Entertainment Industry

Release Cycle

Today, most theatrical motion pictures are released in this sequence:

• Domestic
• International movie theaters
• Home video
• Pay-Per-View
• Cable
• Pay TV
• Satellite
• Network TV
• Free TV (Independent television)

New Distribution Strategies

Some high profile companies and individuals, however, are toying with this distribution model. Most notably, Steven Soderbergh signed a six-picture deal to shoot six high-definition movies for Marc Cuban and Todd Wagner’s HDNet Films to be released in a tripartite attack: simultaneously exhibiting in theaters while being broadcast on their television channel and sold on home video. Every element in Hollywood seems to be up for perpetual negotiation and re-engineering.

While the distribution theories and methods are certainly in flux, the traditional release cycle used to involve a movie appearing in each of these markets for two-year cascading windows. DVDs and new media technologies are shortening these time frames dramatically — and even flip-flopping or eliminating some of the steps as in Steven Soderbergh’s test case that the industry is watching with great interest. In that case, the releases are simultaneous but many traditional business model releases have shortened the two-year to even three-month cycles. This is a very dramatic time of change — even revolution — in the production and distribution methods and strategies in Hollywood.

Historic Distribution Model

Using the classic distribution model as a traditional reference point, the first year’s revenues consist primarily of theatrical receipts. The second year’s income is made up of remaining theatrical receipts and the bulk of the home video income. The third and fourth year’s revenues will be derived from the principal television runs and continued home video rentals.

New movie markets are growing so rapidly that they are no longer just supplements to the basic theatrical market but have become key markets in and of themselves.

Domestic theatrical receipts, for the majority of films now contribute only twenty percent to a film’s total revenue. This figure continues to drop. As a movie is exploited in several markets, the investment risk is diminished and the total potential earnings are increased.

Thus, the five greatest revenue-producing markets are:

• Major Theatrical Distribution (via studios)
• International Film Distributors
• Networks and Major Cable Channels
• First-run satellite premieres (Direct TV,
     Starz, etc.)
• Independent Television
• Home Video chains like Blockbuster, Hollywood
     Video, and NetFlix
• DVD and VHS sales (a la Wal-Mart, K-Mart, etc.)

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