In the film industry, distribution is the intermediary between production and exhibition and involves the following functions: sales, that is, the securing of rental contracts for specific play dates; advertising directed to theaters through trade publications and to filmgoers through the print and electronic media; the physical delivery of prints to theaters; and the method of release. New York City, the media and communications capital of the country, has served as the distributing center of the industry throughout most of its history. Distribution originally serviced motion picture theaters exclusively in the domestic and foreign markets, but as new electronic technologies were developed, distribution subsumed ancillary markets such as network television, cable television, home video, and the Internet. Nontheatrical distribution involved similar functions, but serviced educational, social, and religious organizations outside commercial exhibition.
Distributing a feature film, a company charges the producer a fee based on the gross receipts (i.e., rentals) taken in by the film. In Hollywood, the schedule of fees ranges from 30 to 45 percent of the gross, depending on the market. The fees remain in effect for the duration of the distribution contract and are levied each time a film is released to a new "window," for example, home video, cable television, or network television. The revenue from these fees is designed to offset the distributor's overhead expenses in maintaining a permanent sales organization, to recoup advertising and promotion costs, and to generate profits. When the distributor puts up financing for a feature film, the fee also serves to reward the company for taking the risk of production financing.
Hollywood has operated on a global basis since the 1920s. Overseas, American film companies dominated the screen just as they did at home. They distributed the biggest box office attractions and captured the lion's share of ticket sales. Before World War II, about a third of Hollywood's revenues came from abroad; by the 1960s, the proportion rose to about one-half. As demand for film entertainment increased worldwide, especially in western Europe, the Pacific Rim, and Latin America during the 1980s, Hollywood entered the age of globalization. In practice, globalization meant that film companies upgraded international operations to a privileged position by expanding "horizontally" to tap emerging markets worldwide, by expanding "vertically" to form alliances with independent producers to enlarge their rosters, and by "partnering" with foreign investors to secure new sources of financing. Achieving these goals has led to a merger movement in Hollywood that has yet to run its course. The history of these mergers would reveal how today's media giants, such as Time Warner, News Corp., Disney, and Viacom, protected their entrenched positions by strengthening their distribution capabilities.
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