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The Business of Media Distribution

Book Description

Written by the insider who headed sales for Lucasfilm across distribution markets and managed the release of Star Wars Episode III, this is the first book to show how all related media distribution markets, including television, video and online, work together and independently to finance and maximize profits on productions. It demystifies how an idea moves from concept to profits and how distribution quietly dominates an industry otherwise grounded in high profile elements (production, marketing, creative, finance, law).

The book provides a unique apprenticeship to the business, illuminating at a macro level how an idea can move from concept to generating $1 Billion, relating theory and practice in the context of the maturation of global market segments, and exposing the devil in the detail that impacts bottom line profits.

Producers, media executives, and entertainment attorneys in specific niches will benefit from this wide-ranging look at the business across various distribution outlets, including theatrical, television, airlines, merchandising, cable, and home video.

Table of Contents

  1. Front Cover
  2. Title Page
  3. Copyright
  4. Dedication
  5. Contents
  6. Acknowledgment
  7. Chapter 1 Market Opportunity and Segmentation — The Diverse Role of Studios and Networks
    1. Introduction
      1. Market Opportunity and Segmenting the Market
      2. Defining Studios by Their Distribution Infrastructure
      3. What Does Distribution Really Mean?
      4. Range of Activities — Distribution Encompasses Many Markets
      5. Overhead
      6. Pipeline
      7. Need for Control
    2. Joint Ventures
      1. Demise of Historic Joint Ventures
      2. Branding and Scale Needs; Online Giving Rise to New Era of Joint Ventures?
    3. Studios as Defined by Range of Product
      1. Quantity
      2. Range of Labels and Relationships
      3. Pipeline and Portfolio
      4. Brand Creation versus Brand Extension
    4. Windows and Film Ultimates: Life Cycle Management of Intellectual Property Assets
      1. Film: Primary Distribution Windows
      2. Film Revenue Cycle
      3. Shifting Windows
    5. Television: Channels Defined by Range and Quantity of Product Plus Reach and Specialization
      1. Defining Networks by Product, Reach, and Range of Budgets
      2. Product Portfolio Strategy: Brand Extension versus Brand Creation
      3. Television Windows and Life Cycle Revenues
    6. Internet and New Media
  8. Chapter 2 Intellectual Property Assets enabling Distribution — The Business of Creating, Marketing, and Protecting an Idea
    1. The Development Process
      1. Development in Stages
      2. Development in the Context of Distribution
      3. Is Online Different?
      4. Development Guidelines
      5. Development Costs
    2. Optioning Properties
      1. Efficiency of Options
    3. Marketing Ideas (aka Pitching)
      1. Rhythm of the Story, Walk Me through the Story
      2. Toy Story as an Example
    4. Protecting Content: Copright, Piracy, and Related Issues
      1. Copyright
      2. Trademarks
      3. Piracy and Fighting Illegal Copying and Downloads
  9. Chapter 3 Financing Production: Studios and Networks as Venture Capitalists
    1. Overview
      1. Principal Methods of Financing Films
      2. Principal Methods of Financing Online Production
    2. Variety of Financing Methods as a Response to Difficulty and Risks in Predicting Success of experience Goods
      1. Challenge Exacerbated in Selecting which Product to Produce
    3. Studio Financing
      1. Classic Production–Financing–Distribution Deal
      2. Studio Financing of Production Slate; Studio Co-productions
    4. Independent Financing
      1. Foreign Pre-sales
      2. Ancillary Advances
      3. Negative Pickups
      4. Third-party Credit — Banks, Angels, and a Mix of Private Equity
    5. Rent a Distributor: When a Producer Rises to Studio-like Clout
      1. Reduced Distribution Fee Key to the Deal
      2. Funding Ensures Tapping into 100% of Revenue Streams
    6. Television: How and Why Does It Differ?
      1. Network, Cable, and Pay TV Financing
      2. Deficit and Risk Continuum
      3. TV and Online’s Relatively Lower Risk Profile
    7. The Wrinkles of Co-production
      1. Case A: A Party Invests in Production in Return for an Equity Stake
      2. Case B: A Party Invests in a Production in Return for Distribution Rights
