brand and word-of-mouth analysis of the motion picture industry philippines (october 2013)

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0 University of Asia and Pacific School of Economics Research Seminar I: Industry Analysis MOTION PICTURE INDUSTRY: An Analysis of the Explanatory Power of Brand-Related Variables and Word-of-Mouth to Industry Performance Submitted by: Camu, John Harmon M. Quintos, JosetteAlbertine S. Salcedo, Althea Mae M. Tuason, Rige Gabriel N. Mentor: Ms. Jovi Dacanay October 21 2013

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Movies are considered ―experience goods‖, wherein production/distribution companies distribute the finished films to exhibition outfits for consumers to watch before making a sound judgment regarding the content and quality of a movie. Consumers play a vital role in the performance of a motion picture since a positive word-of-mouth is proven to affect the behavior of moviegoers. Word of mouth initiates from informed consumers who are familiar with brand-related variables such as star power and co-production between companies that influence them to watch a film. Thus, revenues generated in the first week are highly due to the informed consumers who consider the explanatory variables of star power and co-production. After the first week, gross revenues are then influenced by another significant explanatory variable in word of mouth which considers the percentage increase in revenues from week one to week two, along with the number of screens in week two compared to week one. Gross revenue are therefore further explained, particularly by the three explanatory variables mentioned: star power, co-production and word of mouth phenomenon.

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University of Asia and Pacific

School of Economics

Research Seminar I:

Industry Analysis

MOTION PICTURE INDUSTRY:

An Analysis of the Explanatory Power of Brand-Related Variables and Word-of-Mouth to

Industry Performance

Submitted by:

Camu, John Harmon M.

Quintos, JosetteAlbertine S.

Salcedo, Althea Mae M.

Tuason, Rige Gabriel N.

Mentor:

Ms. Jovi Dacanay

October 21 2013

1

TABLE OF CONTENTS

OVERVIEW .......................................................................................................................... 2-3

Chapter 1: The Motion Picture Industry ............................................................................4-14

Industry Definition ...................................................................................................... 4-5

Product and Services ................................................................................................... 5-6

Product Process ........................................................................................................... 6-8

History of the Philippine Motion Picture Industry .......................................................8-10

Philippine Motion Picture Industry and the Macroeconomy ...................................... 10-13

Linkages to the Rest of the Economy ............................................................................. 14

Chapter 2: Industry Condition .......................................................................................... 15-20

Factors Affecting Demand ........................................................................................ 15-17

Factors Affecting Supply .......................................................................................... 17-18

Cost Structure and Regulatory Policy Framework ..................................................... 19-20

Chapter 3: Industry Structure ........................................................................................... 21-23

Industry Players ............................................................................................................. 21

Market Structure ....................................................................................................... 21-22

Market Share ................................................................................................................. 23

Chapter 4: Porter’s Five Forces Analysis.......................................................................... 24-31

Intensity of Rivalry ................................................................................................... 24-26

Threat to Entry ......................................................................................................... 26-27

Pressures from Substitutes ........................................................................................ 27-28

Bargaining Power of Suppliers ................................................................................. 28-29

Bargaining Power of Buyers ..................................................................................... 29-31

Chapter 5: Industry Conduct ............................................................................................ 32-34

Pricing Policies ......................................................................................................... 32-33

Advertising/Promotions ................................................................................................. 33

Production/Marketing Strategies ............................................................................... 33-34

Chapter 6: Industry Performance and Prospects ............................................................. 35-45

Regression Analysis ................................................................................................. 36-45

Coopetition ................................................................................................... 36-39

Star Power and Word Of Mouth .................................................................... 39-46

First Week Sales ................................................................................ 39-41

Second Week Sales............................................................................ 41-44

Overall Gross Revenue ...................................................................... 44-46

Chapter 7: SWOT Analysis .................................................................................................... 47

Chapter 8: Conclusions and Recommendations ............................................................... 48-49

BIBLIOGRAPHY .................................................................................................................. i-v

APPENDICES ..................................................................................................................vi-xxiv

2

INTRODUCTION

Movies are considered ―experience goods‖, wherein production/distribution companies

distribute the finished films to exhibition outfits for consumers to watch before making a sound

judgment regarding the content and quality of a movie. Consumers play a vital role in the

performance of a motion picture since a positive word-of-mouth is proven to affect the behavior

of moviegoers. Word of mouth initiates from informed consumers who are familiar with brand-

related variables such as star power and coproduction between companies that influence them to

watch a film. Thus, revenues generated in the first week are highly due to the informed

consumers who consider the explanatory variables of star power and coproduction. After the first

week, gross revenues are then influenced by another significant explanatory variable in word of

mouth which considers the percentage increase in revenues from week one to week two, along

with the number of screens in week two compared to week one. Gross revenue are therefore

further explained, particularly by the three explanatory variables mentioned: star power,

coproduction and word of mouth phenomenon.

STATEMENT OF THE PROBLEM

Given the numerous issues and problems confronting the Philippine motion picture

industry. In this study, the researchers aim to answer: In spite of the losses in some major firms,

how do the major players sustain their market dominance?

Sub-problems:

1. How does word-of-mouth and star power affect the players‘ performance?

2. How necessary are these factors to gross revenues?

3. What benefits can be derived upon determining the strength of each variable in

explaining gross revenues?

OBJECTIVES

1. To analyze the effects of star power and word-of-mouth in explaining industry revenues

2. To assess which strategy should be highly prioritized to maintain market dominance

3. To formulate recommendations for the sustainability of the local film industry

THEORETICAL APPROACH

The framework which will be used in the analysis revolves around the economic concept

of signaling. Since movies are experienced goods, individuals can only formulate their

judgments about the film by actually watching them in cinemas. According to the signaling

theory, first-week moviegoers tend to base their judgments whether to watch a film or not

through brand-related variables and movie attributes and not on the quality of the movie itself.

