Name: Radhika K Section: i Reg No: 1221055 CONSEQUENCES OF DEMAND AND SUPPLY MISMATCH IN THE ENTERTAINMENT INDUSTRY Introduction: The entertainment industry is in the race to embrace corporates, and the production houses today are vying with each other to reach out to the global markets. With increasing incomes of the common man and broad room for expansion, industry representatives and analysts say that the film and entertainment sector has remarkable potential for growth. Movie production tycoons are aiming to develop content and partnerships to conquer both domestic and international audiences. Demand and Supply The Indian film industry produces roughly twice the number of movies as the American film industry, and sells 2.5 times the number of box office tickets as the U.S market. However, the Indian film industry box office revenues have been under the scanner; in 2008 Indian films earned only USD 1.6 billion compared to Hollywood's USD 9.7 billion, though ticket prices in India are less expensive than those in the U.S. or Europe. Factors affecting the mismatch: This scene is attributed to screen penetration and consumer spending still being considerably less as compared to the global scene. India is still a very price-conscious market. Also, cinema business is a tertiary demand and is the last in the chain of decision-making from a consumer’s perspective. However, demand for luxury goods, cinema tickets are said to be extremely elastic – consumers like to cut down on expenses on these when the prices rise. Demand also largely depends on the current market situation of other necessary products as well as the share of disposable income of the common man. The industry also has a limitation that the supply cannot be stepped up within a very short period if the demand goes up. For any movie, even if supply is good, demand does not go beyond a certain point due to elements such as content, production values, story presentation, performances of actors etc. and the audience acceptance of the same.
The Future: Trade analysts and experts expect revenues from Indian cinema to grow from USD 2.3 billion in 2008 to USD 3.6 billion by 2013. The corporatization of the film production houses and investment in Hollywood by tested companies like big cinemas is a giant leap towards improving the market standings of the film industry.
References: The Hindu, Boxoffice.com