Worldwide, people are watching more films than ever - and investors are watching filmmakers too, betting more than $10 billion in private equity on studio profitability between 2004 and 2007. Soaring costs and tightening consumer budgets have been pinching margins but new growth from the emergence of Blu-Ray as the dominant high-definition disc format combined with continued expansion of new revenue streams, such as electronic distribution and rental kiosks are easing that crunch - according to Film Entertainment Worldwide: The Private Equity Era, a new management report from Adams Media Research and Screen Digest.Total worldwide feature film revenue for major U.S. studios is expected to soar from $34.9 billion in 2007 to $41.6 billion by the end of 2011 – with the U.S. contributing nearly half of that, or $20.4 billion in revenue. Growth over that time will be driven by electronic sales and rentals, which will average 14.6% growth annually from their current small base. Growth in sales of physical media will be more important since they represent more than 50% of total film revenue.
The average film budget for Motion Picture Association (MPA) members – once the new private equity money is factored in – grew from $46.9 million to $63.2 million between 2004 and 2007, inflating total MPA film expenses from $9.7 billion to nearly $13.2 billion over that time, an average of about 10% annually. Meanwhile, worldwide revenue from those films shrank from $36.6 billion in 2004 to $34.9 billion in 2007. With worldwide revenue only set to grow at about 6% annually between 2007 and 2011 it is clear that studios cannot keep increasing spending at the rates they have over the past few years.
