The Economics of Film Distribution

Interesting comment from one of our readers on digital film distribution:

I distribute films and did so for
a major studio for some years. Not an exhaustive answer but here are a
few things at work in no particular order.

The delay for video rental after the theatrical release is because
the exhibitors (movie chains like Regal) insist on not having their
business encroached by the home video market.

Studios are somewhat ambivalent about embracing online rentals for a
number of reasons. With each new format VHS, DVD, Blue Ray etc. they
have been getting to resell the same product to the same customer which
may end with online sales.

Studios have been slow to do it but want to do their own digital
distribution. On the other hand Netflix and Amazon are some of their
largest customers and so are shy about going into competition with them.

Part of poor availlability in older titles has to do with the fact
that ownership of the digital rights can be varied and hard to track
down or establish. The studios may not own them. Some heir to some
producer or star from back in the day may own them and no one is
actively working to generate revenue with them. There may be fights for
control of those rights that are keeping them from coming to market.
Digital rights were not spelled out in contracts for films long ago.

The companies that specialize in monetizing the “brand” of a star
like Marilyn Monroe typically only want to invest in a star that has
lots of different revenue streams like merchandizing stuff ets. A great
movie star who is not actually iconic, like a Walther Matthau for
example, cannot generate enough revenue to pay for a company to work at
keeping his films availlable in all formats, His films will only be
moved into a new format when someone buys a whole library of content
that has some of his work in it.

It isn’t cost effective to spend the money establishing legal ownership of a film that won’t sell many copies.

This is a little of what is happening and why. There is a real
dearth of good economic history written about Hollywood. Some of this
is also because so many decisions in this industry aren’t made for
economic reasons in a straightforward way – and a lot of the data and
reasons people do make economic decisions are pretty propietary about
their data.