Product Place (Distribution) in the Film Industry

By Shaun Beirne and Ashlee Yang

The number one goal of any commercial business is to make a profit. To do this a business must design a product with a compelling value proposition to satisfy customer desires.
Once designed, prototyped and manufactured the business must find a way to transfer the title of the product to the consumer. This by definition is when a business must consider a way to place or distribute the product.

Popular culture as captured by Film has been delivered to mass market consumers since around the beginning of the 20th Century, although some suggest it was far earlier.

The original films would be produced and distributed to ‘Nickelodeon’ theatres in North America.
Traversing the 20th Century theatres saw such developments as Multiplexes, Drive-Ins, 3D and IMAX. However the underlying distribution here was to start and end with Film Producers and the Consumer via mass market offerings.
In this way the Supply Chain was very simplistic:

Blog

However the advent of Videocassetes in 1971 and later DVD’s meant that the Film makers had a new market to contend with and as such they were forced to diversify their distribution to meet new consumer needs.

In modern times we have cable television (e.g. Foxtel) and now Video On Demand (VOD’s) like Netflix.

Let us now look at one of the major film corporations as a Case Study.

Disney

Walt and Roy Disney incorporated The Disney Brothers Studio in 1923 releasing their first comedic production in 1927.

Since that time they have employed various supply chain methodologies and in fact concurrently using more than one model

Prior to 1953 the entity, by then known as Walt Disney Studios, combined with upstream partners such as Columbia Pictures and United Artists to distribute their productions to the theatres who in turn delivered them to the consumers.

This traditional 2-level supply chain was broken, as so many are, by a dispute over the value of a Disney production ‘True-Life Adventures’.

It was then that the brothers incorporated Beuna Vista Film Distribution Company so that they could take control of their own distribution thus removing one level of the supply chain and delivering directly to their retail partners.

In 1983, Walt’s son in law and CEO Ron W. Miller launched the Disney Channel in April. Disney Channel successfully targeted children and teenagers during the morning and afternoon by showing popular series, occasional live- action and animated specials. The premium programming services also includes family oriented movies in the early evenings and classic films during late evening and overnight hours.

Feature films were still distributed, at least in their initial release, to the major Theatres by Beuna Vista Film, however there was also a second supply chain that now took programs directly to the consumer via Television.

Disney Supply chain

By 1990, the Disney Channel had about five million subscribers within the United States.
In 1992, the channel launched their own multiplex service and by 1995, its subscriber base expanded to 15 million cable homes.
By 1996, Disney and Tokuma Shoten Publishing agreed that Disney would distribute studio Ghibli animated films internationally and followed this agreement with acquisitions of Capital Cities/ABC, Buena Vista Pictures Distribution, Inc was merged into ABC, Inc.

So now not only was Disney in the business of producing their own film and television but also distributing content on behalf of other production companies.

In 1997, The Disney Channel rebranded to the name “Disney Channel” and introduced a new logo. It went on to transition from a premium service into a basic cable channel and decided to shift its target audience more toward children. In the same year, the home division of the Disney Company released its first DVDs.

The Channel expanded during the following years with buying ABC stations and Fox Family Network (now known as ABC Family), launching overseas with Fox Kids channel (now known as Disney HD),and launching Disney Cinemagic (now known as Sky Movies Disney) in United Kingdom 2006.

During 62 years of the distribution history, Walt Disney Studios Motion Pictures has promoted 26 films that have received nominations for the Academy Award of Best Picture.

With the launch Video-On-Demand in Australia and New Zealand on March 31st 2015 Disney teamed with Netflix to distribute the magic of its films such as the current number one kids flick ‘Frozen’.
So now, you guessed it, Disney is back to where it all began in teaming with a separate entity to distribute their content.

This leaves the question what next for Disney and it’s cohorts in the film and television industry?
Will as they have before end up acquiring the independent streaming services or launch their own distribution service? Only time will tell

Oh and if you can think of the next generation of distribution beyond VOD’s feel free to share, though you may want to patent it first and make yourself a few billion dollars first!

References

http://disney.wikia.com/wiki/Walt_Disney_Studios_Motion_Pictures

http://thewaltdisneycompany.com/about-disney/disney-history/1950-01-01–1959-12-31

http://www.dailymail.co.uk/news/article-2935889/Netflix-secures-Disney-films-Frozen-Angelina-Jolie-s-Maleficent-Australian-packages-no-word-House-Cards.html

http://disney.go.com/vodppv/vod.html

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20 thoughts on “Product Place (Distribution) in the Film Industry

  1. Thanks for your post. The Disney case study provides a good example of different distribution channels at different stages in the Disney company’s lifecycle. They are such a successful company that they have the power to buy up or reproduce their own version of different steps in the distribution channel in order to sell their products. Despite this, depending on what product they’re promoting, they still need to use the retailer (movie cinema) to show their films whilst simultaneously using other direct avenues to distribute. I wouldn’t be surprised if they did end up acquiring a company such as Netflix in the future in order to simplify their distribution channel once again.

