Question 1: In order to better define the forces that challenge the movie industry, we started by realizing the following Porter’s analysis.
Buyers:based on the reading, we denote a pretty high bargaining of the buyers, due to the various alternatives that provide us with movies (torrent files, YouTube, streaming movies for free)
Suppliers: contrary to thebuyers, the suppliers’ bargaining is decreasing because of the illegals downloads on the internet. (e.g Sony pictures, MGM). However, legal procedures to obtain movies by downloading are being developed online.
Competitive Rivalry:Internet stands as the main competitive issue for the whole movie industry. As implied above, movie selling are going down because of the downloading(most of thempiracy movies). It is important to mention that streaming websites arecausing a reduction of movies sales.Youtube.com appeared as the biggest and most popular video-sharing website in the world.
Substitutes:The threat from substitute is globally low. The main concern is to watch a movie, therefore watching it legally or not does not matter.
New entrants:There is a relatively low threat ofnew entrant in this market. The use of YouTube, among other similar websites, could provide amateur movies with a great promotion, as they do not generally have to required funds for classic advertising.
A growing number of people download movies or series illegally, watch movies in streaming. What is important to stress is that movie industry is facing the Internet development, which cause adecrease of the movies sales. The studios have therefore started to create partnerships with organizations like Youtube.com, in order to attempt to solve the problem. As a result, legal procedures to download such movies are established.
Question 2: Describe the impact of disruptive technology on the motion picture industry.
The positive effect of the free trial before you buy (sampling effect)seems weaker for movies than for music, even if positive externalities exist with the phenomenon of word of mouth. In addition, downloading and storing film remain more expensive equipment and time, since the file is heavier and that, unlike a DVD, you must find the correct version on the Internet and possibly under -securities. Finally, for the same product, revenues are generated in multipleformats: bathroom, DVD, TV and Internet now. Effects of pirating films can vary for different segments of the economy of the cinema. While aware of the specific effects of piracy on the film industry, common trends are emerging among the various content industries.
Illegal downloading creates a shortfall difficult to quantify for the film industry. Still, many studies suggest that there is also apositive overall effect on the health of the economy, notably by boosting supply. So, a ministerial inquiry conducted in 2008 on the relationship of the French with the consumption of cultural goods, shows that the age group of 15-19 years shows the greatest propensity to buy. Although the study conflates practices and illegal downloading, the fact remains that the 15-19 range more often to the cinemaand buying more DVDs than the average French. Yet it is these same individuals from which the practice of downloading is the most common.
We can summarize the impact of Internet on the film industry:
| Negative effect | Positive effect |
consumers | -viewing of lower quality -wasting time looking for the right file | -lower prices - increased accessibility of films|
Industry | -lost sales -Reduction of income for each broadcast window following the reduction of delays the timing of media -increased costs of enforcement of copyright | -increase in sales as an opportunity to test before buying (sampling effect) and by buzz effect . -increased sales of low prices in complementary sectors |
Government | -tax losses -increase compliance...