Hollywood Movie Industry

Joanna Zwirbulis Aleksey Narko Eray Ersöz

Ravi Kumar Michal Goszczycki

Cluster Analysis Microeconomics of Competitiveness (Licensed by HBS)

Country

Analysis

Cluster

Analysis

Recom

mendation

• United States

• California

• Los Angeles

• Industry& Government

problems

• Suggestions

• Hollywood

• Entertainment

Industry

Agen

da

Population: 317 million

Average unemployment: 7.3%

(highest- Nevada 9%, lowest- South Dakota 2.6%)

(Bureau of Labor Statistics, Dec. 2013)

GDP:$15,685 billion GDP per capita: $49,922(1st)

GDP growth: +4.1% (in 2013)

Exports: 2nd globally Imports: 1st globally

Negative Trade Deficit $34.3 billion

(Trading Economies, Jan. 2013)

Global Competitiveness ranking 2013-14: 5th

Innovation: 7th

Labor market efficiency: 4th

Domestic market size: 1st

Ease of doing business: 4th

Rostow’s stages of growth (5th stage- the age of mass

consumption): global leader

US Economic&Business Perfomance

US Economic&Business Perfomance

Source: Global Competitiveness Report 2013-2014

US

Diamond

conditions

Firm Strategy & Rivalry

+ Intense local competition

(14th)

+ Ease of doing business

(4th)

+ Economic Freedom (10th)

+ Flexible labor market (6th)

- Macroeconomic

environment (117th)

- Institutions (35th)

- Total Tax rates/

% Profits (101th)

Demand Conditions

+ Leader in the market size

(1st)

+ Innovation (7th)

+ Business sophistication

(6th)

+ Buyer sophistication(9th)

- Budget deficits/ General

Debt (140th)

Factor Conditions+ Availability of the latest

technology (6th)

+ Infrastructure (15th)

+ Availability of research and

training services (9th)

+ Geographical condition

(climate and topography)

+ Labor market efficiency

(4th)

- Inefficient government &

bureaucracy

Supporting Industries

+ Cluster Development (6th)

+ Strong Innovation & R&D

+ Financial market

development (10th)

- Increased global

competition

California basicinformation

Sources:

50states.com

Facts and Figures:Population: 38 million

Labor force size: 18,6

million

Income per capita: $43,647

Unemployment rate: 8,9%

Ranked 8th largest Economy

in the world

Home of the world’s biggest

publicly traded companies

California Economicperfomance

Cluster Employment

Los Angeles County

Sources:Wikipedia.org

Facts and Figures:

Population: 10 million

Incorporated cities: 88

Total number of firms,

2007: 1million

Persons below poverty

level: 16,3%

Gross Products Comparisons, 2012 (In billion $)

Hollywood ClusterHistory & Facts

- From 1910 movie companies moved from

the New York to Hollywood

- In 2011 industry employed nearly

162,000 wage and salary workers and

more than 85,000 free-lance professionals

- Around 247,000 direct job opportunities

- $43 billion in labor income with a $120

billion annually output

- Around 13.300 establishments in 2011

Hollywood Cluster Map

Source: The LA Motion Picture Industry Cluster, Harvard Business School

Domestic Competition

- In total over 40 states like New

York, Louisiana , Texas,

Michigan, Georgia, Florida and

New Mexico

- In 2004 Los Angeles peaked at

118,200 and 2011 it felt down

with a 13,6% to 102,100

International Competition

- Bollywood (India), Nollywood

(Nigeria) and Pricy

Major Hollywood Movie Studios

The Historic MGM Studios

- Established in 1915 as Triangle Pictures

- Market Capitalization (MGM) : $11.51B

- James Bond, Pink Panter, Rocky

Paramount Studios

- Established in 1913

- Market capitalization (Viacom) : $38.6B

- Titanic, Forest Gump, Top Gun, The Godfather

Warner Bross Studios

- Founded in 1923 by four brothers: Jack, Sam,

Herry&Albert

- Market capitalization (Time Warner) : $38.6B

- Casablanca, The Exorcist, Batman

Universal Studios

- Founded in 1912

- Market capitalization (Comcast) : $133.6B

- E.T, Jurassic Park, Jaws

DreamWorks Studios

- Founded in 1994

- Market capitalization : $1.45B

- Shrek, Amistad, Madagaskar

Source:wikipedia.org

LA

Diamond

Motion picture

Firm Strategy & Rivalry

+ Studio Cooperation

- Strategic Monopoly of big

studios

Demand Conditions

+ One of the biggest

domestic markets

+Innovation (7th)

+Established international

distribution channel

+ - Growing market of

home cinema

Factor Conditions+ Human Capital (artist

agencies and schools)

+ Geographical condition

(climate and topography)

+ Financial investment

power-house

-Rising Prices of labor and

physical assets

Supporting Industries

+ Film Awards and festivals

+ Related Industries

Vfx, sound, Ads, financial

and others

+Film Awards and festivals

Future challenges

- Lack of domestic savings in California region – harmful to investment

- Cyclical state deficit

- Slow integration of the minorities into the culture

- 25 % higher energy prices than n the rest of the US

California state problems:

Film industry:

- Development of new technologies allowing for piracy

- Home cinemas which account for the drop in theatre

admissions

Los Angeles location:

- run-away of the film shuting to other cuntries due to cost , scenery

Recommendation

For the Californian Government:

- Reduction of costs of running the industry in order to

reduce the number of run-away production (taxes)

- Finding a way to at least equalise the prices of energy in

California with the prices in other states

- closer monitoring of the needs of the filming industry

through the Californian Film Commision

For the Federal Government:

- Increase domestic saving to improve the environment for the

investment

- Suppoting the industry through the establishment and constant

updating of property rights legislative, fighting piracy

Thank you for

Attention!Questions???