the cima student

The pre-seen materials have been released for a few weeks now so the MCS students have had time to digest it, so it’s a good time to look at the Industry Analysis for the MCS Menteen case study.

With this in mind, Thomas Newman, from The CIMA Hub has kindly looked at the file industry for us to get MCS students thinking about what lies ahead for them in the MCS exam next month.

Menteen Industry Analysis

The Management Case Study is fast approaching, and perhaps you’re feeling a little disoriented. The Menteen case is fascinating, but the film industry is a big and intimidating one to begin to investigate!

The following article is not a complete analysis, but is intended to give you an initial sense of the current state of play in the industry from a global perspective, and point you in the direction of some useful data and considerations.

Recent Revenue Trends

For the film industry, the most important indicator of success or failure is box office revenues. The box office of course literally refers to the place where cinema (movie theatre) tickets are sold, but is also used as a general term for revenue generated by movies during their run in cinemas.

The box office numbers are crucial as they are the earliest, objective indicator of a film’s value and future revenue-generating potential. So when trying to assess the health of the industry as a whole, box office revenues are an obvious place to start.

In recent years, box office revenues have been increasing steadily.

Gross revenues for 2011 were $32.6 billion dollars, increasing year on year to 2015 when they finished at $38.3 billion – an 18% increase in 5 years. Now if we look at the graph above, we can see that there are some interesting points of detail.

With the US and Canada, there is no obvious growth trend. Rather, there were ups and downs, though 2015 settled at a higher gross than any of the previous 5 years. The real growth trend is seen in the “International” category.

From the pre-seen, we know Menteen is a European film studio, and based on its translation activities, we know it caters to the European market. So are these positive international growth trends indicative of a healthy, growing European box office?

Well, not so fast! Let’s look at this next graph, which breaks down the international market further. Though Europe in this analysis is lumped in with the Middle East and Africa, there is still reason to be cautious about the European market based on these numbers.

The EAMA box office revenues actually declined in that period from $10.8 billion dollars to $9.7 billion dollars – a 10% decrease. How much of that decline is attributable to Europe alone is hard to discern, but if we look at large European domestic markets like Spain and France, there were declines of 8% and 18% respectively! So we’re certainly dealing with an uncertain European market, to say the least.

We’ll begin to look into some of the possible reasons for this volatility in the mature film markets of North America and Europe below. The most we can say for now is that on balance, these mature markets have been more or less steady in terms of annual revenues in the last 5 to 10 years. There is neither a discernible upward nor downward trend. However, the obvious residual question is: where exactly is the substantial global box office growth coming from, if not from Europe and North America?

Perhaps unsurprisingly, the main driver of that growth is China!

What’s Selling and Who’s Buying?

So, what kinds of films are making waves in the current market? To get a sense of what’s selling, let’s have a look at the top 4 grossing movies internationally for the last number of years. In 2013, the top four in order were: Iron Man 3, The Hunger Games: Catching Fire, Despicable Me 2, Frozen.

In 2014, the four was made up by: Transformers: Age of Extinction, The Hobbit: The Battle of the Five Armies, Guardians of the Galaxy, Maleficent. In 2015, we had: Star Wars Episode VII, Jurassic World, The Avengers: Age of Ultron, Inside Out. And most recently in 2016, we had four Disney productions with: Captain America: Civil War, Finding Dory, Zootopia, The Jungle Book.

Is there a pattern here? Three of the four number ones in the last 4 years have been Comic-book Superhero movies. Of the 12 in total, at least 6 could be categorised as Family movies (The Jungle Book, Zootopia, Finding Dory, Inside Out, Despicable Me 2, Frozen for sure; with The Hunger Games and Maleficent arguably falling into that category too, making 8 of 12).

Overall, the films all fall into one of the following categories: Family, Sci-Fi, Fantasy, Comic-Book Superhero – with some overlaps here and there. Certainly, the most common thread is: family-friendly, special-effects oriented adventure. There is a conspicuous lack of adult drama, comedy, horror, (non sci-fi/comic book) action, romance. Certainly, there seems a formula for success in recent years in line with the common thread mentioned.

What would all this mean for a company like Menteen?

Well, we’re told in the Pre-seen that Menteen has just had considerable success with Runaway. Based on the profile of the lead actor Justin Fletcher and the description given, it seems a family-friendly comedy.

So Menteen are at least on the family track, and following through with Runaway 2. However, expansion into the Comic-Book Superhero and Animated-Family movies may be difficult to achieve.

Conclusion

There are several other important points for consideration in this intriguing industry, but too many for this short overview! The CIMA Hub’s full industry analysis looks at issues surrounding marketing, the guilds, financing, and a number of other important challenges facing the industry and companies within it.