Supply and Demand Factors in Film/Movie Industry
The factors affecting supply and demand in film and movie industry form the basis of major decisions made in the industry. The factors are often represented statistically using various functions for better understanding. It is important to understand these factors since the information greatly helps to prevent making poor decisions in the industry. The factors such as the economic status of the viewers, social factors, environmental factors, cultural factors, and time significantly affect the demand in filming industry as represented by the T values (Chisholm & Norman, 2012). On the other hand, factors such as industry incentives, infrastructure development, cheap labor, and the presence of skilled crew have a significant effect to supply in the industry (Chisholm & Norman, 2012).
Factors Affecting Demand in Filming Industry
First, the economic status of the viewers has a major impact on the demand for a product in the filming industry. This factor specifically affects the demand for a cinema hall in a particular society (Rahimi, Mousai, Azad & Syedaliakbar, 2014). The economic factor is composed of variables like the price of related goods and services to the cinemas and the side costs of theaters (Rahimi, et al., 2014). Both of these factors have supplementary and substitutionary relations to the demand for cinemas. According to the findings of Rahimi et al., the variables had a coefficient of 0.55 and their t value was 11.5 hence making their impact to demand significant (Rahimi, et al., 2014).
Second, the social factors affecting the viewers have a significant effect on the market for movies (Rahimi, et al., 2014). For instance, the demand of people willing to watch a film in a cinema hall will depend on social variables like people’s occupation and their level of education (Rahimi, et al., 2014). People with good education and more occupational prestige go to cinemas in larger numbers than the poor and illiterate. Basing on Rahimi et al. research findings, the two factors have a T value of 18.73 and 16.85 respectively hence making them highly impacting (2014).
Thirdly, environmental factors also affect the demand and supply of product and services in movie and film industry. Through attributes like the presence of cinema in the neighborhood and the degree of community development, the factors significantly influence the success of the filming industry in a particular area through creating competition and awareness respectively (Rahimi et al., 2014). Their high T values of 13.3 and 15.4 respectively explain their high impact on demand (Rahimi et al., 2014).
Also, the cultural factors such as free time and the beliefs of the residents have a high influence on the demand for a particular type of movies. The more free time people have, the more they go to movies hence increasing the demand. Besides that, the beliefs of the residents can decrease the need for cinemas especially when they are against going to cinemas (Rahimi et al., 2014). Judging from the T values of 16.2 and 4.13 respectively, they have a significant impact on demand hence can be used as a determinant factor for cinema owners.
Lastly, an extended period of time affects the market for product and services in the film and movie industry. This effect is the result of the evolution of the sector that occurs over time (Chisholm & Norman, 2012). For example, the improvements of theaters by increasing the screen numbers per theater and the growth in the proportion of the megapixel theaters caused a demand increase in those theaters (Chisholm & Norman, 2012). The changes had made the theaters more competitive than the others which did not adopt the new system (Chisholm & Norman, 2012).
Factors Affecting Supply
The film industry incentives increase the supply of movies and films to the public of a given area. The regions whose authority offers better incentives gets more film production companies interested in producing movies as compared to those with less attractive incentives. These production companies can not resist the offer, especially when the incentives cover their additional labor costs and traveling expenses (Appelbaum et al., 2012). For example, 90% of global productions are made in the United States of America or Canada due to better incentives as compared 10% of productions from other countries (Appelbaum et al., 2012).
Infrastructure development of an area also affects the production of films and movies in a given area.This factor promotes the production of more films by reducing the cost of production through facilitating the construction of sound stages, studios, and post-production facilities for mass production of movies (Appelbaum et al., 2012). This improved infrastructure results in shifting of production to areas with improved infrastructure and a resultant low production cost (Appelbaum et al., 2012).
Additionally, the presence of cheap labor promotes the production of more movies and films. The factor has a higher impact on the rate of production than the effect of incentives. According to Appelbaum et al., cheap labor in developing countries makes it hard for developed nations to compete for productions despite their lucrative incentives (2012). This difference in labor costs influences the production companies to prefer making movies outside North America especially when the savings outweigh the incentives (Appelbaum et al., 2012).The areas with expensive workers eventually lose a big number of movie producers to areas with cheaper workers.
Furthermore, the presence of skilled crew promotes the production of more movies despite their expensive nature. Christopherson and Rightor state that a state needs enough unemployed experienced team who are available to make new productions. They further explain that the state, however, needs many projects to maintain them (Appelbaum et al., 2012). An illustration of the effect of a skilled crew to the potential of production is the case of Greg Marcks who failed to get a job as a screenwriter in New Mexico since the locals had filled all posts (Appelbaum et al., 2012).
Figure 1 Demand and Supply (Source: Hirshleifer, Glazer, & Hirshleifer, 2005)
The diagram above represents a diagrammatic representation of the supply and demand in the filming industry. The Y axis represents the price to be paid by a viewer to get to watch a )movie or film. The X axis represents the available spaces in a movie theater or the available number of copies of a video. When the price of a cinema product such as theater entrance ticket increases, the supply of the product consequently increases. When the Demand of the product increases, the product quantity reduces. When the demand and supply meet at a certain point, the point is called the equilibrium point. This is the appropriate point of the film producing companies to operate (Vogel, 2007).
Conclusion
From the data discussed above, the supply and demand in film industry form a vital part of the decision-making process. Information on supply and demand such as the adverse effects of beliefs, effects of evolution in the industry over time, presence of incentives, cheap labor and the presence of skilled local crew can be used to advise the film producing companies accordingly. This advice is essential in avoiding losses especially for a new corporation with members who are new to the industry.
References
Appelbaum, L. D., Tilly, C., & Huang, J. (2012). Economic and Production Impacts of the 2009 California Film and Television Tax Credit. Retrieved from http://www.irle.ucla.edu/publications/documents/TaxCreditIndustryReportIRLE.pdf
Chisholm, D. C., & Norman, G. (2012). Spatial competition and market share: an application to motion pictures. Journal of Cultural Economics, 36(3), 207-225. doi:10.1007/s10824-012-9168-4
Hirshleifer, J., Glazer, A., & Hirshleifer, D. A. (2005). Price theory and applications: Decisions, markets, and information. New York: Cambridge University Press.
Rahimi, R., Mousai, M., Azad, A., & Syedaliakbar, M. S. (2014). Impacts of economic, cultural, social, individual and environmental factors on demands for cinema: Case study of Tehran. African Journal of Business Management, 8(13), 480-494. doi:10.5897/ajbm2011.2281
Vogel, H. L. (2007). Entertainment industry economics: A guide for financial analysis. Cambridge: Cambridge University Press.
