Group Project Hollywood Motion Picture Cluster Analysis Prepared for Microeconomics of Competititiveness class (Licensed by Harvard Business School) at Warsaw School of Economics (SGH)

1. Hollywood Movie
Industry
Joanna Zwirbulis
Aleksey Narko
Ravi Kumar
Cluster Analysis
Eray Ersöz
Michal Goszczycki
Microeconomics of
Competitiveness
(Licensed by HBS)

2. Agenda
Country
Analysis
• United States
• California
• Los Angeles
Cluster
Analysis
• Hollywood
• Entertainment
Industry
Recom
mendation
• Industry& Government
problems
• Suggestions

3. US Economic&Business
Perfomance
Population: 317 million
Average unemployment: 7.3%
(highest- Nevada 9%, lowest- South Dakota 2.6%)
(Bureau of Labor Statistics, Dec. 2013)
GDP:$15,685 billion GDP per capita: $49,922(1st)
GDP growth: +4.1% (in 2013)
Exports: 2nd globally Imports: 1st globally
Negative Trade Deficit $34.3 billion
(Trading Economies, Jan. 2013)
Global Competitiveness ranking 2013-14: 5th
Innovation: 7th
Labor market efficiency: 4th
Domestic market size: 1st
Ease of doing business: 4th
Rostow’s stages of growth (5th stage- the age of mass
consumption): global leader

4. US Economic&Business
Perfomance
Source: Global Competitiveness Report 2013-2014

5. Factor Conditions
+ Availability of the latest
technology (6th)
+ Infrastructure (15th)
+ Availability of research and
training services (9th)
+ Geographical condition
(climate and topography)
+ Labor market efficiency
(4th)
- Inefficient government &
bureaucracy
Supporting Industries
+ Cluster Development (6th)
+ Strong Innovation & R&D
+ Financial market
development (10th)
- Increased global
competition
Diamond
US
conditions
Firm Strategy & Rivalry
+ Intense local competition
(14th)
+ Ease of doing business
(4th)
+ Economic Freedom (10th)
+ Flexible labor market (6th)
- Macroeconomic
environment (117th)
- Institutions (35th)
- Total Tax rates/
% Profits (101th)
Demand Conditions
+ Leader in the market size
(1st)
+ Innovation (7th)
+ Business sophistication
(6th)
+ Buyer sophistication(9th)
- Budget deficits/ General
Debt (140th)

6. California basic
information
Facts and Figures:
Population: 38 million
Labor force size: 18,6
million
Income per capita: $43,647
Unemployment rate: 8,9%
Ranked 8th largest Economy
in the world
Home of the world’s biggest
publicly traded companies
Sources:
50states.com

7. California Economic
perfomance

8. Cluster Employment

9. Los Angeles County
Facts and Figures:
Population: 10 million
Incorporated cities: 88
Total number of firms,
2007: 1million
Persons below poverty
level: 16,3%
Gross Products Comparisons, 2012 (In billion $)
Sources:Wikipedia.org

10. Hollywood Cluster
History & Facts
- From 1910 movie companies moved from
the New York to Hollywood
- In 2011 industry employed nearly
162,000 wage and salary workers and
more than 85,000 free-lance professionals
- Around 247,000 direct job opportunities
- $43 billion in labor income with a $120
billion annually output
- Around 13.300 establishments in 2011

11. Hollywood Cluster
Map
Source: The LA Motion Picture Industry Cluster, Harvard Business School

12. Domestic Competition
- In total over 40 states like New
York, Louisiana , Texas,
Michigan, Georgia, Florida and
New Mexico
- In 2004 Los Angeles peaked at
118,200 and 2011 it felt down
with a 13,6% to 102,100
International Competition
- Bollywood (India), Nollywood
(Nigeria) and Pricy

13. Major Hollywood
Movie Studios
The Historic MGM Studios
- Established in 1915 as Triangle Pictures
- Market Capitalization (MGM) : $11.51B
- James Bond, Pink Panter, Rocky
Paramount Studios
- Established in 1913
- Market capitalization (Viacom) : $38.6B
- Titanic, Forest Gump, Top Gun, The Godfather
Warner Bross Studios
- Founded in 1923 by four brothers: Jack, Sam,
Herry&Albert
- Market capitalization (Time Warner) : $38.6B
- Casablanca, The Exorcist, Batman
Universal Studios
- Founded in 1912
- Market capitalization (Comcast) : $133.6B
- E.T, Jurassic Park, Jaws
DreamWorks Studios
- Founded in 1994
- Market capitalization : $1.45B
- Shrek, Amistad, Madagaskar
Source:wikipedia.org

14. Factor Conditions
+ Human Capital (artist
agencies and schools)
+ Geographical condition
(climate and topography)
+ Financial investment
power-house
-Rising Prices of labor and
physical assets
Diamond
Firm Strategy & Rivalry
+ Studio Cooperation
- Strategic Monopoly of big
studios
LA
Supporting Industries
+ Film Awards and festivals
+ Related Industries
Vfx, sound, Ads, financial
and others
+Film Awards and festivals
Motion picture
Demand Conditions
+ One of the biggest
domestic markets
+Innovation (7th)
+Established international
distribution channel
+ - Growing market of
home cinema

15. Future challenges
California state problems:
-
Lack of domestic savings in California region – harmful to investment
Cyclical state deficit
Slow integration of the minorities into the culture
25 % higher energy prices than n the rest of the US
Film industry:
- Development of new technologies allowing for piracy
- Home cinemas which account for the drop in theatre
admissions
Los Angeles location:
- run-away of the film shuting to other cuntries due to cost , scenery

16. Recommendation
For the Federal Government:
- Increase domestic saving to improve the environment for the
investment
- Suppoting the industry through the establishment and constant
updating of property rights legislative, fighting piracy
For the Californian Government:
- Reduction of costs of running the industry in order to
reduce the number of run-away production (taxes)
- Finding a way to at least equalise the prices of energy in
California with the prices in other states
- closer monitoring of the needs of the filming industry
through the Californian Film Commision

17. Thank you
for
Attention!
Questions???