A representation of the film value chain
© The Open University (2015)
The film business value chain
Above is a representation of the film value chain.
This is a summary of a very complicated process. This chart could be
drawn with different contents, but it highlights the different stages in
the creation and consumption of an independent feature film.
Development is a crucially important process in its own right. You will learn more about this next week, but a lot of effort goes into getting a film idea, and film script, right before the project ‘goes to market’ to be financed.
Finance: In the world of independent film, in general, each film is financed on its own terms and in its own way. Major studios are able to apply their own funds or secure long-term investment for film funding, so the finance process is not such a concern for them, but in the world of independent film, finance is the most difficult stage.
Pre-pre-production (pre-prep): Note the last development stage, with a dotted line relationship to finance. It is called pre-pre-production and refers to a very difficult stage in the life of some films that are working under tight timeframes.
The film is not yet officially financed. However, money needs to be spent in order to secure key cast and crew, and start to find locations, and so forth. Someone needs to fund pre-prep, but this is a highly risky investment, because the film might collapse at the last minute.
Production is in some ways the simplest part of the chain. Though it has its own risks and uncertainties, it is a very established ‘industrial’ process. It is divided into pre-production, the official ‘prep’ period, principal photography, when the camera is rolling, and post-production when the editing and sound and visual effects (VFX) and music aspects are incorporated.
Distribution is the process of getting the film into the hands of the theatre chains, broadcasters, video stores and video on demand (VoD) operators. The companies that do this are called distributors. In general a producer uses a sales agent to license a film to distributors outside the producer’s own country.
Exploitation is the process by which consumers actually experience the film. The most important and first exploitation market is the cinema and the companies that run cinemas and cinema chains are called exhibitors. However, as we will discuss, films are more and more being consumed in different ways with the growing importance of digital technologies.
We have structured this course around the different elements of the value chain. In Week 2 we will talk about development. In Week 3 we jump to distribution and exploitation. A major source of finance is from distributors and sales agents paying for the rights to the film before it is made. Therefore, you really need to have a sense of how distribution works before you can understand finance. So Week 4 is finance. Week 5 is production itself. In Week 6 we will take a step back and consolidate.
The term ‘value chain’ has this very specific meaning in the film industry, as all the stages of life that a film project goes through from the very beginning to the very end. However, the same term is used in a slightly different way to help analyse business processes in many industries. To find out more about this, you can read the article by Hilary Collins, ‘Porter’s value chain and the business of film’. This is available on The Open University’s source of free learning, OpenLearn.
From the wider business perspective, to form a successful film, which is a product for an organisation, it is important to add value in each activity that the product goes through during the life cycle. The best possible value can be achieved in the film development process by adding value in each stage. Porter classified the generic value added activities into two:
Each film has its own life cycle which is defined by many factors and negotiations. Is it an existing brand or franchise? Are there any big stars in it? What audience would be drawn to this particular film? What is its potential to attract public support? The answers to these questions often determine who has the most influence in the journey a film takes from idea to screen: who has the most power.
Because development is such a risky process, it is not something that
all players in the film value chain are able to do – particularly those
that are commercial players.
As we have seen the source of the film itself is a key factor. For the major studios the ‘star’ system is crucial as well as the development of major franchises that spawn one blockbuster after another. However, in the world of independent feature films, it is – in a sense – much harder to predict outcomes.
"Avatar for example took 10 years to make since when James Cameron wanted to make it it 1997, there wasn't enough technology to ensure the film would be a success and no one would back the film properly due to this. The detail in the film was also part of the reason that the film took so long. Just developing the language that the Na'vi spoke took enormous amounts of time. However the wait was clearly worth it as it is one of the highest grossing movies of all time." Ryan Wiggins
Development is a crucially important process in its own right. You will learn more about this next week, but a lot of effort goes into getting a film idea, and film script, right before the project ‘goes to market’ to be financed.
Finance: In the world of independent film, in general, each film is financed on its own terms and in its own way. Major studios are able to apply their own funds or secure long-term investment for film funding, so the finance process is not such a concern for them, but in the world of independent film, finance is the most difficult stage.
Pre-pre-production (pre-prep): Note the last development stage, with a dotted line relationship to finance. It is called pre-pre-production and refers to a very difficult stage in the life of some films that are working under tight timeframes.
The film is not yet officially financed. However, money needs to be spent in order to secure key cast and crew, and start to find locations, and so forth. Someone needs to fund pre-prep, but this is a highly risky investment, because the film might collapse at the last minute.
Production is in some ways the simplest part of the chain. Though it has its own risks and uncertainties, it is a very established ‘industrial’ process. It is divided into pre-production, the official ‘prep’ period, principal photography, when the camera is rolling, and post-production when the editing and sound and visual effects (VFX) and music aspects are incorporated.
Distribution is the process of getting the film into the hands of the theatre chains, broadcasters, video stores and video on demand (VoD) operators. The companies that do this are called distributors. In general a producer uses a sales agent to license a film to distributors outside the producer’s own country.
Exploitation is the process by which consumers actually experience the film. The most important and first exploitation market is the cinema and the companies that run cinemas and cinema chains are called exhibitors. However, as we will discuss, films are more and more being consumed in different ways with the growing importance of digital technologies.
We have structured this course around the different elements of the value chain. In Week 2 we will talk about development. In Week 3 we jump to distribution and exploitation. A major source of finance is from distributors and sales agents paying for the rights to the film before it is made. Therefore, you really need to have a sense of how distribution works before you can understand finance. So Week 4 is finance. Week 5 is production itself. In Week 6 we will take a step back and consolidate.
The term ‘value chain’ has this very specific meaning in the film industry, as all the stages of life that a film project goes through from the very beginning to the very end. However, the same term is used in a slightly different way to help analyse business processes in many industries. To find out more about this, you can read the article by Hilary Collins, ‘Porter’s value chain and the business of film’. This is available on The Open University’s source of free learning, OpenLearn.
From the wider business perspective, to form a successful film, which is a product for an organisation, it is important to add value in each activity that the product goes through during the life cycle. The best possible value can be achieved in the film development process by adding value in each stage. Porter classified the generic value added activities into two:
-
primary activities which are classified as product and market related activities
-
support activities that are related to infrastructure, technology, procurement, and human resource management.
Each film has its own life cycle which is defined by many factors and negotiations. Is it an existing brand or franchise? Are there any big stars in it? What audience would be drawn to this particular film? What is its potential to attract public support? The answers to these questions often determine who has the most influence in the journey a film takes from idea to screen: who has the most power.
Why development is so important and so hard
Because development is such a risky process, it is not something that
all players in the film value chain are able to do – particularly those
that are commercial players.
As we have seen the source of the film itself is a key factor. For the major studios the ‘star’ system is crucial as well as the development of major franchises that spawn one blockbuster after another. However, in the world of independent feature films, it is – in a sense – much harder to predict outcomes.
"Avatar for example took 10 years to make since when James Cameron wanted to make it it 1997, there wasn't enough technology to ensure the film would be a success and no one would back the film properly due to this. The detail in the film was also part of the reason that the film took so long. Just developing the language that the Na'vi spoke took enormous amounts of time. However the wait was clearly worth it as it is one of the highest grossing movies of all time." Ryan Wiggins
