms
such as Netflix and Hulu is forcing the
film industry to rapidly adjust its
business model. While theatrical
distribution is still seen as the first
window of release, some companies are
experimenting with multiple-platform
releases. In 2011, IFC and Magnolia
Pictures released Margin Call on VOD,
Netflix and Amazon at the same time as
the films theatrical run. The film made
about $10 million across both platforms.
In the coming years, studios will grapple
with how to adapt to the changing
distribution landscape.
The Future of Distribution
Major Hollywood film
studios, including
Paramount, Universal,
Sony and Walt Disney.
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I analyzed reports created by economists that contained financial data about the film industry. I also looked at research from social
scientists that broke down the history of Hollywood distribution methods. I looked at historical box office data from the website, The-
Numbers. I also analyzed financial reports from Netflix and Hulu to see how their revenues and net profits have changed over time.
Methods
Special thanks to Dr. Eubanks, my Discovery Research classmates, and the Media, Self & Society program.