Monday, October 31, 2011

High Risks and High Costs of P&A in Cinematic Releases

Drake outlines five peculiarities of Hollywood films as cultural goods in the article “Distribution and Marketing in Contemporary Hollywood”. One of the peculiarities of blockbuster marketing that piqued my interest is the cultural value of seeing a movie in the cinema. As noted by Drake, box office sales account for only one quarter of movies revenue, with the rest of the revenue being comprised of DVD sales, international release, and licensing. Although many Americans might assume box office sales would play a much larger role in revenue generation, it is important to note that they are disproportionately valuable in terms of overall revenue generation for cinematic releases. Box office sales serve as important indicators of a films overall profit potential, heavily influence the value of a film in overseas markets, and play a large role in constructing a movies marquee value. In other words, box office sales are vitally important because of their role in determining the financial worth of a movie in after cinematic release sales, which make up three quarters of a films revenue.

Also important to note is the risk associated with a cinematic release. Given the high production costs of a blockbuster, uncertainty of a movies profitability, and the importants of block buster sales, producers and studios pay a great deal of money to advertise their releases, and garner hype for their productions. In 2005, blockbusters had an average production cost of 60 million dollars, and a P&A (pint and advertising) cost of 36 million dollars (half the cost of production). The reason for this high investment in a movies marketing and advertising lie in the understanding of P&A as a revenue stabilizing expenditure. Movies that are not advertised well enough simply do not develop the hype needed to succeed as cinematic releases.

This leads to the question, how does movie marketing help reduce the risk associated with blockbuster releases? One simple answer is that P&A increases benefits of cinematic attendance to a particular movie. Movies play an extremely important role in our culture; people quote them, talk about them, learn from them, and experience a cultural phenomena by attending them. By paying top dollar to advertise a production, producers are actively reminding viewers of the aforementioned cultural benefits associated with movie attendance. And because admission might buy a social experience rather than viewing a particular movie, it is vital to studios that viewers see their movies over others.

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