    Liked by 2 people

    • Thanks for the comment.
      Yes I tend to agree I think the major production companies, not just Disney will look at acquiring Netflix or it’s partners to not only streamline their distribution chains but also to gain market control.
      Interesting times.

      Like

  2. Thanks for the Blog. For me it would be interesting to know what drove the evolution of Disneys control of distribution channels. Was it the desire to capture more of the profit or controlling the delivery and hence the reception of the product? Technology has also allowed Disney to control the retail interface through its own channels – something not possible (or at least cost prohibitive) when movies were shown exclusively in bricks and mortar move theatres.

    Liked by 1 person

    • Correct.
      The origins of Buena Vista can be traced to a dispute with RKO Pictures who up until 1953 had distributed Disney content for 15 years. The issue was around the value of the content, so certainly it seems that a strong motivation was financial considerations.

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  3. evolutions for film industry are more difficult than other industries, because the music and movie business has been consistently wrong in its claims that new platforms and channels would be the end of its businesses. the new technology produced a new market far larger than the impact it had on the existing market. but for Disney, their cases of evolution is success enough, since it has the power to face the market changes, it has sound reason to believe that Disney will launch their own distribution service.

    Liked by 1 person

    • I think in general any change to the landscape due to changes in technology is difficult for the incumbents to accept. Generally those within an established industry with established methods are preoccupied with the threat of change rather than the opportunity it presents. Disney however has displayed a good track record on evolving with the times, something I expect they will continue to do.

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  4. Disney have a fantastic opportunity in their future to provide an ‘on demand’ type service. They have such a stable of brands and appeal to many segments of the audience. With the purchase of the Star Wars franchise from Lucasfilm they’ve opened yet another segment of the market to appeal to. They are well underway with the development of some reported six plus films in this franchise, and no doubt this will lead on to merchandise, collectables, special editions, box sets, clothing, theme parks, etc, etc.

    Disney could very easily replicate a Netflix like service, that would immediately have a wealth of film and tv to offer its potential customers. Yes they have pay tv style channels currently available, but, as Netflix is currently proving, there is another segment of the market that wants ‘on demand’ entertainment.

    Onward and upwards for Disney in my view.

    Liked by 1 person

    • Yes I tend to agree. Disney is certainly not a company to sit on its hands. They will no doubt evolve with the times and either replicate or acquire someone like Netflix.
      As you rightly say they also have been able to expand their market share over the years but purchasing IP from other companies and the purchase of the Star Wars franchise was a very Savvy investment. They will be assured of a broad cross section of consumers when they release the movies, and the added merchandise etc, to the market.

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  5. Pingback: It’s time to fight: anywhere, anytime, on any device. (Also, Kevin Spacey.) | Marketing Management Blog

  6. Hi guys – enjoyed reading this one and the deep dive in to Disney’s long term channel strategy evolution. I wrote a blog on the video streaming market in Australia as things heat up over here as Netflix joins the party. While Disney came from the top down in the content production and moved into the direct to consumer channels as you’ve pointed out, Netflix went the other way, and has a built up a $35 bn market cap business through aggregating content and creating an engaging user epxerience and a compelling value proposition, leveraging the rise of DVD in the late 1990s through to betting big on online content streaming under their monthly subscription model.

    They are now involved in content production and original programming, using this this as a tool to acquire cusotmers by releasing shows like House of Cards exclusively on their service. So effectively operating as a fully integrated production to distribution play in the online channel.

    What’s next for Disney? They have always been innovators (Disneyland, etc) but I wonder if they would struggle – like so many former ‘pure-play’ studios have – to make the leap into aggregating content from other distributors to create a holistic value proposition, which is what’s required in the streaming business. It requires a big step outside of the comfort zone to start promoting titles from other studios, and it would be a big challenge for them to do deals with their direct competitors to license content from other studios to get the breadth they need to develop a great service, not just another studio-specific direct to consumer model.

    Liked by 2 people

    • Yes you could quite possibly be correct in that someone like Disney may struggle for the breadth and depth of content that consumers are demanding.
      However they have repeatedly shown a desire to improve their own content with the purchase of independent production companies, most notably in the last decade Pixar (2006 for $7billion) and more lately Lucasfilm (2012 for $4billion). They also have various brands that produce content for various genres including Touchstone which is used to distribute their films targeted at the mature age consumer and ESPN Films targeted at the sports consumers.
      So yes whilst you may be correct re the studio-specific nature of Disney I think they have the ability to diversify and remain key players in the Film and Entertainment industries.