      3. Case C: When There is Creative and/or Production Collaboration between Parties with Respect to a Production
      4. Online’s Relatively Low Co-Production Quotient
  10. Chapter 4 Theatrical Distribution
    1. Theatrical Release as a Loss Leader
      1. Basic Definitions and the Uneasy Tension between Distribution and Production
      2. The Theatrical Release Challenge — Locomotive for Awareness While Profits Remain Downstream
      3. Hedging Bets and Profiling Release Patterns
    2. History and Market evolution
      1. Consent Decrees, Block Booking, and Blind Bidding
      2. Multiplexes and Bankruptcies of Major Chains
      3. The Digital Divide and Digital Cinema
    3. Distributor–exhibitor Splits/Deals
      1. Components of Film Rental
      2. 90/10 Minimum Guarantee Deals
      3. Aggregates: Alternative to 90/10 Deals with House Nut
      4. Firm Terms vs. Settlement
      5. Four-Wall Structure
    4. Release Strategy and Timing
      1. Factors in When to Release
      2. The Online Factor
      3. Records Aren’t What They Used to Be — Dissecting Opening Weekends
    5. Theatrical Booking
      1. Locations, Types of Runs, Length of Runs, Frenzy of Booking
      2. Prints and Screen Counts
      3. Per Screen Averages
      4. Decay Curves and Drop-Offs — Managing the Release
      5. International Booking
    6. Concessions
  11. Chapter 5 The Home Video Business
    1. Compelling Value Proposition
      1. History and Growth of the Video Business
      2. Early Roots: Format Wars and Seminal Legal Wrangling
      3. The Betamax Decision: Universal v. Sony
      4. The Early Retail Environment: The Rental Video Store
      5. Transition from Rental to Videos for Purchase: Retail Expands to Accommodate Two Distinct Markets for Video/DVD Consumption
      6. The Emergence of and Transition to DVDs
      7. Beyond an Ancillary Market: Emergence of the Made-for-Video Market
      8. Next Generation DVDs: Blu-ray versus HDDVD — Format War Redux
      9. Product Diversification
    2. Maturation of the DVD Market and Growing Complexity of Retail Marketing
      1. Peaking of the DVD Curve and Compressed Sales Cycle
      2. Expansion of Retail Mass Market Chains: Wal-Mart, Best Buy, Target, etc.
      3. E-Tailers and Next Generation Retail
    3. Inventory Management and Impact on Pricing and Profits
      1. Returns and Stock Management
      2. Pricing, Price Reductions, and Price Protection
    4. International Variations
      1. Release Timing and Development of Market
    5. Video economics and Why Video Revenues are Uniquely Profitable to Studios
      1. Video Revenues
      2. Video Royalty Theory and Influence on Cash Flow
      3. Setting Royalty Rates
      4. Video Costs
    6. The Future of Video
  12. Chapter 6 Television Distribution
    1. Free Television (United States)
      1. Free Television Market Segmentation
      2. Free Video-on-Demand and Internet Access — What Does Free TV Mean?
      3. Distribution Patterns and Windows: The Decline of Ratings for Theatrical Feature Films on TV and Evolution of the Market
      4. Economics and Pattern of Licensing Feature Films for TV Broadcast
      5. First Run TV Series
      6. Syndication Window and Barter
      7. Online’s “Short Tail” versus “Long Tail” and Impact on Syndication
      8. Impact of Elimination of Fin/Syn Rules and Growth of Cable
      9. Basic Economics of TV Series
      10. Up-front Markets, Mechanics of Advertising Sales, and Ratings
      11. Internet Intersection — Live + What?
    2. Pay Television
      1. Film Licenses and Windows
      2. Basis for License Fees; Calculation of Runs
      3. Output Deals
      4. Deal Term Overview (Pay and Free TV)
    3. International Market
      1. History of Growth
      2. International Free Television
      3. International Pay Television and Need for Scale
      4. Co-Productions
      5. Case Study: The Kirch Group
    4. A New Landscape — Impact of DVRs, VOD, and Digital Television
      1. TiVo and DVRs
      2. The New TV Paradigm/VOD
  13. Chapter 7 Internet Distribution, Downloads, and On-demand Streaming — A New Paradigm
    1. Grand experiments and Revolutionary Changes in Consuming Video Content: Downloads and On-demand Access Coming of Age
      1. The Explosion of Video on the Web
      2. Download Services — Challenges to Adoption, Growth through Internet Leaders Not Pirates, and a Market Made by iPods
      3. Download Revenue Model Wars I: Subscription versus Pay-Per-Download
      4. Streaming — Fundamentals of Monetizing Internet Advertising