These brand-related variables include the power of the lead stars to influence the moviegoers

through their large fan-base and even through promotions. Other movie attributes which

influence the signal of moviegoers to watch a film include the genre, the ratings, the director, and

the reputation of the producer. The behavior of 2nd

week moviegoers are different in a sense that

the decision-making process is dependent on the behavior of moviegoers in the 1st week of a

film‘s screening. This is called the word-of-mouth phenomenon, more formally known as the

theory of information cascades. Based on the Specific Model which parallels the theory of

information cascades, moviegoers may have a high or low signal in the first week and these

3

signals will generally cause individuals to watch a movie. However, in the third week, when

Consumer A (1st week) and Consumer B (2

nd week) both have high signals, Consumer C (3

rd

week), even with a low signal will reject his opinion about a movie given a high signal coming

from the two consumers. These also work vice versa as the dominance of low-signals in the first

two weeks can negatively affect the decision of the moviegoer in the 3rd

week as he may reject

his private high signals due to the dominance of low signals from the first two weeks. In this

study, the researchers will examine the demand for the industry as represented by gross revenues

and ticket sales given the different determinants which can affect movie demand.

EMPIRICAL METHODOLOGY AND CONCEPTUAL FRAMEWORK

The theory of information cascades and star power are tested so as to determine the

demand for local films represented by ticket sales whereas the effect of coopetition is tested to

determine its effect on industry revenues. Other determinants of sales are the number of screens

allocated to local films and movie attributes such as stars, genre, ratings, and that of producer

reputation. The conceptual framework is presented below.

Week 1 Week 2

Star Power

Genre

MTRCB Rating Producer

Reputation

Competition for 1st

Week

Overall

Number of screens

Ticket Sales

Word-of-Mouth

Star Power

Genre MTRCB Rating

Producer

Reputation

Competition

Days Cinema

Number of screens

Ticket Sales

Word-of-Mouth

Star Power

Genre

MTRCB Rating IMDB

Producer

Reputation Competition

Days Cinema

Number of screens

Ticket Sales

4

CHAPTER 1: THE MOTION PICTURE INDUSTRY

I. Industry Background

A. Industry Definition

The 1994 Philippine Standard Industry Classification (PSIC) classifies the motion picture

activities, along with publishing activities, radio and television broadcasting and programming

activities, telecommunication activities and information technology activities under the Other

Community, Social, and Personal Activities (Section O). The motion picture industry, in

particular, is under the Recreational, Cultural and Sporting Activities1.

The 2009 PSIC categorizes the motion picture industry under Section J: Information and

Communication. This section includes the production and distribution of information and

cultural products, the provision of the means to transmit or distribute these products, as well as

data or communications, information technology activities and the processing of data and other

information service activities. Publishing includes the acquisition of copyrights to content

(information products) and making this content available to the public by engaging in (or

arranging for) the reproduction and distribution of this content in various forms. All the feasible

forms of publishing (in print, electronic or audio form, on the internet, as multimedia products

such as CD-ROM reference books, etc.) are included in this section.2

There are four classes under this division, which are the production, post-production,

distribution and projection activities. The first class includes production of theatrical and non-

theatrical motion pictures whether on film, television and DVD. The second class includes post-

production activities such as editing, titling, subtitling, and adding of special effects, developing,

processing and reproduction of the film for theatrical distribution. These activities are done in the

film laboratories. The third class includes distributing the film to theaters, television stations and

other exhibitors. The last class includes the motion picture projection in cinemas.3

Table 1.1

Industry Code of Production Activities

Item Code Description

Section J Section J: Information and Communication

Division 59 Division 59: Motion Picture, Video, Television Programme Production, Sound Recording and Music Publishing Activities

Class 5911 Motion Picture, Video and Television Programme Activities

Sub-Class 59110

PSIC 1994 O9211 part

ISIC Rev 4 5911

ACIC 591

Source: www.nscb.gov.ph

1 Philippine Standard Industrial Classification, ―Other Community, Social, and Personal Activities,‖ www.bles.dole.gov.ph/beams/index.php/catalog/41/download/285 (Retrieved July 2013) 2 Philippine Standard Industrial Classification, ―Motion Picture, Video and Television Programme Activities,‖www.nscb.gov.ph/activestats/psic/publication/NSCB_PSIC_2009.pdf 3Ibid, 2009.

5

Table 1.2

Industry Code of Post-Production Activities

Item Code Description

Section J Section J: Information and Communication

Division 59 Division 59: Motion Picture, Video, Television Programme Production, Sound

Recording and Music Publishing Activities

Class 5912 Motion Picture, Video and Television Programme Post- Production Activities

Sub-Class 59120

PSIC 1994 O92112

ISIC Rev 4 5912

ACIC 591

Source: www.nscb.gov.ph

Table 1.3

Industry Description of Distribution Activities

Item Code Description

Section J Section J: Information and Communication

Division 59 Division 59: Motion Picture, Video, Television Programme Production, Sound

Recording and Music Publishing Activities

Class 5913 Motion Picture, Video and Television Programme Distribution Activities

Sub-Class 59130

PSIC 1994 O921113

ISIC Rev 4 5913

ACIC 591

Source: www.nscb.gov.ph

Table 1.4

Industry Description of Motion Picture Projection Activities

Item Code Description

Section J Section J: Information and Communication

Division 59 Division 59: Motion Picture, Video, Television Programme Production, Sound

Recording and Music Publishing Activities

Class 5914 Motion Picture Projection Activities

Sub-Class 59140

PSIC 1994 O92120

ISIC Rev 4 5914

ACIC 591

Source: www.nscb.gov.ph

B. Product and Services

Films are considered the products of the motion picture industry. Films are produced by

recording images from the world with cameras, or by creating images using animation

techniques or special effects. 4

These films are classified into different genres for easier evaluation and comparison. All

films have at least one major genre, although there are a number of films that are considered

4JehoshuaEliashberg, Anita Elberse and Mark Leenders, ―The Motion Picture Industry: Critical Issues in Practice, Current Research & New Research Directions,‖ www.hbs.edu/faculty/Pages/download.aspx?name=05-059.pdf‎ ‎yluJ‎dessecca(2013)

6

crossbreeds or hybrids with three or four overlapping genres (or sub-genres) that identify them.

Suspense-thriller, biographical, romance, and fantasy are few examples of sub-genres. The

following are the main film genres: 5

1. Action: This type of film usually involves physical stunts, chases, fights and rescues.

Oftentimes, it is two-dimensional, meaning there are heroes (protagonists) battling

against villains (antagonists).