      Liked by 2 people

      • Totally agree, I was thinking about this again today when I was re-reading your blog – Disney are an exception and you’re right, they have acquired a huge amount catalogue as well as their own strong heritage of production. Given that, they are actually well placed to not only potentially acquire a company like Netflix or potentially partner more aggressively with Netflix competitors like Google or Amazon, as well as delivering a competing VOD (transactional or subscrption or hybrid) service which they could develop a very strong catalogue for.

        In addition, Disney and the studios that they’ve acquired have their share of massive blockbuster titles which would drive acqusition/retention of customers the same way that Netflix used House of Cards for their AU launch, and Foxtel (under license) uses Game of Thrones. Plus Disney have the advantage of being able to create extremely compelling catalogue and kids propositions, which can also be a driver of value for SVOD services where parents are looking for things to entertain the kids 24/7 (iView / ABC Kids propositions get quite a bit of traction here).

        Liked by 1 person

      • Also – one final thought (can’t seem to edit the post below) – the trend towards day and date release (where the studio release a title simultaneously across all platforms, e.g. theatres and streaming or streaming and DVD or all three) could potentially be a major differentiator for studio branded / owned VOD services… maybe they would only release day and date for VOD on their services, giving them an artificial window which could create demand for their service over another which only has the title a month or more later.

        Liked by 2 people

  7. Great post! And very good comments as well. It was very interesting to read a summary about Disney’s distribution history 🙂 disney defenitely provides an interesting example of different distribution channels at different stages in the company’s lifecycle. The innovative brand Disney does a great job. Thinking about the future and new techologies Disney will be great in video on demand offers.

    Liked by 3 people

  8. I’ve read a short piece about Disney in the Economist Espresso app earlier this month. It predicted that the company’s earnings would be strong and that, ‘The slate of films that Disney will release in 2015 is considered one of the strongest in the history of the movie business, and could gross over $2.2 billion.’ The success of ‘The Avengers: Age of Ultron’ reaffirms Disney’s strategy of ‘making fewer, high-budget films with well-known intellectual property, much of which was acquired through billion-dollar deals for Pixar (in 2006), Marvel (2009) and Lucasfilm (2012).’ Indeed, acquisition plays a huge role for Disney.

    Liked by 1 person

    • yes I agree,“Our acquisition strategy has been pretty clear,” the senior EVP and CFO of Disney wold the press. “We are looking for one of two things. Intellectual property that we can distribute through the Disney ecosystem which today is theme parks, theatrical, TV, cruise ships etc. Or something that can use to extend that network” and he expressed his interest in Marker very clear..
      And to think about “Alice In Wonderland: Through the Looking Glass” and “Pirates of the Caribbean: Dead Men Tell No Tales” as long as other to animated movies “Jungle Book” and ” Zootopia” that Disney is going to release for the next year. I wont be surprised if Disney finally decided to pay 1 billion in 2016 to buy Buzzfeed as the deal was failed this year due to the price Buzzfeed asked for.

      Like

  9. Thank you for your sharing. It is very interesting for understanding the film industry. Improvement of technologies led the film industry become harder to operate; such as internet and new television; consumers have more choice than before. Disney have a high level of brand image and they have a nice opportunity to develop their future; they have enough funds to purchase IP from others and expand the market to satisfy different part of consumers; such as they created Disneyland as a theme park, produced Disney’s toy for kids. Disney is a good example for explaining about the theory of place distribution.

    Liked by 1 person

  10. This blog reminded me of my childhood. I used to see Disney cartoons when i come back from school. really enjoyed it but didn’t know about the distribution of Disney. The blog has shown the distribution channels of Disney from the time it started till present. And explained how it has reduced its distribution channels to make it simpler by making contracts with the television channels directly. It is a nice bog on how the distribution takes place in the film industry.

    Liked by 1 person

  11. Interesting post~
    This post about Disney, Disney cartoons accompanied my childhood, they are really amazing. But before I did not see this blog I really do not know the distribution of Disney.
    I search on the Internet, according to foreign technology blog TNW reported that, now Walt Disney Television production companies and online video distributor Netflix signed a multi-year agreement to provide US subscribers Disney live-action film-making and animation films first-round play services. The agreement came into force 2016, at this time, Netflix has will be the only in the United States can play Disney movies on the TV distributors.

    Like

  12. Very Interesting Blog.
    The social experience of motion picture going lies at the heart of a rich new administration called FilmBot. The interface is altogether visual, with tiles of film notices and basic symbols that permit you to play trailers, spare and score motion pictures and access nearby show times. Be that as it may, the focal reason is that motion picture going is impacted by the individuals you know. Filmbot permits you to connection to a friend network and family to get their suppositions, yet channel the outcomes. You can dole out a rate from coordinated hundred for every companion. This creates an interesting FilmBot score for a film in view of your companions’ scores of the motion picture weighted by the amount you believe their film tastes.
    Thank you for the Blog.

    Like

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