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Hollywood movies are shown not only on the big screen, they're exhibited on video and DVD, on network and cable TV, on pay-per-view, and on airplanes. Hollywood films continue to make money for the studios acrosss all of these platforms, known as "windows of exhibition," years after their theatrical release. Typically, here's how it works.

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1. THEATERS:

the revenue* where hollywood films make money

graph showing box office = 26%, video/dvd = 46%, tv = %28

* Includes domestic and international revenue sources; "TV" includes all related revenue streams, including pay-per-view, network TV, and premium cable

Source: "Filmspace: Behind the Scenes," ABN Amro, Sept. 12, 2000

A Hollywood movie will stay in the theaters anywhere from two weeks to 12 months. Of the revenues generated at the box office, the studio ultimately will take home 50-55 percent, leaving the balance to the theater-owners. During the early weeks of a film's release, the studio's cut can be as high as 90 percent in some cases; at the end of a long run, that can flip entirely, leaving 90 percent to the theater-owners and only 10 percent to the studios. This may be one of the reasons the length of the theatrical window has declined in recent years, as studios have determined that it may be friendlier to the bottom line to move their films more quickly to the home-video market.

While the theatrical release is considered the most important stage in the lifecycle of a film -- how well it does in the theaters has a great impact on how it does in all of the other ancillary markets -- it is by no means the most profitable window. According to a September 2000 research report by the international investment bank ABN Amro, global box office accounts for only 26 percent of the total wholesale revenues for a film released today. Worldwide video rentals and sales, in contrast, now account for 46 percent.

Globally, Hollywood studios still dominate the theaters. (Hollywood films are released internationally anywhere from within a couple of days to as long as six months following the domestic release.) ABN Amro reports that U.S. studios control three-quarters of the distribution market outside the U.S. And in dollar terms, moviegoers in the U.S. are still able to account for 44 percent of global box office.

 VIDEO/DVD:

Home video has a protected window of approximately six weeks, meaning that the only place consumers can rent or buy the film is on video or DVD. Now that pay-per-view has become more popular -- and broadband video-on-demand is becoming a reality -- some in the home-video industry have argued that the "window of exclusivity" is too short and doesn't give stores enough time to turn a profit. Consumer demand for most rentals historically peaks in the first three weeks of availability and then drops off precipitously, which could be why distributors rely on an unorthodox revenue stream -- late fees -- to help boost earnings. "One of the dirty little secrets of the home-video business," writes Larry Gerbrandt, a senior analyst at Paul Kagan Associates, "is that their largest profit generator is actually late fees."

Still, the statistics bear out the fact that the home-video market is booming business. According to figures compiled by Ernst & Young for the DVD Entertainment Group, 182 million movies and music videos were shipped last year, a 90 percent increase over 1999. Consumer spending on video in 2000 was approximately $20 billion, while movie ticket sales were only slightly more than one-third that amount, at $7.5 billion. In fact, the top video title of 2000 -- Buena Vista's "Tarzan" -- grossed $268 million in video sales and rentals alone. That's $15 million more than the top movie of the year, Universal's "The Grinch," took home at the box office.

DVDs in some cases account for 30 percent of a studio's retail revenue from sales and rentals. DVDs wholesale for only $10-$15 each (compared to $45-$65 apiece for video cassettes) and are sold to consumers at $18-$30. Viacom's Blockbuster chain -- which boasts a 40-percent market share for all home-video rental revenues and has expanded to 7,700 stores worldwide -- has argued that there should be an exclusive window for DVD rentals and sales. A "DVD rental window" would mean that video stores would have an opportunity to offer the discs to customers exclusively, preventing discount retailers like Wal-Mart Stores -- which accounted for 18 percent of consumer spending on video purchases in 1999 -- from grabbing a piece of that market until the exclusive rental window expired.

 PAY-PER-VIEW (PPV)

When the exclusive home-video window closes, studio films are then made available on pay-per-view venues, on both cable and satellite TV systems. At this stage, the movie is available exclusively for two to six weeks on PPV. (Note that the film will always be available on video after its initial availability, so subsequent discussions of "exclusivity" do not take into account the home-video window.)

Generally, studios will get anywhere from 45-55 percent of the revenues generated from PPV, depending on the individual movie and the number of PPV channels on which it can be exhibited. If News Corporation had been able to purchase DirecTV, the leading satellite operator would have been paired with one of the seven major studios (Twentieth Century Fox is owned by News Corp.) under one roof. As it is, however, AOL Time Warner is the only media conglomerate that owns both a cable operator and a studio, one of the many instances of vertical integration in the global media conglomerates.

[Note: Learn more about the media conglomerates' major holdings on FRONTLINE's "Merchants of Cool" website.]

4. PREMIUM CABLE CHANNELS (Pay TV)

After the exclusive PPV window expires, the movie can then be shown on premium cable channels such as Showtime, HBO, and Starz. The movie is shown concurrently on both the premium cable channels and PPV for approximately six weeks. Then the PPV window closes, leaving an exclusive window for the premium cable channels that lasts for approximately 18 months.

HBO, Showtime, and Starz each have exclusive deals with the individual studios in which they agree to pay the studio for all of the movies it produces in a given year. The amount that the premium channel pays per film is based on domestic box-office gross, and can go as high as $20 million to $25 million for a blockbuster. The average is approximately $6 million to $8 million per picture.

NETWORK and CABLE TV

After premium cable (pay TV), the movie appears on network (free) television for one to two runs; this interval lasts for 12-18 months. Increasingly, the top-rated cable channels -- USA Network, TBS, TNT -- have been able to outbid the networks to obtain rights to broadcast movies. In some cases, the network or cable channel may even buy future runs at 5- or 10-year intervals.

The network/cable channel negotiates with the studio for each movie. Generally, the network will pay the studio a fixed amount ranging from $3 million to $15 million, depending on the movie and the number of runs.

While network TV has often been a movie's penultimate revenue stream, it was infused with a certain amount of cachet when George Lucas agreed to a television premiere of his "Star Wars" prequel, "The Phantom Menace," on Fox TV, directly after the video window had closed. Lucas's film was not the only film to bypass both the PPV and premium cable windows. Disney decided to do the same with "Toy Story" by broadcasting the movie on its own network, ABC.

6. SYNDICATED TV:

Following the broadcast premiere and second run (or however many runs the network/cable channel has bought the rights to broadcast), the movie then goes into syndication, again either on network television or a cable network, or even both. This period lasts for about five years.

Movies are licensed to the highest bidder on a title-by-title basis. Studios can exhibit the movies for as long as they own the copyright or the right to distribute the film. The price that a network pays for each film is negotiated on a case-by-case basis; there is no formula for what the studios take home. The larger the market, the larger the studio's cut. In the largest television markets, studios may charge up to $5 million.

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