As indicated by the typical company data, the demand for motion picture/film has been stable but may be declining due to decline in admission of theaters. The demand for other content for TV and digital platform seems to be still strong.

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend

• There is a downward trend globally (except for China) in the industry of film content in the past several years.

• Poor performance in the theatres of film products of those companies seems to have been offset partially by the growth in demand from TV network and physical media.

• We have seen strong growth in China’s theatrical market. However, while it helps US companies offset the decrease of admission in US market the growth in admission in China’s market has come primarily from local language films.

• Growth in digital platform has been stable and film maker may seek expansion in digital media content.

• Demand for TV content (series) seems to have been strong and growing fast.

Causes behind the trend

• The decline may be rooted to declining admissions of theaters in those regions, which, in return, affect investment for higher budget films and cause further decline in demand due to poor performance of those films.

Industry Future

• As downward trend in this industry continues, companies may not be able to continue to make profit from their motion picture content.

General Financial Performance of Companies In the Sector

While it seems that the demand for films has been fluctuated depending on quantity and quality of release for some certain year, there is a downward global trend (except for China) in the industry of film content, which may be rooted to declining admissions of theatres in those regions. And this may be why, when the theatrical revenue (down average 3% in 2016 and 2017) of products of those companies goes down, their film content revenue from TV network (up 20% for the same period) and from physical media (up 6%) did not go down as deep as in theatres. However, the slowing down admission in theatres may, in return, affect investment for higher budget films and cause further decline in demand due to poor performance of those films. Strong increase in China’s theatrical market helps offset the decrease of admission in US market.

Growth in digital platform has been stable. Demand for TV content (series) seems to have been strong growing fast.

The general decrease in revenue has hurt profitability of those film makers in this sector. The typical company in this sector has an about 35-40% gross margin in 2017 with a SG&A as percentage of sales of about 25-32% and operating margin of 8-10%.

The typical enterprise price/EBI ratio is 46.

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