Centralization of the film industry

Centralization of the film industry

The film industry is among the top entertainment sector in America and the entire world. Watching films both at home, on the televisions, and in public cinema’s has become so common and we can safely say that the film industry has been integrated into the world’s culture. However, except for the famous movie stars, producers, and other key industry participants, most people know very little about the film industry. One of the most interesting sectors of the film industry is its finance sector. Most people don’t know and are not even interested in knowing facts such as: who finances the production of movies, how much does a typical movie cost, how is the budget of production determined and how exactly are profits achieved? There is no any definite answer for all this questions since there are a lot of variables involved all the parts of this industry.

As it is in business and all other investments, not all movies make profits, and there isn’t any sure way of establishing exactly what will be earned. As all business people do, players in the film industry produced their products in the best way they see fit. They then advertise and promote sales as much as possible through relevant channels and sometimes the outcome may be satisfactory and sometimes disappointing.
The film El Mariachi, which had no stars, was produced in the year 1992. Despite being made for just $7000, this action themed film made about two million dollars in the United States movie theatres and took the career of Robert Rodriguez, its director, to the next level.

When Columbia decided to buy the film from director, it spent $200,000 more for its post-production work not to mention the millions invested in its advertisements and thus what had started as a successful film at very low costs ended up being an extravagantly expensive movie as most are in Hollywood. The director, Robert Rodriguez, a few years later remade the movie as Desperado featuring Antonio Banderas, who was a rising star. The second time the movie cost seven million dollars, which is a thousand times the amount he had used initially. The film, however, earned back twenty-five million U.S dollars. This illustration brings us back to our initial questions on the determination of costs and does expenditure necessarily correlate with returns in this industry?

Finance in Hollywood is complex because of the unpredictability of the industry. Huge hits in Hollywood may end up accumulating losses, production budgets may not even have constraint but rather keep accumulating; expensive expenditure may turn out to be economical; prices and costs are not definite since everything is determined through negotiation, and ironical enough, the participants in the industry would rather have their most intimate secrets revealed but not their incomes. These conditions make the cost of everything in this industry to be relative depending on the factors that affect a particular situation.
The cost of making a movie relies on many factors. Some of these factors are: whether to produce it in a low –budget indie or a big-budget studio? Whether to use famous movie stars or not? The choice of the studio to use may rely entirely on the type of movie being produce. If one decides to use established stars in a movie, it may increase the cost of producing the movie at an increasing rate. This is because stars make everything in a movie expensive since they mostly come as a package with their helper. A star may bring along his own chef who charges more than the other chefs present; he/she may bring along a trainer, an acting coach, an expensive personal stylist and the list is endless. The studios and the actors also don’t reveal their money transactions to the public. This is because a studio may have agreed to pay a large sum to a particular actor say, Bradley Cooper. Irrespective of what Cooper get, the studio doesn’t want the next act it is hiring to use that sum as a base for bargaining for his/her own pay and thus the secrecy. The act, on the other hand, may have accepted a certain amount of payment from a previous studio but wouldn’t want that value to hold him/her back in future income negotiations. The studio, on the other hand, may claim that a hit didn’t make profits so as to avoid fulfilling its contractual agreements of paying the directors and other important participants a certain percentage of the profit. Despite all this complexities, it is well-established fact that production in Hollywood in most cases exceeds the budgets. There are also many other inefficiencies in the industry that good management practices can solve.

Among the many positive managerial practices that could improve the situation in the film industry, centralization of the organization in the industry would be the most effective of them. Centralization refers to a situation where most of the power in the organization lies in the hands of a few high-ranking leaders in the organization. The most centralized organization usually house their executives who make decisions in the central headquarters offices where they have conference rooms for business meeting and discussions. Centralization has several advantages some of these being: fast execution, having a focused vision, effective control, and accountability of the organization and reduction of conflicts in the organization.

Centralized organizations usually have a focused vision since the vision of the organization lies with the leader while all the other employees align themselves to achieve it. Communication of a common vision by the leaders ensures that all the employees of the firm move in one direction thus eliminating potential inconsistencies in the firm. This may be very productive in the film industry that has a lot of inefficiencies brought about in the name of employee creativity.

Centralization of an organization also ensures timely executions of decisions and policies since decision making lies in the hand of a few people. Centralization enables the leaders to gather information, analyze it and make a timely decision that is communicated to the rest of the organization. This is more effective and time-saving as compared to a decision made in decentralized firms where combined outcome of the firm will be inconsistent since the different managers at the different branches may not share the same point of view. A good example of this inconsistency is the film industry where nothing is definite.
Another merit of centralization in the organization is the reduction of conflicts. When employee’s jobs are following instructions and sticking to the firm’s policies, there are no reasons for employees to undermine each other and start conflicts. A different scenario that may be contrasted to this is decentralization of power where a lot of people have a little power. In such a situation even the negligible employee misunderstandings may be magnified if an employee develops a notion that the employee is undermining his/her power.

Finally, when power is reserved to the leaders through centralization, it is easier for the leaders to control the activities of the organization. In addition, it is also easier for the employees to be held accountable for their actions and thus boosting productivity.

A good example of a practical situation where centralization improved the functions of an organization is the Montage Hotels & Resorts. After experiencing considerable growth, the hotel decided to centralize all its account payable transactions so as to ensure cost reductions, improving efficiency and lifting the burden of handling accounts that lay on individual branches. As a result of this centralization, the hotel has been able to maintain a headcount in the accounts department even though business has increased. There also has been a reduction in the cost of accounting and also a reduction in errors. This is a clear example of what centralization can do to an organization facing decentralization inefficiencies and thus also very applicable in the film industry.