The majority of movies are financially unsuccessful. Indeed, 80% of them do. It’s useful to compare the film industry to the real estate market. If a real estate developer developed a $10 million building entirely on the speculative market, he or she would expect to make a 50 percent profit. If the film firm is also a distributor, the odds improve slightly because it won’t have to pay third-party distribution fees. In addition, by controlling distribution, the film business can ensure that its pictures have the highest chance of success.
An independent film producer who passes over pictures to a third party to distribute for a fee is in the worst possible situation. The best position to be in, on the other hand, is as a fee-based distributor of other people’s films. The film industry’s saving grace is that when a rare blockbuster comes along, it may more than makeup for the losses on a number of other pictures.
The film industry, like wildcat oil drilling, is a type of gambling. The issue is that it takes a lot of money to make enough films to have a rare blockbuster, and only a few businesses have the financial wherewithal to do so. This element favors the studios because they have the financial resources to sustain a succession of flops.
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