FOR IMMEDIATE RELEASE
12:01 A.M. PDT, Monday, December 7, 2009
LAEDC Study Concludes Redbox’s $1
Could Result in $1 Billion in Entertainment Industry Losses
Ripple Effect of Lost Revenues in
in Economic Output, Along With Reduced Contributions to Guild and Union Pension Plans
The LAEDC study, which utilizes the Redbox model of $1
Study Author Greg Freeman
“The economics of the motion picture industry are based on exclusive release windows which allow price differentiation - that is - some earlier transactions take place at higher price points," said Gregory Freeman, vice president of Consulting and Economic Policy for the LAEDC. "Redbox, or any other distributor that weakens the release window model, could reduce overall industry revenues. Lower revenues will likely lead to lower production activity, hurting the
Of the 9,280 jobs, more than half of the losses will occur in the Information Sector, the LAEDC found. In addition to motion picture and sound recording industries, this sector includes publishing industries, radio and television broadcasting, telecommunications industries and Internet service providers. Other industries impacted will be retail trade, accommodation and food services, health care and social assistance, professional, scientific and technical services, and manufacturing, among others.
The loss of production will also result in a reduction of up to $35.4 million in contributions to health and welfare funds for entertainment guild and union members. The LAEDC study found that the majority of this loss will occur in union plans for below-the-line employees because residuals paid to such employees are diverted into health and welfare funds.
Finally, state, county and local tax revenues could be reduced by more than $30 million, according to the LAEDC study. Earnings that would have circulated throughout the regional economy, generating taxable purchases and thus tax revenue, will be lost. Additionally, the state will lose income tax revenue and unemployment and disability taxes that would have been paid.
On top of the losses caused by Redbox $1
Redbox’s low-cost kiosks are challenging the traditional distribution and release model of the industry, which is built upon timed, sequential release into differentiated market segments through a variety of channels (box office, sell-through, rental, pay television and cable). According to the report, the financial success of a project (and its distributor) depends on a multi-phased distribution strategy. Although box office numbers are headlined in industry and popular press, revenues from this income stream account for less than twenty-five percent of the total revenues earned by distributors. Most movies are not immediate money makers and companies rely on sequential sales, such as in the home entertainment market to recoup their production and marketing investment.
Given the unpredictability of the studio agreements and
litigation with Redbox, the LAEDC report finds that the economic impact of the
spread of low-cost new release
The report also points out those new forms of digital
delivery will provide new streams for the industry, but the decline in
To view the entire report, visit http://www.laedc.org/reports/
About LAEDC (www.LAEDC.org)
The Los Angeles County Economic Development Corporation
(LAEDC), the region’s premier business leadership organization, is a private,
non-profit organization established in 1981.
Its mission is to attract, retain, and grow businesses and jobs for the
[Editors: For media interviews with Gregory Freeman, author of the
study, contact George
Mc Quade, MAYO Communications, Publicity@MayoCommunications.com, 818-340-5300.]