      5. Internet Viewing and Immediacy of Content — Video on the Monitor and the YouTube Generation
      6. Revenue Model Wars II: Free TV Advertising Supported versus VOD
      7. Living Room Convergence — Truly Marrying the TV and Computer
    2. Impact on Residuals and the Changing Landscape: How Online and Download Revenues became the Focus of Hollywood Guild Negotiations and Strikes
      1. Does Abandoning the Historical Residual System Make Sense?
    3. Beyond Professional TV and Video — User Generated Content
      1. Power to Create Stars
      2. Use Propelled By New Tools
      3. Mobile Phone Applications
  14. Chapter 8 Ancillary Revenues: Merchandising, Video Games, Hotels, Transactional Video-on-demand, Airlines, and Other Markets
    1. Merchandising
      1. As Risky and Lucrative as the Film Business
      2. What Properties Can Spawn Successful Merchandising Programs?
    2. Licensing Programs
      1. What Is a Licensing Program?
      2. Quality Control and Timing
      3. Licensing Deals
      4. Economics: Minimum Guarantees/Advances
      5. Role of Agents
    3. Toys as a Driver
      1. Mega Deals: Star Wars and Spider-Man
      2. Coming Full Circle: Toys Spawn Films Spawn Toys
      3. Toys and the Internet — Growing Crossover with Avatars and Virtual Worlds
    4. Extending the Franchise: Video Games, Books, etc.
      1. Additional Ancillary Revenue Streams: Books, Film Clips, Music, Live Stage, etc.
    5. Hotel and Motel
      1. Size of Market and Window
      2. Economics
      3. International
    6. PPV (Cable) and Transactional VOD
      1. PPV and VOD Roots
      2. Residential VOD: The Virtual Video Store
      3. Next Generation: Subscription-Video-on-Demand and Internet VOD
    7. Airlines
      1. Market
      2. Window
      3. Economics
    8. Non-theatrical
      1. Window
      2. Economics
  15. Chapter 9 Marketing
    1. Back to experience Goods
      1. Strategy (Film)
      2. Budget Tied to Type and Breadth of Release: Limited Openings, Niche Marketing, and the Web’s Viral Power
      3. Timing, Seasonality, and Influencing External and Internal Factors
      4. Day-and-Date Release
    2. Third-Party Help: Talent and Promotional Partners’ Role in Creating Demand
      1. Talent Involved
      2. Promotional Partners
    3. Theatrical Marketing Budget
      1. Direct Costs
      2. Allocation of Media Costs
      3. Trailers
      4. Posters
      5. Commercials (Creating) and Creative Execution
      6. Press and PR
      7. Web Sites
      8. Market Research
      9. Indirect/Third-Party Costs
      10. Net Sum and Rise in Historical Marketing Costs
    4. Video Marketing
      1. Macro Level Spending/Media Plan and Allocation
      2. Press, PR, and Third-Party Promotions
      3. Net Sum
    5. Television
      1. Direct Costs
      2. Commercials and Opportunity Costs
      3. Press and PR
      4. Use of Programming Schedules/Lead-Ins
    6. Online Marketing: expanding the Toolset
      1. Social Networking
    7. Case Study: Marketing a Mega-Film
      1. Pre-Release Window: Period Leading Up to Time ∽30 Days Pre-Release
      2. Release Window: ∽30 Days Pre-Release Through First Two Weeks Post-Release
      3. Post Release Window: ∽30 Days Post-Release Through DVD+
  16. Chapter 10 Making Money — Net Profits, Hollywood Accounting, and the Relative Simplicity of Online Revenue Sharing
    1. Profit Participation Accounting
      1. History of Net Profits
      2. Celebrity Lawsuits Spotlight Accounting Practices
      3. Why So Complicated — Endemic to the Talent System?
    2. Gross and Net Profits: How are They Defined and Calculated?
      1. Included and Excluded Revenues
      2. Certain Costs Always Deducted
      3. Distribution Fees
      4. At the Source Recognition
      5. Distribution Costs and Expenses
      6. Gross Participations, Deferrals, and Advances as Cost Items
      7. Imputed Costs: Production and Advertising Overhead, Interest
      8. Phantom Revenues: Allocating Taxes and Other Non-Picture-Specific Items
      9. Net Profits: An Artificial Breakeven Point and Moving Target
      10. Gross Participations/Profits
      11. Impact of Categorizing Costs as Production vs. Distribution Costs
    3. Online Accounting: Simple Revenue Sharing and the Net Profits Divide
      1. Gross is Gross and Net is Net — Sort of
      2. Revenue Sharing
    4. Variations of Profit Participation
      1. Types of Breakeven
      2. Adjusted Gross and Rolling Breakeven
  17. References
  18. Index