2. Comedy: Plots are typically light designed to amuse and make the watchers laugh. It may

be done by exaggerating language and action. Various forms of comedy such as spoofs,

parodies, slapstick, romantic comedy and cark satirical comedy (black comedy).6

3. Drama / Other: along with a serious tone and mood, realistic characters, settings and

situations also characterize it. This does not focus on special effects and other genres

such as comedy or action. Instead, it emphasizes plot and character development and

interaction.

a. Romance: stories that center on a the positive and negative sides love between

two or more characters

b. Documentaries: stories that develop on a true story and are narrated in the

presence of factual figures and places explained by an expert on a certain field

c. Historical: these films revive the past through the use of old-fashioned costumes

and plots that bring to present the world lived by one‘s ancestors

C. Product Process

Producing a film is a sophisticated process that requires a complete specification of the

conditions, materials, personnel needed to produce a film. The stages for production can be

divided into three main stages: (1) Preproduction (2) Production and (3) Post Production. Each

stage is sequentially in order, unable to proceed to the next until the earlier stages have been

significantly completed. The output of this production stages are then distributed and exhibited;

(4) Distribution and (5) Exhbition

1. PREPRODUCTION

The preparation for every element in the filming process takes place in the preproduction

stage. The producer and director are the central figures when it comes to organizing the

preproduction stage. Schedules would be set to organize the order in which each process of the

preproduction tasks of the director and producer will be planned and carried out.7

2. PRODUCTION

―The start of production is the moment when the score has been written, the musicians

are assembled, and the conductor raises the baton. The ship has been constructed, the crew has

been chosen, and the captain pulls up the anchor‖.8 Production is also called ‗principal

photography‘ which is the period when the first unit completes photography.

5 Tim Dirks, ―Main Film Genres,‖ http://www.filmsite.org/genres.html (accessed July 2013) 6Adapted from film genre descrption used by Fee, Edward. ―The Costs of Outside Equity Control: Evidence from Motion Picture Financing.‖ (Journal of Business, 2002, vol. 75, no.4) 7 Ibid, 41 8 Ibid 225

7

3. POSTPRODUCTION

Much of what the audience perceives on the screen is created during the postproduction

process, when the raw material accumulated during the shoot is transformed into a product9. It

involves the editing of sequences and images, as well as the sound that will be used for

producing the final product. It is also in this stage that finishing touches are executed in film

laboratories.

4. DISTRIBUTION

Entering into the right theaters and territories are crucial to the film‘s critical and

financial success. A distributor must know that a character-driven film without major celebrity

talent in the cast may need to be released in a few key territories at sites known to attract the

right kind of audience. Film distributors are mainly responsible for getting the film into theatrical

release in movie or cinema theaters10

. Distribution in this industry‘s sense is the interaction with

its two main groups of customers: exhibitors and its audiences. It encompasses the physical

distribution of the prints to the theaters or cinema as well as the marketing activities in each of

the markets in which it is released11

.

There is also a subset of film distributors that deals with nontheatrical distribution such as

licensing to television, airlines, video, and the internet. These are normally handled between the

production entity and television networks or syndication companies. There are separate

distributors for video and other forms of electronic distribution. Since distribution covers all

these as well as film advertising, a distributor should also work with various staff and agents and

must know media.

They use a variety of strategies to get people to buy tickets to their movies such as

holding advance screenings for key journalists or opinion leaders to creating elaborate contents

open to the public to see a movie prior to normal screenings. When television advertising is

involved, commercials have to be made. It is a tricky business wherein trailers are made without

giving too much or too less but just enough to entice people about the movie12

. All in all,

distributors have many factors to consider, including whether the release date is right, the

behavior of their target market, what competition will be at that time, and the best way to market

this particular movie.

5. EXHIBITION

Exhibition will refer to activities performed by theater chains and individual theater

sites13

. Theater chains have virtually taken over the exhibition business, and they have their own

buyers and bookers who attend screenings prior to a film‘s release. Theater owners should know

which movie to exhibit that interest its market. Their location must be strategic enough that it is

9 Ibid, 253 10Yager F. and Yager J. Career Opportunities in the Film Industry.(NY: Ferguson, 2009), 192 11Eliashberg, Jehoshua, Anita Elberse, and Mark A.A.M Leenders. "The Motion Picture Industry: Critical Issues in Practice, Current Research & New Researh Directions " HBS. (2009), 18-19. www.hbs.edu/faculty/Publication%20Files/05-059.pdf (accessed July 6, 2013). 12Yager F. and Yager J. Career Opportunities in the Film Industry.(NY: Ferguson, 2009), 204 13Eliashberg, Jehoshua, Anita Elberse, and Mark A.A.M Leenders. "The Motion Picture Industry: Critical Issues in Practice, Current Research & New Researh Directions " HBS. (2009), 31-34. www.hbs.edu/faculty/Publication%20Files/05-059.pdf (accessed July 6, 2013).

8

where there are enough people and basically, there is easy access by driving which is explained

by the relationship between theater characteristics which are price and quality, the distance

consumers have to travel to theater, and their demand for movies14

. They are also responsible for

tracking box office receipts meaning they have to keep the books as up-to-date as possible. In

addition to this, they often have to make concessions with distributors to get blockbusters which

they will have to agree on the less desirable film in exchange for being allowed to show which

movie will fill their theater. Aside from advertising and marketing, theatrical exhibition is also

one of the major factors in persuading the public what they want to see. At the same time, it also

influences the growth and decline of exhibition industry because prior and during theatrical

release: there is a combination of advertising, media attention and word-of-mouth

communication.

D. Historical Background of the Film Industry

Prior to the existence of Philippine cinema, theater had already been embedded in the

country‘s national culture given that in early societies, ritual practitioners already had the habit

of performing their dance dramas through imitative communal dance, all of which aim to the

assurance of the Earth‘s fertility, to the proper regulation of seasons and elements, and to the

grant of augmentations in harvest and in warfare activities15

.

