On June 12 2009, a diverse group with an interest in the economic workings of the film industry gathered for a day of papers, discussion and debate. Hosted by the University of Sydney, the inaugural symposium of the recently formed Screen Economics Research Group (SERG) brought together participants from a variety of backgrounds – from producers and filmmakers to academics in screen studies, marketing and (last but certainly not least) economics.

Although SERG’s stated interest spans the screen industries, Friday’s event was focused largely on film. With such a variety of perspectives brought to bear on the topic, the challenge was to create a space for mutual comprehension and dialogue. There was, then, a sense that each speaker was offering dispatches from the frontline of their own discipline, translating this material for use by scholars in other disciplines and, ultimately, the film industry itself.

Beyond the obvious distinction between those who used economic formulae and those who did not, it was possible to identify three broad (and somewhat overlapping) strands in the papers:
• Industrial structures and strategies
• Consumer behaviour
• Investment and returns

Industrial structures and strategies

Film producer, marketing expert and recent PhD graduate Jon Silver talked about his research into the continued dominance of the Hollywood industry, arguing that traditional accounts have not sufficiently emphasized the role of strategic marketing. Indeed, as Silver suggested, perhaps even US state intervention can be explained as a result of Hollywood’s methodical, deliberate and relentless marketing of itself and its product. This was a lively and illuminating talk, with clear implications for the Australian film industry’s own strategic approach.

Another way of understanding Hollywood’s success is its ‘portfolio approach’ – by maintaining a diverse slate of films, the studios have been able to offset their many loss-making film investments against the massive revenues generated by a relatively small number of hits. Economic historian Michael Pokorny (University of Westminster) extended his work on the ‘portfolio approach’ by focussing on the way that studios specialise in or diversify across different genres, and their varied success in doing so. This led to interesting discussions of the criteria for investing in a particular genre (previous popularity of a particular type of film, vs. a gap in the market, for example), and the always-difficult question of how to identify firm boundaries between genres (is Titanic a romance, a drama or an adventure film – or all of the above?)

Meanwhile, economist Darlene C. Chisholm (Suffolk University, Boston) demonstrated the way that cinemas in a local area (Boston, in this case) maintain a balance between differentiating their selection of films and matching their competitors’ line-up. Among the results of this research was the finding that exhibitors tend to minimise these differences during peak times (such as school holidays).

PhD student Dean Brandum (RMIT) used box office data from 1968-71 to demonstrate the flaws in Hollywood’s ‘roadshow’ strategy, which involved playing high-profile films in upmarket theatres, with pre-booking of seats and limited screenings per week. Although the strategy appeared lucrative, Brandum argued that the extended runs granted to many of these films could not match the short but intense box office onslaught achieved by many non-roadshow titles. Indeed, this may go some way towards explaining why the roadshow strategy was eventually abandoned, and why movies in recent years have been granted an increasingly brief window in which to garner their revenues.

Consumer behaviour

John Sedgwick (London Metropolitan University), a previous interview subject for CSB’s The Knowledge, discussed his fascinating new research into consumer expectations, which looks at the relationship between what viewers think of a movie before and after seeing it. Considering moviegoing as a type of risk-taking activity, this research will ask: to what extent do audiences value movies for their predictability as opposed to their novelty?

Jordi Mckenzie (University of Sydney) outlined his research based on the impact of ‘Cheap Tuesdays’ on demand for filmgoing in Australia. He is using this data to draw conclusions about price elasticities for film tickets, taking into account other variables including weather, population characteristics and the nature of the films themselves. Given changes in these variables, how much are audiences prepared to pay for a trip to the movies?

Stuart Cunningham, John McDonnell and Jon Silver (QUT) looked into audience behaviours in the online world, and discussed the way that these have been addressed (or not) by media companies. They asked whether new distribution opportunities are undermining the power-base of the established firms. Their research points towards a variety of outcomes for new and existing players, in an environment characterised by accelerating rates of change.

Investment and return

David Walls (University of Calgary) extended and qualified his well-known work on the unpredictability of the film business by looking at the variance of film returns in relation to a number of factors including the involvement of marquee cast. Although the variance in film returns is, according to Walls, technically infinite, it is nonetheless possible to model for the probable distribution of these returns. In addition, Walls’s research shows that the presence of marquee talent can work to reduce risk, but is no ultimate guarantee of an increased return on investment.

Simon Molloy (SKC Consulting/ AFTRS) looked at the variance in returns on Australian DVD sales as compared with box office. In contrast with traditional assumptions, it was demonstrated that DVD revenues were, even more than cinema revenues, distributed according to a ‘winner takes all’ model, in which the leading titles claim the lion’s share of the returns.

Finally, David Court (AFTRS) examined the return on investment of films supported by the Film Finance Corporation between 1988 and 2002. Pointing out that copyright is traditionally thought to protect the interests of creators, he asked why copyright owners in these film properties have suffered almost universally poor returns, and what incentives are left for creators when the risks so radically outweigh the rewards.

The day’s proceedings were ably chaired by Deb Verhoeven (RMIT), who quite rightly pointed out that meaningful dialogue between the disciplines of media studies and media economics is an all-too-rare phenomenon. Accordingly, one of the most stimulating features of the symposium was the way that quite different perspectives on the same material were brought together. The resulting dialogue, while grounded in academic discourse, offers the potential for real outcomes for the industry, in terms of understanding film audiences, film investment and returns, and strategic approaches to the film business.

CSB hopes to publish elements of this research in the months ahead – so watch this space!

- Allan Cameron

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