#3: How Studios Make Money                 
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As late as 1948, Hollywood studios made virtually all of their money from a single source: the box-office. But with the emergence of television, studios had to find new ways of making money.  They therefore moved to home entertainment.   

By 2003 the studios were taking in almost five times as much revenue from home entertainment-- television, videos, and DVDs-- as from movie theaters. (See Table 1)

TABLE I. STUDIO REVENUES WORLDWIDE, 1948-2003 (Billions)

Inflation-Adjusted in 2003 Dollars

Year

Theater Video/DVD Pay-TV TV, Free Total Theater Share (%)
1948 6.9 0 0 0 6.9 100
1980 4.4 .2 .38 3.26 8.31 55
1985 2.96 2.34 1.04 5.59 11.9 25
1990 4.9 5.87 1.62 7.41 19.79 22
1995 5.57 10.6 2.34 7.92 26.53 20
2000 5.87 11.67 3.12 10.75 31.41 19.5
2003 7.48 18.9 5.56 11.4 41.2 17.9

 

Not only did movies in theaters provide a smaller share of the revenue in the new entertainment economy, but, because of the ever-increasing cost of marketing them, they yielded little, if any profit.  Video, DVDs, Pay-TV and Broadcast, which have much lower marketing costs, now yielded almost all the profits for the corporate owners of the studios.

 What Else Should Be Demystified?


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