By the turn of the 19th

century, zarzuelas and vaudevilles became prominent as Filipinos

from all over the country greatly participated both as actors and audiences in this type of

performance arts. The former was characterized as a traditional, satirical-themed Spanish one-act

opera while the latter was a stage show of variety of acts wherein actors engage themselves in

dancing, singing, and comedy to passionately prove their art of entertainment16

.

During the 19th

century, motion picture was introduced in the country via the efforts of

Spain. Silent films arrived in the Philippines. There were no stable audiences for the films that

time. The change happened just when the Americans made a film that illustrated the execution of

Dr. Jose Rizal. Filipinos‘ sense of nationalism rose, leading to the production of the First Filipino

film entitled “DalagangBukid”, which was helmed by Jose Nepomuceno, the Father of

Philippine Movies. The zarzuela-based film set the tone for the emerging popularity of

Philippine literature-related themes and was released in September 25, 191917

.

During the 1930s and the 1940s, Julian Manansala, the Father of Nationalistic Film,

produced and directed Patria Amore. The said film helped in establishing the market for Filipino

films. Film artists and producers strayed from the guidelines and commented on socio-political

issues, using contemporary or historical matter.

The industry was put under a command during the Japanese invasion in the early years of

the 1940s. Crimes and punishment turned widespread during the three-year occupation of the

14 Ibid

15Arsenio Bautista, ―History of Philippine Cinema,‖ National Commission for Culture and the Arts (2011), 1-3,

http://www.ncca.gov.ph/about-culture-and-arts/articles-on-c-n-a/article.php?i=115&igm=1 (accessed July 7, 2013) 16Ibid, 2011. 17NadiTofighian, The Role of Jose Nepomuceno in the Philippine Society (2005), 9-14, http://su.diva-portal.org/smash/get/diva2:200615/FULLTEXT01.pdf (Accessed July 8, 2013)

9

Japanese. Instead of releasing Hollywood movies, the Japanese dominated the market with the

influx of films coming from their region. Philippines served as an important market for Japanese

films.

From 1919 to 1940s, the trends of Philippine films can be deciphered by analyzing the

popularity of genres that time. Specifically, they are dramas and zarzuelas. Soon enough, action

movies began to be the norm. From the stratification considered before which is religion, the

basis soon became Philippine literature. The industry still managed to compete despite the arrival

of Hollywood movies. It was evident then that the habit of moviegoing was already headstand in

the country that time18

.

To date, the decades of the 1950s and the 1970s are considered the Golden Ages of

Philippine Cinema as it was in these periods wherein Filipinos films had been considered

undisputed leaders in the continent‘s film scene and had also garnered international recognitions

from different award-giving bodies across the world such as the Cambodian, Berlin, and Asian

Awards19

. The period of 1950s mirrored the rebuilding and dominance of cinemas20

. This decade

was considered the “First Golden Age of Philippine Cinema” due to the discovery of new

cinematic techniques which increased the awareness of both local and international markets21

. In

terms of output, the film industry was able to produce at an average of 350 films a year. The

establishment of the First Golden Age can be explained through the emergence of studio systems

in the country. The Big Four which monopolized the industry that time were the LVN Pictures,

Sampaguita Pictures, Premiere Productions, and Lebran International22

. In this decade, local

films started to bring home recognitions from internationally-acclaimed festivals.

During the 1960s, the industry suffered decline due to labor-management conflicts and

the increasing demands for foreign films that dominantly consisted of action and sex films. The

latter were characterized as ―bomba pictures‖. They were attributed with such title because they

explicitly show sex scenes and were just shown in provinces or small-scale film distributors in

order to attract the film audience23

.

The Second Golden Age was achieved in the period of 1976-1986 under the Marcos

administration wherein young filmmakers debuted and made a mark in the industry in the

persons of Lino de Brocka, Eddie Romero, Mario O‘ Hara, Ishmael Bernal. There was also the

rise of independent film companies such as LEA Productions, Regal Films, Viva Films, Seiko

Films and a lot more24

. In this period, a regulatory board was established to ensure the public of

the proper censorship of films. This was called the Board of Censors of Motion Pictures

(BCMP), which is equivalent to MTRCB at present. The collapse of the studio movement paved

the way for the rise of independent film outfits and new product designers, writers, and editors25

.

18 Nick Deocampo, Film: American Influence on Philippine Cinema (Manila: Anvil Publications, Inc., 2011) 19Arsenio Bautista, ―History of Philippine Cinema‖, National Commission for Culture and the Arts (2005), 1-3, http://www.ncca.gov.ph/about-culture-and-arts/articles-on-c-n-a/article.php?i=115&igm=1 (accessed July 7, 2013) 20Anonymous.―History of Philippine Cinema‖.Philippine Journeys (n.d.), http://www.aenet.org/family/filmhistory.htm (Accessed July 8, 2013) 21Ibid, n.d. 22 Joseph Palis, Cinema Archipelago: A Geography of Philippine Film and the Postnational Imaginary (Chapel Hill: University of North Carolina, 2008), 115-119. 23 Joseph Palis, Cinema Archipelago: A Geography of Philippine Film and the Postnational Imaginary (Chapel Hill: University of North Carolina, 2008), 116. 24Ibid, 117. 25Ibid, 117.

10

In the 1980s, the decade when the former president Ferdinand Marcos was subjected to

People Power, film producers and directors incorporated in their movies the hardships, cruelty,

and tyranny experienced by the people because of the Martial Law. In 1985, two movie

governing bodies were created to help the industry. These are the Movie and Television Review

and Classification Board (MTRCB) and the Videogram Regulatory Board (now known as the

Optical Media Board) that primarily aimed to combat piracy26

.

From 1990s and up to the present, there seems to be a repetition of genres, plots, styles

and characterizations. The producers seem to be more profit-oriented. But still, we are still

recognized today in different international film festivals, such as the Cannes Film Festival27

.

―Digital computer technology has brought us to the next decisive historical and discursive

caesura. We are in the backslash.‖28

These digital cinemas open new market opportunities for the

industry. According to the Executive Director of the Film Development Council of the

Philippines, the shift to digital filmmaking has provided the country a better chance to give a

more quality film and more quantity of films produced because several digital effects can now be

altered using technology. Furthermore, the film experts believe that the cinema ―will be

invigorated by the fresh blood injected into it by the digital filmmakers‖29

.

