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Movie Industry

Question 1

A PESTEL (Political, Economic, Social, Technological, Environmental and Legal) analysis describes the analytical process included in the analysis of a certain issue by focusing on the six aspects that form the name. In this particular case study, the PESTEL analysis will focus on the movie industry in the United States. Politically, the movie industry has a big role to play. This is evidenced by the several political dramas that are produced by the movie industry. Since several people watch these movies, the ideologies provided in the movies will affect them and their thoughts whether consciously or unconsciously. A common example provided in this case is the prominence of African American presidents in movies or television series, which may have influenced the election of Barrack Obama as the president. Therefore, the movie industry has a major effect on the politics of the country in question.

Economical analysis will prove that movie industries contribute a lot to the economy of the U.S. This is because the entertainment industry controls a major share of the revenues collected in the United States especially. It is common knowledge that several people allocate a specific amount of their salary towards entertainment. However, the past few years have contradicted this fact. It has been noticed that the revenues grossed by movie theatres have increased significantly yet the number of movie theatres is dwindling. In addition to this, most citizens prefer to watch television as opposed to watching the movies in the theatres as they did in the past. Revenues have increased since the movies are still popular but they are just not watched in the movie theatres. This may be attributed to the fact that several new appliances’ have come up that facilitate the same theatre experience in the comfort of one’s home.

For the general economy, the revenues collected have not been affected but the profitability if the movie theatres have significantly decreased. Socially, movie industries are a crucial element of the society. This is because they are one of the most common entertainment spots. Movie theatres have been considered an escape from reality for several people for the longest time. This is because during the movie one is transported from all the problems that they may be facing such as mortgage payments for example. Consequently, the effect of the movie industry in the social lives of the citizens of the U.S. is still colossal. Technological advancements have had both a positive and negative impact on the movie industry. Developments such as the invention of 3D viewing have boosted the sales of several major movie theatres. This is because they provided a new experience that their customers liked. On the other hand, innovations like home theatre systems and LCD screens have decreased the popularity of movie theatres.

This is because such systems offered a more flexible option to the people who wanted to watch movies. Such systems have been the main cause of the deterioration of the movie theatres. Environmentally, the movie industry has an effect but it is not very pronounced. Such an environmental effect may include a certain movie featuring the need for environmental conservation. Other than such features, it does not have any other important role in the movie industry. Legal systems influence the movie industry to some extent. From time immemorial, there has always been an element of competition between studios and theatres. Studios in a bid to reduce this competition used their ownership rights to stop movie theatres from showing movies from rival companies. This resulted in a lawsuit between the US government and Paramount pictures, a studio. The Supreme Court ruled that the studios and theatres should be treated as individual entities and should be autonomous. This is an example of the influence the legal system has on the movie industry.

Question 2

Porter’s five forces model is an important tool in the analysis of several industries for example the movie industry in this case. The first force is the risk of new rivalry in the industry. In the case of markets that yield many profits, it is easy for mew investors to want to join the market. This causes losses for the existing operators especially if there is a sudden influx of new companies. In the movie industry, this force applies since it is a profitable venture. However, in order to ensure their profitability, they may set up some entrance and exit barriers in which case the former will be high while the latter is low. This will ensure the entrance of new firms in the movie industry is limited. The second force in the model is the threat associated with substitute products. Such a threat will cause the customers of the product in question to opt for the substitute product especially if it is cheaper. In the movie industry, substitutes are a common cause for competition. For instance, the inception of a new movie theatre, which offers low priced movie tickets, will cause the next theatre to do the same in order to stay in business.

The power customers have pertaining to bargaining is the third force. This power makes the customer aware to any changes in pricing of commodities. In the movie industry; the customers do not have a great bargaining power and are not perceptive of matters like the changes in pricing. The fourth force is the power suppliers have to facilitate bargaining. The suppliers in the movie industry are the studios, which provide the movies. Their bargaining power is crucial to the competing firms in the market. Disagreements between the suppliers and the firms, theatres, may cause an increase in the competition to obtain the suppliers especially if their terms are reasonable. The final force in the model is the intensity if the competition that already exists in the industry. Increased competition will lead to the provision of very high quality services to the customers. This will be achieved by the constant need to outdo each other that will cause the availability of better commodities for the customers.

Question 3

Strategic issues facing the movie industry include changing demographics and new inventions. Changing demographics are affecting the movie industry immensely. This is because the age bracket of the people who watched the movies most has changed. Teenagers and the youth aged between 14 and 24 are the most frequent ‘moviegoers.’ This is contrary to the past situations in which older people visited such places more. Movie industries have been affected adversely by this situation. Another strategic issue is the innovations that have come up. Inventions like the new LCD screens and home theatre systems have caused a decrease in the number of people who go to movie theatres. Such amenities are preferred since they are more flexible, that is, one can watch movies at any time.

Question 4

Exhibitors have come up with strategic actions in order to counter these issues. Movie industries have decided to focus on the production of movies that appeal to the 14-24 age brackets. This is because their sales will increase since they frequent the theatres the most. This action will also be beneficial to the theatres whose profitability has hit an all-time-low.  Provision of cheaper movie tickets and services offered to the theatres may attract the customers back to the theatres experience. However, this may not be successful since they have another substitute for watching movies. I would suggest the former recommendation, that the movies produced focus on the people between the ages of 14-24. This suggestion is appropriate since it will be profitable for both the studios, which produce the movies, and the theatres, that air the movies.