History of Film: Film Distribution
There were many changes in marketing and distribution of films from end of the silent period to the modern digital period. There was a studio system that existed at the end of the silent period and collapsed in 1949 with a court ruling. During this same time a sales era of marketing existed.
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After the Second World War the sales era was replaced with a new way of thinking and sales and marketing were not synonymous anymore.
Marketing after World War II meant finding out what consumers’ needs and wants were and providing them with products to satisfy those needs and wants. Globalization began to occur rapidly in the 90’s and expansion in foreign market meant marketers had to concentrate on this market more than they had in the past. The digital period also meant changes of first runs and second runs for films. The studio system was a means of film production and distribution dominant in Hollywood from the early 1920s through the early 1950s.The term studio system refers to the practice of large motion picture studios (a) producing movies primarily on their own filmmaking lots with creative personnel under often long-term contract and (b) pursuing vertical integration through ownership or effective control of distributors and movie theaters, guaranteeing additional sales of films through manipulative booking techniques. A 1948 Supreme Court ruling against those distribution and exhibition practices hastened the end of the studio system.In 1954, the last of the operational links between a major production studio and theater chain was broken and the era of the studio system was officially dead.
The period lasted from the introduction of sound to the court ruling and the beginning of the studio breakups; about 1927 to 1954, when the studios no longer participated in the theatre business. During the Golden Age, eight companies comprised the so-called major studios responsible for the studio system.Of these eight, five were fully integrated conglomerates, combining ownership of a production studio, distribution division, and substantial theater chain, and contracting with performers and filmmaking personnel: Fox (later 20th Century-Fox), Loew’s Incorporated (owner of America’s largest theater circuit and parent company to Metro-Goldwyn-Mayer), Paramount Pictures, RKO (Radio-Keith-Orpheum), and Warner Bros. Two majors, Universal Pictures and Columbia Pictures were similarly organized, though they never owned more than small theater circuits.The eighth of the Golden Age majors, United Artists, owned a few theaters and had access to two production facilities owned by members of its controlling partnership group, but it functioned primarily as a backer-distributor, loaning money to independent producers and releasing their films. The ranking of the Big Five in terms of profitability (closely related to market share) was largely consistent during the Golden Age: MGM was number one eleven years running, 1931 to 41.With the exception of 1932 when all the companies but MGM lost money.
One of the techniques used to support the studio system was block booking, a system of selling multiple films to a theater as a unit. Such a unit, frequently twenty films, typically included no more than a few quality movies, the rest perceived as low-grade filler to bolster the studio’s finances. On May 4, 1948, in a federal antitrust suit known as the Paramount case but brought against the entire Big Five, the U. S. Supreme Court specifically outlawed block booking.Holding that the conglomerates were indeed in violation of antitrust, the justices refrained from making a final decision as to how that fault should be remedied, but the case was sent back to the lower court from which it had come with language that suggested divorcement the complete separation of exhibition interests from producer-distributor operations was the answer. The Big Five, though, seemed united in their determination to fight on and drag out legal proceedings for years as they had already proven adept at after all, the Paramount suit had originally been filed on July 20, 1938.
The sales era is called the sales era because many companies’ main priority was to move their products out of the factory using a variety of selling techniques. The sales era lasted from the early 20’s to the end of the World War II. Compare this to the cinema and both the sales era and studio system era align closing on a time period. During The sales era, companies felt that they could enhance their sales by using a variety of promotional techniques designed to inform potential customers about and/or persuade them to buy their products. This type of thinking was initiated by the economic climate of the time.The selling concepts related markets that already existed, where globalization hadn’t yet occurred and creating profit pools hadn’t even been thought of yet. However October 29, 1929—”Black Tuesday”—marked the beginning of the Great Depression.
This was the single most devastating financial day in the history of the New York Stock Exchange. Within the first few hours that the stock market was open, prices fell so far as to wipe out all the gains that had been made in the previous year. Since the stock market was viewed as the chief indicator of the American economy, public confidence was shattered.Between October 29 and November 13 (when stock prices hit their lowest point), more than $30 billion disappeared from the American economy— comparable to the total amount the United States had spent on its involvement in World War I (Schultz, 1999). The amount of disposable and discretionary income that consumers had to spend on necessities and luxuries also decreased dramatically as the unemployment rate approached 25 percent. Companies found that they could no longer sell all the products that they produced, even though prices had been lowered via mass production.Firms now had to get rid of their excess products in order to convert those products into cash.
In order to get rid of products, many firms developed sales forces and relied on personal selling, advertising signs, and singing commercials on the radio to “move” the product. Theodore Levitt(1960), a prominent marketing scholar, has noted that these firms were not necessarily concerned with satisfying the customer, but rather with selling the product. This sales orientation dominated business practice through the 1930s until World War II, when most firms’ manufacturing facilities were adapted to making machinery and equipment for the war effort.Of course, the war dramatically changed the environment within which business was conducted. This also changed companies’ philosophies of doing business. The marketing concept era, a crucial change in management philosophy can be linked to the shift from a seller’s market, where there were more buyers for few good and services, to a buyer’s market, where there were more goods and services than people were willing to buy them. When World War II ended, factories stopped manufacturing war supplies and started turning out consumer products again, an activity that had practically stopped during the war.