E. Industry and the Macro Economy

1. Contribution to GDP

The National Statistics Coordination Board (NSCB) had recently revealed that on the

average, Metro Manila Film Festival (MMFF) entries generate more or less half-a-billion pesos,

an amount constituting 10% of the combined local and international revenues of motion pictures

screened in the country and one-third of the total domestic gross of local movies. Despite having

fewer national releases, on the average, a local film earns twice as much as foreign films.

As regards the contribution to the Gross Domestic Product (GDP) in 2011, the total

revenues from both local and foreign movies constitute 0.06% of the total GDP (0.016% coming

from local films and 0.046% coming from the foreign films)30

. It is also shown below that for

two years, during the year 2008 until 2010, the industry‘s GDP contribution is slowly increasing.

During the year 2009 and 2010, local films‘ contribution was stagnant but there was an increase

in the foreign films‘ contribution which resulted to a 1.6% increase in 2010. For 2010 and 2011,

overall contribution of both the local and foreign films was stagnant. Even though the local

films‘ contribution increased from 0.014 of 2010 to 0.016 of 2011 or a 12.5% increase, there was

still a decrease in foreign films‘ contribution to GDP of 0.048 of 2010 to 0.046 of 2011 or a

12.5% decrease which resulted to the same overall contribution of the industry to GDP of 2010.

26ArunaVasudev, LatikaPadgaonkar, and RashmiDoraiswamy, Being and Becoming the Cinemas of Asia (New Delhi: Mac Millan, 2002) 27Anonymous.―History of Philippine Cinema‖.Philippine Journeys (n.d.), http://www.aenet.org/family/filmhistory.htm (Accessed July 8, 2013) 28 Kristen Daly, How Digital and Computer Technologies are Changing Cinema. (2008), 1. 29 Joseph Palis, Cinema Archipelago: A Geography of Philippine Film and the Postnational Imaginary (Chapel Hill: University of North Carolina, 2008), 139. 30 Dr. Romulo Virola, ―Now Showing: Panday, Nag-Shake, Rattle, and Roll‖, Statistically Speaking (February 13, 2012), http://www.nscb.gov.ph/headlines/StatsSpeak/2012/021312_rav_mpg.asp

11

Year

Gross

Domestic

Product

(GDP) in

current

prices

Local Foreign Total Local Foreign Total Local Foreign Local Foreign Local Foreign Total

2008 20 150 170 1.133 3.358 4.491 56.6 22.4 7,720,903 0.015 0.043 5,739,592 0.02 0.059 0.079

2009 20 141 161 1.119 3.806 4.925 55.9 27 8,026,143 0.014 0.047 5,993,427 0.019 0.064 0.083

2010 18 131 149 1.297 4.29 5.587 67.3 32.7 9,003,480 0.014 0.048 6,442,033 0.02 0.067 0.087

2011 23 129 152 1.547 4.48 6.027 6.3 34.7 9,734,783 0.016 0.016 7,142,606 0.022 0.063 0.085

Total

0.058

0.061

0.062

0.032

Number of films with reported

gross revenueGross revenue Average revenue

Percentage share of gross revenue

to GDP

Household Final

Consumption

Expenditure (HFCI) in

current prices

Percentage share of gross revenue

to HFCE

Source: National Statistical Coordination Board (NSCB)

Figure 1.5

Contribution of Movie Industry to GDP

2. Contribution to Employment

According to the latest statistics provided by the National Statistics Office for the year

2009, the distribution of employment reached 87, 438 for the overall community, social, and

personal service activities establishments, 95.2% (83,271) were paid while 4.8% (4,167) were

working owners and unpaid workers. Out of these statistics, only an estimate of 18,000 (20.7%)

employees is classified under motion picture, radio, television and other related activities

portion31

.

Source: National Statistical Coordination Board (NSCB)

Figure 1.6

Contribution of Film Industry to Employment

Employees belonging to Sporting & other recreational activities garnered the highest

number of workers per establishment at 35.5 or 40.6%, the statistics say. Ranked second are

from other services activities industry with 31.4 or 35.9%. Followed by Motion picture, radio,

31 National Statistics Office, ―2009 Annual Survey of Philippine Business and Industry (ASBPI) – Other Community, Social, and Personal Service Activities for all Establishments: Final Results‖, Social and Personal Services Activities (February 6, 2012), http://www.census.gov.ph/content/2009-annual-survey-philippine-business-and-industry-aspbi-other-community-social-and-0

62%

0%

1%

1%

13%

23%

Percent Distribution of Other Community, Social and Personal Service

Activities Establishments for All Employment Sizes by Industry Group:

Philippines, 2009

Other service actvities

News agency activities

Library & archives, museums and other

cultural activitiesSewage & refuse disposal, sanitation and

similar activites

12

television & other entertainment activities with 18.1 or 20.7% 32

Figure 1.7

Contribution of Film Industry to GDP

It was said that with the average number of workers per establishment for each sector is

14, sewage and refuse disposal, sanitation and similar activities industry recorded the largest

average number of workers per establishment at 35. Next is the sporting and other recreational

industry with 25 while the other service industry, ranking the least, has an average number of

workers per establishment of 833

In connection to employment, NSO also provided the necessary statistics as regards the

compensation the industry has for its employees. The overall compensation for this sector totaled

to Php 20, 298.4 million in 2009, with the motion picture, radio, television and other

entertainment activities paid the second highest average annual compensation34

.

Figure 1.8

Contribution of Film Industry to Compensation (GDP)

32Ibid, 2012. 33 Ibid, 2012 34Ibid, 2012.

