Podcast Summary
Personal finance and film industry insights: Both personal finance and film industry provide valuable lessons on making informed decisions and understanding economic principles. Personal finance offers strategies for wealth building and navigating financial products, while the film industry showcases the importance of economics in funding, revenue, and job creation.
The world of personal finance and the film industry both offer valuable insights into making informed decisions and understanding economic principles. In the realm of personal finance, the NerdWallet Smart Money Podcast provides clarity on strategies to help individuals build wealth, invest wisely, and navigate financial products. Meanwhile, the film industry, as exemplified by Hollywood, showcases the importance of understanding economics, from funding mechanisms and revenue sources to the role of government subsidies and the economics of movie theaters. Despite declining movie theater attendance and the impact of COVID-19 on the global box office, the film industry remains a significant contributor to the US economy, supporting millions of jobs and generating impressive revenues. Both areas highlight the importance of gaining knowledge and understanding complex systems to make the most of opportunities and resources.
Movie industry changes: increasing costs and decreasing physical attendance: Movie industry evolves with technological advancements, increasing ticket prices, and decreasing physical attendance. Funding options expand, from studios to investors and crowdfunding.
The movie industry is undergoing significant changes, with both increasing costs and decreasing physical attendance leading to growth in new distribution methods and financing options. Once a mere 7¢ ticket in 1910, movie tickets now cost an average of $9.26, a 132-fold increase. At the same time, fewer people are physically going to theaters, with some films like Greenland and Disney's Mulan opting for online releases. This trend isn't new, as Mark Cuban attempted a similar dual distribution model in the early 2000s with Magnolia Pictures. However, the big studios have largely benefited from these technological advancements. Movies are not just profit-driven entities but actual companies, and they need funding before they have a product. Studios incorporate their films to raise capital, and the investor ecosystem looks for solid returns from solid management teams. Smaller films, like Paranormal Activity and Supersize Me, have found success on modest budgets and through viral advertising on the internet. Crowdfunding platforms also enable investors to fund movies and receive royalties. Private equity firms, hedge funds, family offices, and ultra-high net worth individuals typically provide funding for big-budget films.
Movie industry's alternative funding sources: product placement and government subsidies: Major studios fund movies through product placement, a significant but ethically questionable practice, and government subsidies, which are crucial for industry growth
The movie industry relies on various funding sources beyond traditional investments. These sources include paid product placement and government subsidies. Paid product placement is a significant funding tool for major studios, often accounting for a substantial portion of a movie's budget. It's often subliminal and not disclosed during the movie, raising ethical concerns, especially when targeting children. The movie industry's lack of disclosure regarding product placement is a double standard compared to other media platforms like YouTube. Additionally, government subsidies play a crucial role in the movie industry's success, with powerful lobbying efforts securing significant financial support. Despite the industry's financial success, these funding sources remain essential for Hollywood's continued growth.
Movie production incentives fail to deliver on promises: Movie production incentives often result in high costs for taxpayers and can be prone to abuse, despite their intended goal of bringing film production jobs and economic growth to states.
Movie production incentives (MPIs), which are tax breaks designed to encourage film production, have not lived up to their promises of economic growth and raising tax revenue. Instead, they often result in high costs for taxpayers. For example, in Massachusetts, each film job created cost taxpayers $324,000. Production companies must spend a significant amount before becoming eligible for these incentives, and many states offer cash rebates on qualified purchases, which can be artificially inflated. The system is prone to abuse, and several film directors have been charged with tax fraud. Despite these incentives, many Hollywood films fail to generate a profit due to Hollywood accounting, which is notoriously opaque. In summary, while MPIs were intended to bring film production jobs to states and stimulate economic growth, they often result in high costs for taxpayers and can be subject to abuse.
Financial conflicts in film industry: Movie studios and theater companies face financial disputes due to complex relationships and subjective profit definitions, leading to potential losses for both parties.
Conflicts of interest and subjective definitions of profits can lead to disputes and potential losses for creators and theaters in the film industry. For instance, movie studios may own subsidiaries, such as costume companies, leading to overcharging and profit shifting. Meanwhile, theater companies, which generate significant revenue from food and beverages, can also face financial challenges due to the way they are paid by studios for showing films. In the first week of a film's premiere, theaters may only receive a small percentage of the ticket price, with the rest going to the studio. These complex financial relationships and subjective profit definitions can result in disputes and perceived losses, as seen in the case of Stan Lee and his unpaid net profits from Spider-Man.
Revenue Shares Between Studios and Theatres: Disney's decision to take a 0% revenue share during the premier week of their new Star Wars film caused controversy but it's a common business practice in the film industry. Disney's success comes from producing high-quality movies, which gives them pricing power in the free market economy.
In the film industry, revenue shares between studios and movie theatres shift over time, with theatres receiving a larger percentage as the movie's run continues. This is due to the fact that theatres risk losing customers if they don't show popular films. Disney's decision to take a 0% revenue share during the premier week of their new Star Wars film caused controversy, but it's a common business practice in the industry. Disney's critics argue that they have too much power, but they aren't a monopoly. Instead, they are successful because they produce high-quality movies, which gives them the pricing power in the free market economy. The intergalactic system (free market economics) is constantly changing and transforming, and it can be complex. To make sense of it all, tune in to What's New with Wired, a podcast that delves deep into the latest news in technology and culture. Their award-winning journalism will help you navigate the ever-evolving world. Listen to What's New with Wired wherever you get your podcasts.
