Which is the Savvier Industry: Music or Film?

I have long stated my belief that the Film Industry is much savvier than the Music Recording Industry. While they may be just as ethically sleazy, as their accounting shenanigans demonstrate, their business smarts just seem better.

As a Business, film seems to outmarket, outmonetize and outsmart the music recording industry on a regular basis. They are the "Survivor" of the Arts & Intellectual Property industry. 

The most significant and notable difference shows up in the economics of product pricing. The film industry seems shrewder, they understand how to grab a marginal purchaser, they price their wares dynamically.

Of course, they have a different business models: their products cost much more to produce (than music) and are far less numerous in number.

Even as their theatrical distributors (movie theaters) are having a rough go of it, the film industry, by most measures, is doing well. Yes, DVD sales may be growing more slowly — but that’s an inevitable function of full adaptation by consumers. DVD sales remain robust.

Growing more slowly is better than shrinking.

The strength in the industry was outlined in a Sunday NYT article on "Hollywood’s non-slump" (somewhat reminscent of a similar Register column from August). As this more recent column implies, the key difference between the Film and Music industries is their ready adaptability to new technologies:

"American moviegoers are increasingly passing up the chance to hoot and holler in the dark with hundreds of strangers if the films are not big events or smaller genre ones. The number of movies in the $100 million to $200 million box-office range has fallen dramatically the last two years. As a result, executives at the major studios are more closely scrutinizing midrange films – those with budgets from $50 million to $75 million.

In addition, domestic DVD sales have slowed from their gangbusters growth rate of a few years ago. But the slack has been taken up by the surprisingly strong performance of television DVD’s like "Seinfeld" and straight-to-DVD movies like "Lion King 1½." And most of the money made off of these DVD’s goes to the same entertainment conglomerates that own the movie studios.

To Ms. Snider and others in the film industry, the possibilities of the on-demand world – one perfectly customized to a viewer’s life – offer Hollywood the next big leap forward. Videocassette recorders did not, as feared, become the Boston Strangler of the movie studios. And while VHS may be near death’s door, the rise of the DVD has more than made up for that disappearing revenue. "There’s always been something to replace it that’s groovier," Ms. Snider said. "Portable, wireless devices are pretty irresistible."

The Times Art department has been quite busy also; Some nice graphics from the column:

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Doing the Hollywood Math: What Slump?
December 11, 2005

The Hollywood crisis that isn’t
By Andrew Orlowski in San Francisco
The Register, Tuesday 4th October 2005 20:31 GMT

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What's been said:

Discussions found on the web:
  1. Damian commented on Dec 13

    Not even close – Film is way ahead of the record business.

  2. Emmanuel commented on Dec 13

    Call me old-fashioned, but I still prefer to have a tangible product on hand in the form of disks as opposed to online content delivery–and so do many others. I think that Blu-ray technology has the potential to revitalize currently moribund DVD sales. Imagine, all the episodes of “My Mother the Car” or “Trapper John, MD” on a single 5″ disc! Progress marches on, and is there to serve the ever-diversifying entertainment preferences of consumers.

  3. Jim Rockford commented on Dec 13

    I disagree. I think both industries are in profound trouble for the same reasons:

    Competition with earlier music/film.
    Not making popular entertainment.

    Bob Iger of Disney says he’ll make fewer films and focus on more profitable ones. Marginal films such as say Serenity or Closer cost money and end up net drains on investment. You can milk some more revenue from them by flogging them on DVD, cable/TV sales, and foreign sales but that’s still limited. You’ll still end up with a net loss plus an opportunity cost. Depending on the few big hits to actually MAKE money which investors demand.

    Meanwhile you compete with earlier product, sometimes decades earlier, for consumer spending which is not limitless. If a consumer has 100 DVDs of film and TV, what’s the marginal incentive even at bargain pricing to purchase either Serenity or Mrs. Dalloway? Particularly if you already have Seinfeld, South Park, or Star Wars on DVD.

    Neither film nor music has offered anything revolutionary in decades. Popular Music has almost year for year matched film’s slump in creativity and the ability to seize the popular imagination on a broad basis (which is where you make money). Instead we get too much niche products that don’t have broad appeal, and competition with better and earlier products.

  4. Franklin Delano Sinatra commented on Dec 13

    How much longer until Hollywood has exhausted all of the good ‘prepositioned’ properties? Not many more unfilmed Spidermans out there.

    I see the mass audience fragmenting, and maybe other than childrens films there won’t be hits anymore. They’re already pretty rare.

    I think people are already bored with CGI. It looks to me that kids movies are the tentpole these day. Kids’ tastes can change, too….

  5. Rigel commented on Dec 14

    The non-death of the radio is another emperical example of how poorly the music industry knows economics. Music comes packaged in many forms: movies, video games, store musak, radio, and personal collections. For the average consumer public performances of music are becoming more taylored to personal taste. The skateboard shop plays punk, the men’s suit store plays jazz. Radio proliferates, moves to more mediums, offers more channels, and even allows personalization (ie LaunchCast). However consumers building personal collections are asked to pay most of the cost for music creation, and more every day (iTunes is raising its prices). Given the choice between cheap, customized public performances and expensive personal collections consumers choose the former.

    Every hour a teen spends listening to the radio in his room, he is not listening to a CD he bought. If the CD was priced correctly, the music industry would go from making $0 on the teen, to making at least $1.

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