35.5

010203040

Sporting and other

recreational activities

Other service activities Motion

picture, radio, televison

and other entertainment

activities

Sewage & refuse

disposal, sanitation and

similar activites

Library &

archives, museums and

other cultural activities

News agency activities

Em

plo

ym

ent

(in t

housa

nds)

Industry Group

Distribution of Employment for Other Community, Social and Personal

Service Activities Establishements for All Employment Sizes by Industry

Group: Philippines, 2009

18.1

1.7 0.7 0.0

2203.6

0

500

1000

1500

2000

2500

Other community, social

and personal service

activities

News agency activities Motion

picture, radio, televison &

other entrtainment

activites

Sporting and other

recreational actvities

Sewage & refuse disposal

sanitation and similar

activities

Library &

archives, museums and

other cultural activities

Aver

age

An

nual

Com

pen

sati

on

per

Pai

d E

mplo

yee

(in

th

oou

san

d

Pes

os

Industry Group

Average Annual Compensation per Paid Employee for Other

Community, Social and Personal Service Activities Establishements for All

Employment Sizes by Industry Group: Philippines, 2009

361.3

90.0

13

For the total Revenue earned by the sector in the same year which amounted to Php 125,

176.6 million, motion picture, radio, television and other entertainment activities generated the

second largest revenue of Php 43, 738.3 million or 34.9%. While the cost excluding

compensation paid to employees totaled Php 63, 125.4 million, 46.5% of which or the biggest

cost amounting to Php 29, 342.5 million were disbursed by the same industry group35

.

Figure 1.9

Distribution of Revenue and Cost to Industry Groups

Revenue-cost ratio, the revenue generated per peso cost amounted to Php 1.9836

. For

motion picture, radio, television & other entertainment activities alone, it has Php 1.49 revenue

per peso cost which means that for every peso spent by the industry, Php 1.49 was generated.

Value added for Motion picture ranking third was estimated at Php 18, 622.6 million or

25.5%. While its value added per worker, a measure of labor productivity, only had Php 1,031.1

thousand37

.

Figure 1.10

Distribution of Value-Added per Worker for Other Community, Social, and Personal Service Activities

35 Ibid, 2012 36 Ibid, 2012 37 Ibid, 2012

67.77

43.7383

9.9216

2.61080.5996

0.5403

24.787129.3425

6.62031.8722

0.08760.0416

0.00

20.00

40.00

60.00

80.00

Sporting and other recreational

actvities

Motion picture, radio, televison

& other entrtainment activites

Other service activities Sewage & refuse disposal

sanitation and similar activities

News agency activities Library & archives, museums

and other cultural activities

Rev

enue

and C

ost

(in

mil

lion

Pes

os)

Industry Group

Distribution of Revenue and Cost for Other Community, Social and Personal

Service Activities Establishements for All Employment Sizes by Industry Group:

Philippines, 2009

Revenue Cost

835.4

15472.6

1370.2 1031.1 506 303.7 1330

5000100001500020000

Other service activities News agency activities Sporting and other

recreational actvities

Motion

picture, radio, televison

& other entrtainment

activites

Sewage & refuse

disposal sanitation and

similar activities

Library &

archives, museums and

other cultural activities

Other service activities

Val

ue

-ad

ded

per

wo

rker

(in

th

ou

san

d P

eso

s)

Industry Group

Distribution of Value-added per Worker for Other Community, Social and Personal

Service Activities Establishements for All Employment Sizes by Industry Group:

Philippines, 2009

14

F. Linkages with the Rest of the Economy

Motion Picture and Video Production Industry Motion Picture Projection Industry

General

Distribution

Structure

High direct linkages

Intermediate demand industry

Total final demand of the industry is a negative

value due to very high imports which may imply

that the industry imports many commodities

from abroad in order to produce the final output

which is the movie itself.

Low direct forward linkages

May be considered as a final demand

industry.

Intermediate

Demand

Structure

Two most important destinations of output: (1) manufacturing and (2) motion picture projection

industry with 74% and 25% respectively.

Used as inputs for the manufacturing and motion

picture projection industries in order for them to

complete their final products.

Revenue is mainly sourced from those two

industries and therefore rely on the purchases of

their output.

The Private Services Industries are shown to be an overwhelming receiver

of the industry‘s outputs with 98.3%.

Private services include the exhibition

of the films into the cinemas which is

the final destination of output

Final

Demand

Structure

There is no, or even negative purchases of its

output from personal consumers, and has a large

allocation of its output towards the import sector which may imply that the final output is not for

the consumption of private consumers.

Naturally, the film has to first be exhibited

before the general audience (private consumers)

may purchase the good.

The high value of imports implies that the there

is a large number or high cost of imported

products/services from abroad.

The final output which is the

exhibition of films are 102%

concentrated on the personal consumption expenditures sector of

the GDP. Naturally, the purchasers of

exhibited films would be individuals

classified as consumers who buy

tickets of the films.

Cost

Production

Structure

Intermediate input industry which means that the

industry has less direct forward linkages but

more backward linkages as it accepts outputs

from other industries for the production of its own outputs.

70.91% of total input allocated to the

total intermediate inputs

29.09% allocated to the total primary

inputs

High backward linkages with other

industries imply that it uses outputs of

other industries as inputs.

Intermediate

Input

Structure

Most important source of inputs: manufacturing

industry which accounts for almost 80% of the

industry‘s inputs, and thus has a high bargaining

power as a supplier

The top three industries from which

the this industry uses its outputs as

inputs are manufacturing, motion

picture and video production and

distribution, and electricity, steam and

water with 34%, 32% and 18%

respectively.

Primary

Input

Structure

The compensation of employees has the highest

percentage among other primary sources of

inputs which implies that the labor force is the

most important component in order for the

industry to complete its final product and be sold to other industries as inputs.

Other important primary sources of inputs are

the operating surplus and the depreciation with

27% and 22% respectively.

Compensation of employees are the

highest contributory factors of primary

input followed by physical capital with

41.41% and 30.73% respectively.

15

CHAPTER 2: INDUSTRY CONDITION

DEMAND

Theater cinemas are usually situated in urban areas wherein they have to meet the

different demands of the public in terms of comfort and services. Exhibitors‘ decisions about

how to allocate movies to screens constitute a form of indirect price differentiation, because in

most multiplexes the auditoriums vary in their screen size, quality of sound system and seat

condition38

.The demand for motion pictures varies along three major dimensions: 1) the movie

dimension; 2) the show time dimension; and 3) the screen life dimension39

. Price differentiation

along the contours of these dimensions is likely to increase revenues.

