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Movies as Intellectual Properties in the Digital Age

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Movies as Intellectual Properties in the Digital Age

Postby MrFredPFL » Thu Oct 10, 2019 11:40 pm

Story :

Movies are the most expensive works of art, with budgets that can reach hundreds of millions of dollars. Ownership of movie properties is fairly well defined, but the new digital era has completely upended the old models of valuing film properties. This valuation is crucial, both for financing the movie in the first place and for any future transactions in the completed film.

For example, our work (Palia et al, 2008) documents how studios parse the rights to show a film in various territories and venues (TV, DVD) to determine how budgets should be split among collaborating studios and production companies. Independent films often sell rights forward to finance their movies, and if the creative team and the financiers cannot agree on a price, the movie may never get made.

Valuation is also crucial when film libraries change hands. For example, the value of the film library of MGM was a big component in the discussions during the trials and tribulations of MGM during the early part of the 21st century that culminated in a bankruptcy filing in 2010. It had never been easy to estimate how many people will watch a particular film and in what venues. However, traditionally, one could value a film based on comparables or, if the film has already been made and shown, on early results (usually U.S. theatrical exhibition).

The digital age has dramatically changed these equations. The first crack in the wall appeared when piracy became an issue. First, there were grainy VHS tapes filmed during screenings and sold around the world. Piracy has graduated since to full-blown good quality copies available illegally on the internet. New valuation models must consider how much of the projected revenue may be lost to piracy. There is broad consensus that there will be a decline in revenues, but the extent is not clear (Danaher and Smith, 2017).

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