Film

Overview

Movies are a tough business, and it’s not getting any easier. Consumer habits are ever changing. Subscription video on demand (SVOD) has disrupted the home entertainment business, replacing the formerly profitable sell-through model. The windowing discussion is always looming. VR and AR are around the corner. China is the source of all the growth recently. And throw in the flavor of the month (e.g., franchise fatigue), and it’s enough to make any industry executive’s head spin.

Theatrical movie attendance has actually been one of the most resilient purchase categories in the past 50 years. Today, however, that number is hovering lower and, for all the reasons mentioned above, has the industry buzzing — not to mention the ownership structure that has altered the industry in the past few years, which has created some interesting dynamics.

These changing dynamics and the likely continued disruption for both theatrical and home entertainment require a deep understanding of audiences’ preferences and habits; a detailed knowledge of the industry value chain and relationship nuances; and a keen eye for investments, to ensure financial returns. L.E.K. Consulting has helped many clients successfully navigate this complex journey.

How we help

We are active in many aspects of the movie business and support clients who ask questions in multiple areas that include:

• Content management
  • What is the value of the current slate, and how can we finance optimally? 
  • Which library assets can we exploit and monetize better?
• Windowing strategies
  • How should film rents be optimized (for both studios and exhibitors) in the face of changing theatrical windows?
  • How will PVOD impact the traditional business model, and what is the right way to participate?
• Home entertainment
  • How do we maximize the home entertainment business, and what is the best way to address the “Amazon issue”?
  • What is the optimized distribution for content (e.g., Netflix, O&O, etc.), and what is the value for each?
• Economics/business model
  • What is the value to studios, cinemas and consumers for a theatrical subscription service?
  • What else can studios/exhibitors do to drive visits and maximize guest experience?
  • How do nontraditional and new studios create sustainable businesses in the highly competitive filmed entertainment market?
• Operations
  • Where are the cost reduction opportunities for studios/exhibitors?
  • As a service provider, how can we optimize our offering to attract more business from the traditional studios and from new content developers?
  • As an exhibitor, how can we impact guest loyalty and frequency, and drive per-cap spending?
• Growth strategy 
  • What is the forecast for theatrical exhibition, home entertainment, OTT spend, etc.?
  • What are the available avenues for growth for each player in the value chain?
  • How do we best participate in emerging filmed entertainment markets (e.g., China)?

Examples of our work

L.E.K. has a long track record of supporting players in the film industry and is one of the global leaders in the sector. Select examples of our work include:

• For a major studio, we evaluated the future stability of its feature animation business to underwrite a successful $7 billion acquisition of a leading feature animation studio

• For a mini-major studio, we developed a film ultimates model that allowed the studio to greenlight a project resulting in tens of millions of profit

• For a major theatrical chain, we performed a detailed operation diagnostic that led, within 12 months, to $10-15 million of annual savings

• For a major tech player, we evaluated the entire VR value chain to assess the best options for monetization to inform the entry strategy

• For a major service provider, we detailed the true profitability of film projects in order to help the vendor price and select projects better, leading to increased profitability