Specific movie demand:

This dimension is about how certain levels of box-office revenues can be estimated or

how can the success of movies be calculated. This involves knowing whether there is a strong

correlation of production costs and gross box-office revenues. Another would be how sequels

perform similarly compared to the original ones in terms of the order of magnitude. A movie

success is also revealed after the first weekend on the screens40

. In the Philippine setting, such

dimension can be divided among the following prevailing demand determinants according to

consumer behavior

A. Star Power

Movie success can also be based on the actors who are in the film41

. As said in the first

parts of this paper, distributors handle how the film will be advertised to people with the

consideration of the proper timing when they can take advantage of the actors‘ fame.This is also

true for producers as they are the ones who chose the actors. Moviegoers tend to watch a film if

their favorite stars play a role in the film42

. It becomes sort of fan-based.

B. Technology: Digital Animations and Effects

Advances in digital technology have the capacity to change the pre-production,

production and post-production stages in making a film43

. More and more of the producers

nowadays shift to such process of filmmaking because it can influence the preferences of

moviegoers.

C. Word-of-Mouth

Moviegoers can be classified into two, the informed and uninformed. The informed are

those consumers who have first-hand information regarding the film that is why they decide to

watch the film. In contrast, the uninformed are those who are persuaded to watch a film primarily

because of the feedback they hear from other people who have already watched the film. In this

38Orbach, B, and L Einav. "Uniform Prices For Differentiated Goods: The Case Of The Movie-theater Industry." International

Review of Law and Economics 27, no. 2 (2007): 129-153. 39 Ibid 40 Ibid 41Eliashberg, Jehoshua, Anita Elberse, and Mark A.A.M Leenders. "The Motion Picture Industry: Critical Issues in Practice, Current Research & New Research Directions " HBS. (2009), 16. 42Yager F. and Yager J. Career Opportunities in the Film Industry.(NY: Ferguson, 2009), 204 43Eliashberg, Jehoshua, Anita Elberse, and Mark A.A.M Leenders. "The Motion Picture Industry:

Critical Issues in Practice, Current Research & New Research Directions " HBS. (2009), 16. www.hbs.edu/faculty/Publication%20Files/05-059.pdf (accessed August 4, 2013).

16

case, they reject their private opinion instead. They are driven by the public who watch the film.

This constitutes the theory of information cascades. It states that the consumption of a movie is

subjective and the demand is dependent on whether or not the moviegoers are influenced by

other factors, such as advertisements and promotions. Herd Theory, on the other hand, is

somewhat similar to informational cascades. The only difference is that in the herd theory, one

does not totally reject his private opinion regarding a movie44

D. Director

The tendency for people to watch the film is based on how well the director can make an

excellent film45

. Just like why movie sequels are generally produced, they want to outperform the

original or either continues a legacy. Thus when a certain film hits the top list or a high rating in

the box office, the whole production team especially the director gets the credit.

E. Genre

Most films produced today are those that accumulate greater profits such as comedies,

romantic comedies, romance and teen-oriented drama. As what is reflected on box-office

receipts, romantic comedies are at high ranks, as well as comedies46

.

F. Age Ratings

Those movies that receive a general patronage or PG-13 earn well. However, movies who

are rated R-13 do not earn as much because there are only selected moviegoers who can watch

the film. Usually, in the Philippine scenario, when a child wants to watch a movie, the entire

family goes as well47

.

G. Critics‟ Review

A critic‘s review about a film provides crucial information for moviegoers in the movie

market. Critics make an impact on the moviegoer‘s film selection that may influence the first

weekend box office performance of a certain film since reviews are most often published before

the movie is released or immediately after the release48

.

H. Market Power of Distributor

A distributor is also in charge of advertising a certain film that will thus influence a

moviegoer to either watch or not to watch the movie. They say that if the distributor has already

established a name in the industry, moviegoers expect a quality and enticing film from these

movie outfits. Advertising and promotions from movie distributors may serve as an indicator of a

box-office success.

44 King, M. The Dynamics of Informational Cascades of Local Films in Theaters: A Demand Study. MasteralThesis.University of Asia and the Pacific. May 2004. 45 Santos, A. (2008). Pre-Release Indicators of Box Office Performance: A

Study on the Pre-Consumption Behavior for Movies. Masteral Thesis. University of Asia and the Pacific. May 2008.

46Philippines Box Office.Box Office Mojo International. (2013).

http://boxofficemojo.com/intl/philippines/?yr=2013&wk=26&p=.htm (Accessed August 13, 2013) 47 Ibid. 48Jeon, J, and L Jiao."The Influence Effect of Critics Reviews on Foreign and Domestic Movies."Economics in Trinity College of

Duke University. https://econ.duke.edu/uploads/media_items/jeon-and-jiao-honors-thesis1.original.pdf (accessed August 13, 2013).

17

Show-time demand:

Basically this dimension is about the patterns of the number of moviegoers or the

attendance patterns during the week and across seasons. According to Orbach and Einav, these

patterns are predictable: approximately 3.5 times of the number of moviegoers on an average

week day (Monday, Tuesday, Wednesday and Thursday) are the number of moviegoers on an

average weekend day (Friday, Saturday and Sunday). This kind of basis of pattern suggests that

the demand for movies on weekdays may be more elastic than the demand on weekends. The

pattern could also be applied to movie attendance during the different seasons: that there are

more moviegoers during summer and holidays than ordinary days or the rest of the year49

. If a

movie is shown in a peak season, such as a Valentine‘s Day, in summer, and in the yuletide

season, it has a large probability that moviegoers would patronize the film.

Release dates thus affect how the movie will perform in the box-office. ―A movie that

fails to open strongly often loses the attention of the media, audiences, and exhibitors. Timing

the opening carefully is therefore crucial.‖50

Aside from the season when will the film be shown, one should also take into account the

power of influence of the foreign competitors. If, for example, a film would be of rival to Harry

Potter or Spiderman 3, local film distributors should not release the movie on the same playdate

of the said movie or even near the date of release.

Another would be as mentioned above wherein distributors will want to take advantage

on how famous the actor is. A distributor would not want to release a movie when the cast in it is

not in a good position to be in public. Some distributors may also want to take advantage on the

fact that a certain cast is infamous.