The relationship marketing era follows the marketing concept era. Relationship marketing succeeds the marketing concept era; however most firms are still practicing the marketing concept use of marketing. The advent of a strong buyers market created the need for consumer orientation by businesses. Companies had to market good and services, not just produce them, but sell them to. This realization has been identified as the emergence of the marketing concept. Marketing would no longer be regarded as supplemental activity performed after completion of the production process. Instead, the marketer ould play a leading role in product planning.
Marketing and selling would no longer be synonymous terms. Today’s fully developed marketing concept is a companywide consumer with the objective of achieving long-run success. All facets and all levels of management of the organization must contribute first to assessing and then to satisfying customer wants and needs. Even during tough economic times, when companies tend to emphasize cutting costs and boosting revenues, the marketing concept focuses on the objective of achieving long-run success instead of short term profits.The firm’s survival and growth are built into the marketing concept; companywide consumer orientation should lead to greater long-run profits. Gone With the Wind, released December 15th 1939, was no doubt a cash cow. In the film’s 8th closing week it had already earned $5,567,000, where it began to see profit.
By June 1st 1940 the film had already made its year and half goal of over 20 million; a very sizeable profit for the producers of the film. It did however require a large amount of investment from its producer David O. Selznick, of almost 4 million in production costs, and another million in marketing expenses.Adjusted for inflation it would have nearly been 50 million in production costs alone. David Selznick must have known his film was going to be a big hit. He paid $50,000 for the rights to a New York Times bestselling book. If the film was going to do as well as the book he knew he was going to see a large profit from his cash cow.
It wasn’t common to have a worldwide release during the studio system era like it is today. Typically films would be released in their native country first and then a few months later it would be released in countries with speaking languages the same as the country of origin.In North America the first run of a film refers to the exhibition of theatres it would play in. A first run of a film would only play in the major cities in the downtown areas in the “de luxe” first run film theatre. These theatres would seat anywhere between 1500 to 5000 people in one room to one screen. This is of course before the days of digitization where people can view the film on DVD, and before the days of multiplexes. First run films had a higher ticket premium than that of second run or subsequent runs of the film.
Gone With the Wind is said to have charged $0. 5 for a matinee viewing of the film and up to $2. 20 at Manhattan’s Astor in its first run. Compare this to the $0. 23 average ticket price in that year, the price was very high. Gone With the Wind’s first run lasted two and half years and was seen by 203 million people. It played in 156 theatres in 150 cities domestically.
Gone With the Wind was eventually released around the world. Box office revenue for foreign release is much harder to calculate. Gone With the Wind made $30 million in domestic revenue and $19 million in foreign revenue in its first run.Adjusted for inflation that amount would total about $755,821,500. 00 today. (Dollar Times) Most of Gone With the Wind’s came from domestic revenue, about 63. 3 percent.
Enter 2009. Many things have changed. Firstly a new marketing era is now in place. The studio system has collapsed. Globalization is not a competitive advantage of the studio system period, it is a competitive necessity. Films that do not compete in the global market do not compete at all. First runs last only weeks, months if the film is a really big hit.
First runs are not only in the downtown theatres but also in the neighborhood theatres, and now in the muitlplex theatres. A second run in today’s language is when the film hits the new release section of the rental shop. In its third month Avatar is a big hit. At the time of this writing it is still playing in its first run. How does it compare to Gone With the Wind? Avatar is currently being seen on 3,452 theatres in hundreds of countries. Estimated to cost $280 million to make Avatar is much more expensive to make, even for adjusting inflation that Gone With the Wind.Currently domestic box office revenue is $710,842,764, and its foreign box office revenue amounts to $1,839,000,000.
This is prove of the globalization of the cinema industry. The majority of the box office revenue no longer comes from domestic revenue but rather from the foreign market. Avatar is not only seen on the traditional 2D screens that Gone With the Wind was but it also seen on 3D screens, and IMAX screens, allowing for price alterations between the different formats the film is viewed in. It will be interesting to see how Avatar does when it ends its first run and enters its second run.A film that has ended its first run and second run is much more accurate to compare with Gone With the Wind since the film would have been shown at neighborhood theatres two and half years after it was first released. Titanic was released in 1997 and has ended both its first and second run. How did these two films compare? Titanic’s production budget was $200 million compared to Gone With the Wind’s adjusted for inflation budget of 50 million.
Total gross revenue for Titanic has reached $1,843,201,268, while Gone With the Wind has reached $400,176,459.Adjusted for inflation Titanic would have reached nearly 3 billion in total gross revenue at $2,996,049,690. If Gone With the Wind were adjusted for total gross revenue it would reach $3,099,918,548. Total gross revenue includes first run, second run, and all other revenue that comes from the film, including T. V rights, rentals, VHS and DVD sales. It can be concluded that the importance of globalization in the film industry is more important now than it was during the studio system period. The way in which films are exhibited today is very different than it was during the studio period.
First run theatres do not exist in the same way they did during the studio system period. Second runs of films were in theatres and now they are a way in which the audience may view the film on their terms, following the marketing concept idea. Consumers choose the way in which they consume products. The industry adapts to this and finds new ways to market their ideas and invents new products for the consumer to consume.Works Cited ‘Avatar’ Passes ‘Titanic’s’ Overseas Record. The Hollywood Reporter, 24 Jan. 2010.
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