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Film Industry Revenue: Past, Present, & Future

The Hollywood film business achieved a 7.8 percent compound annual growth rate (CAGR) in the decade ended in 2005, but for the next decade Kagan Research sees CAGR decelerating.

Annual increases for most of the next 10 years will be in line with recent inflation rates of 1.9-3.0 percent, although 2007 and 2008 are expected to be above that 10-year average.

With the downshift, the growth engine moves from home video -- the industry mainstay since the DVD format was introduced during 1996 in Japan -- to TV media today. Kagan estimates Hollywood theatrical films generated $47.2 billion in global sales in 2005 to all media -- cinema, video, TV and merchandising. The figure excludes direct-to-video and other non-theatrical filmed entertainment, such as TV programs.

The Upside Revenue Opportunities
According to Kagan, the smallish revenue category of International Pay-Per-View/Hotel/Airline will achieve a 21.5 percent CAGR from 2006-2015 for the biggest percentage gain, and blossom into a $1.7 billion business for U.S. theatrical films by 2015. But international PPV will still comprise less than 3 percent of total global film revenue.

Also in the next decade, Kagan expects the domestic PPV/Direct Broadcast Satellite/Video On Demand to be the second-fastest growing of 15 film revenue categories at 15.6 percent CAGR. The domestic basic cable category is expected to be third fastest growing at 9.8 percent CAGR. While third, it's still very impressive given that its $6+ billion in forecast 2015 revenue will be larger than the international and domestic PPV categories combined.

Of the 15 categories, two will actually shrink. The large domestic home video market is forecast to contract at less than a 1 percent annual rate during the 2006-2015 time frame, while the smallish domestic broadcast network TV category is expected to decrease at more severe 4.5 percent CAGR. Theatrical gains in pay TV more than offset that broadcast network TV decline.

Looking backward at the higher-growth 1996-2005 time frame, foreign and domestic video made the biggest impact. By 2005, home video had captured 51.4 percent of global revenue while theatrical had fallen to 19.9 percent and TV to 22.5 percent. By 2015, home video is forecast to fall to about 40 percent of global film revenue, as revenue migrates to video on demand.

Update: here's the latest US Movie Market Summary -- analyzing trends in the U.S. movie industry since 1995.

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