So far the research into the movie industry has been very good in assisting in the understanding of the economics that is involved in movies.
From some of my research I have found that the movie industry is going through some hard times right now. Many people have theories about why this is happening.
The people higher up in the movie industry say that the cause of lowered attendance at theatres and less people renting or buying movies is due to the internet.
Annual Ticket Sales
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Tickets (billion) 1.21 1.30 1.36 1.44 1.46 1.38 1.44 1.61 1.53 1.49 1.38 1.42 1.40 1.36
Revenue ($bn) $5.26 $5.77 $6.23 $6.74 $7.36 $7.42 $8.12 $9.34 $9.25 $9.28 $8.86 $9.28 $9.60 $9.37
Note: Figures for 2008 are at an annualized rate.
The internet has opened up a brand new ways to share media. A few of them are p2p which is sharing from one person to another using a 3rd party program such as lime wire, there is bit torrent where you connect to thousands of people at once and download from them all, or just simply sending a file directly to a friend.
Some people claim that this is not the reason, some say it’s because of unoriginality in the movie industry these days which could be caused by under paid writers which could have caused the recent writers strike which put a halt to many productions. From the year two thousand to the year to thousand and three after a steady rise in number of theatres in what appeared to be a blooming time for movies, for some reason there was a rather large closer of theatres. In Canada in the year two thousand there were six hundred and seventy seven theatres and drive-in theatres; but that quickly dropped in a year or two later in two thousand two, two thousand three when it dropped almost one hundred to five hundred and eighty eight.
Market share of attendance, by size of movie theatre
1991/92 1998/99 1999/00 2000/01 2002/03
Total number of movie theatres 620 614 644 677 588
Number of theatres 54 44 42 48 44
Attendance 16 7 6 7 5
Number of theatres 19 14 17 14 13
Attendance 17 9 10 8 6
Number of theatres 27 42 41 38 43
Attendance 67 84 84 85 89
One thing seen in this also is that bigger theatres increase attendance; this is most likely due to people coming in to the city because their theatre in their small town was shut down as seen in previous table.
One explanation to all these theatres shutting down is the increase in internet piracy. According to one representative of the MPAA (Motion Picture Association of America) in the year two thousand and five there were huge losses because of people downloading movies instead of going out to theatres or driving to their closest movie retailer and buying or renting a film. The MPAA is working to stop this internet piracy by filing law suits against individuals caught downloading movies. It is harder to do in Canada because of less harsh copyright laws.
Bootlegging and illegal copying of movies hit with an economical punch of three point eight billion dollars. That is not even including downloading the film. Film downloads alone cost another two point three billion to the movie industry. The same study said that the most likely people to be pirates are people ages sixteen to twenty four year old college students. This makes sense because of the economical burden that post secondary education puts on people.
One interesting fact is that four point eight billion dollars in losses from the various form of piracy did not happen in the United States, home of the movie industry. But other countries, like Mexico, Russia, and China were the main culprits.
Piracy doesn’t only affect major United States studios; it also affects paper view providers, video stores, producers. As published in a report by the L.E.K. for the MPAA. According to this survey “Piracy is the biggest threat to the U.S. motion picture industry”.
So in the end movie attendance is down because people today are more likely to sit at their computer then drive to a theatre to spend money. That is why piracy it taking such a big chunk out of the movie industry.