Why Selecting the Right Distribution Channel Is Important to Your Bottom Line
By: Kimberly Grant
In the 4 Ps marketing mix (Product, Price, Place, Promotion), the distribution portion is considered the placement of your product or service. What does that mean in laymen terms? If there is no way to get your product or service to your customer, then you make $0.
What is Distribution in Film?
A lot goes into the distribution of a movie after it’s written, produced, scored, edited, and ready to be seen by the public. In the film industry a distribution channel can be anything from a movie theater, a streaming service (Netflix), Red Box, a TV channel (HBO), film festivals, or a combination of the above. In my previous post, “Building to a New World of Distribution”, I explained how the movie theater industry could use a distribution approach to enter new markets.
For the purpose of this post though, we’ll focus on the distribution of a single film (entertainment). Movie studios and production houses give careful consideration to each type of distribution channel based on a number of factors. Some factors that effect the type of distribution channel of a movie includes:
- Film budget (independently made films usually don’t have a distribution channel in place when they’re made)
- Level of acting talent within the film (a film starring Dwayne Johnson is probably not an indie film and will be distributed in movie theaters)
- Projected reception of a film (a highly talked about film at a film festival will most likely receive a distribution deal from a studio or major streaming service)
Distributing Cash Flow
In my previous post, “Forging the Pathway to Movie Watching”, I discussed a typical, pre-pandemic pathway of distribution for a big budget film, like Black Widow which cost $200 million to make. In 2021, the much-anticipated Black Widow was produced by Marvel Entertainment and distributed by its parent company Disney. Disney made the decision to release Black Widow via two distribution channels: in select theaters and on its streaming service, Disney+, for a fee.
This resulted in the film’s star, Scarlett Johansson and the movie theater companies making less on the film’s movie ticket sales. According to BBC News, Disney made $60 million during the 20 days Black Widow was streamed on its platform. According to Box Office Mojo, the film grossed $183.6 million in domestic theaters. Because Disney made a direct sale profit of $60 million, money was lost by Johansson and movie theater companies.
The movie theater companies made less on their margin for distributing the film. Johansson, whose contract stated that she would make a percentage of the film’s domestic movie theater gross, made a smaller margin, as well. In the film industry, that smaller margin meant that millions of dollars (approximately $60 million) was lost due to Disney simultaneously streaming the film in its first three weeks in movie theaters.
At the time, this was a common occurrence because of the COVID-19 global pandemic. Consumers were reluctant to leave their homes or spend disposable income in movie theaters. Soon after Black Widow was released, Johansson sued Disney in a very large, very public dispute. Thankfully, this litigation ended with Disney and Johansson coming to a private deal that left both parties satisfied.
Does Distribution Really Matter?
The reason why the above distribution dispute was so big was because of the amount of money that Johansson and the movie theaters did not make from Black Widow. In my post, “The Movie Streaming Effect”, I addressed the cost to make a film vs. the money it earned at the box office when the film is simultaneously streamed at home. A film that doesn’t make more than its initial budget is considered a flop or a bad investment. In this specific instance, Black Widow appears to have earned back its budget, but only Disney made a true profit.
So, yes, distribution does matter. The right or wrong distribution channel(s) can mean the difference between making a profit or litigation. Choose wisely.
Interested in more posts about marketing? You can read my last post here.
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