Movie Exhibition 2013 Avengers

Satisfactory Essays

Read the Case Study and answer the following questions: • What changes in the external environment put companies in the difficult position in this industry? Support your answer by conducting PESTEL and Five-Forces Analyses. • How could a company operating in this industry react to the identified challenges? • How does the structure of the industry affects profits? The Movie Exhibition Industry 2013 IT IS APT that 2012’s top-grossing film was The Avengers, because movie studios and exhibitors sought to avenge a dismal prior year at the box office. Domestic box office receipts climbed 6 percent from 2011 to a record—setting $10.8 billion in 2012.‘ Three films—The Avengers, The Dark Knight Rises, and Skyfall—grossed more than $1 …show more content…

That same year, Paramount’s Thor grossed $449 million ($181 million domestically, $268 million internationally) giving the green light to a sequel. Studios focus on 14-24 year-olds, consistently the largest audience for movies. At just 15 percent of the U.S. population, this group purchases 21 percent of all tickets. More narrowly, 10 percent of the population are “frequent” moviegoers who attend more than one movie per month and are responsible for half of all ticket sales. Studios target this audience with PG and PG-13 fare, including 19 of 2012‘s top 25 releases. However, domestic demographic trends are unfavorable. While the U.S. population will increase 42 percent by 2050, this core audience will increase just 35 percent (19 million) or 475 per existing screen (see Exhibit 6). The risks for studios are significant as production costs are considerable (see Exhibit 1). Studios invested $1.6 billion for the 10 films that ranked among 2012's highest grossing ($165 million per film). Costs have increased faster than inflation. In 1980, the production budget for the highest grossing films averaged just $11 million. In the 1990s, films turned to special effects and costs reached $102 million (up 827 percent). Today, special effects alone can top $100 million for a major production. These investments are

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