Demand over the movie’s screen life:

With the movies‘ screen life, the demand for movies diminishes. As said above, a

movie‘s success will be determined during the first week. However, in the next weeks, the

number of moviegoers will decrease thus; the demand for such movie in the cinemas also

decreases. Successful movies have a longer screen lives than those of less popular movies as the

demand decreases in a slower rate over time.

SUPPLY

Suppliers’ Bargaining Power

A. Star Power and Coopetition

Actors and actresses are necessary and integral when it comes to producing a film of any

sort. The story of the film usually revolves around the character and thus, the character is

responsible for the progression of the story. ―One supplier segment that could be stronger than

the rest is the actors performing in the company‘s production‖.51

The actor knows that he can

49Orbach, B, and L Einav. "Uniform Prices For Differentiated Goods: The Case Of The Movie-theater Industry." International

Review of Law and Economics 27, no. 2 (2007): 129-153. 50Eliashberg, Jehoshua, Anita Elberse, and Mark A.A.M Leenders. "The Motion Picture Industry:

Critical Issues in Practice, Current Research & New Research Directions " HBS. (2009), 9.

www.hbs.edu/faculty/Publication%20Files/05-059.pdf (accessed August 4, 2013). 51―Bargaining Power of Suppliers‖. Last Modified July 22, 2013. Accessed August 3, 2013.

http://webcache.googleusercontent.com/search?q=cache:aefzb2ngzskJ:www.smo.dk/disney-assignment/porters-five-forces/bargaining-power-of-suppliers/+bargaining+power+of+actors+in+film+industry&cd=2&hl=en&ct=clnk&gl=ph

18

influence movie audiences/viewers and thus generate more revenues for the film through high

ticket sales. This allows the bargaining power of the actors to be very high, where they may

negotiate the contracts regarding wages and other incentives. The fact that the producers bank on

star actors when they want their film to sell immediately increases the bargaining power of the

supplier (actor). The producers will adjust according to the demands of the actors in order for

him to star in a film.

B. Crew

Indicated earlier in the ―production process‖ section of the paper; the producer hires the

key crew personnel, and with careful selection to ensure that the director is surrounded by the

best creative team. The fact that the crew key personnel have to undergo interviews and auditions

means that the producer and director have the luxury of having options. Thus, in this case, the

bargaining power of the crew is low because their assurance in being part of the film production

process is uncertain, let alone their wage negotiation.

C. Location Owner. (leaser)

An alternative to shooting a film in a studio is to actually shoot in locations that fit the

environment within the script. Usually, the location the director wants to shoot in is not free

accessible, and may belong to an owner. The leaser has the incentive of setting the price for the

lease to which will be recorded in the contract. Price and all other conditions that the tenant or

leaser includes in the contract will be final once the producer consents. The producer can still

negotiate the final price, but only during the negotiation period. In this case, the supplier (leaser)

has a high bargaining power in the sense that they are independent on the producer, and the

production team. If the conditions proposed by the leaser are not agreed upon by the producer,

the location owner will not sign the lease for the location to be used for shooting. The production

team can always rent another location for shooting, but if the location is specific and unique, the

bargaining power of the location owner is very high

.

D. Investors

―When considering an investment in movies or film, financial advisors insist the standard

rule applies: never invest more than you can afford to lose. That goes double for the film

industry, says Vogel‖52

. Schwarts mentions that for every one success box office movie, twelve

others fail. Thus the profitable movies are one in every twelve movies released. Alongside that,

films that select star power actors to boost ticket sales also have the tendency for low returns on

investment. After all the revenues generated, the actors demand (in the contact) that they get paid

first, which leaves the remainder (small or large) for the returns on investment.

In this case, where investors‘ returns are subject to the revenues generated by the movie,

implies the high risk in gaining profit. This shows that their bargaining power on their ROI is not

very strong in the sense that there is no certainty of what they will receive. Though they may

negotiate in the contract with the producers the rate in which they will be paid back, there is no

certainty that the movie will generate enough revenues to do so.

52Schwartz, S. ―Investing in the Big Screen can be a profitable story‖. (October, 2010). Accessed August 4, 2013.http://www.cnbc.com/id/39342145

19

COST STRUCTURE

The movie production and distribution industry, as well as the movie projection industry,

has 16 different costs that influence the overall level of net income. These costs include the

following: (1) materials and supplies purchased (2) fuels, lubricants, oils, and greases purchased

(3) electricity and water purchased (4) industrial services done by others (5) non-industrial

services done by others (6) interest expense (7) goods purchased for resale (8) indirect taxes (9)

research and experimental development (10) environmental protection expense (11) royalty fee

(12) franchise fee (13) bad and doubtful debts (14) depreciation of fixed assets and (16) other

costs.

Below is the table representing the total cost structure of the entire motion picture

industry based on the 2008 Annual Survey of Philippine Business and Industry.

Table 3.8

Cost Structure

PSIC Code (1) (2) (3) (4) (5) (6) (7) (8) (9)

Motion Picture and

Video Production

556777 18215 42313 234609 1145242 14244 43600 24499 5258

Motion Picture,

Audio, and Video

Projection

210385 3847 227805 58762 1553333 - 11610 338892 -

REGULATORY POLICY FRAMEWORK

One of the factors currently affecting the profitability of the Philippine film industry is

the excessive taxation of both local and foreign movies screened in theaters53

. The Philippine

movie industry, at present, shoulders about nine different kinds of taxes, duties and fees: cultural

tax, amusement tax, withholding tax, municipal tax, value added tax, excise or specific tax on

positive prints, customs duties on films, corporate income tax and the MTRCB screening fee. In

Quezon City, however as the entertainment capital of the Philippines, implements the reduction

tax on locally produced films from 50 to 30 percent.54

Additionally, the level of taxation depends on the film‘s grading by the Cinema

Evaluation Board. Film that is graded ‗A‘ will be exempted from any taxation, whereas a graded

‗B‘ film will have to pay 35% of the original 30% amusement tax that will be collected.55

53 Angara, J. “An Act Reviewing the Philippine Movie Industry by Providing Incentives to the Proprietors, Lessees, Operators of

Theaters and Cinemas‖, 5th Cong., 1stsess, H.B. 404, http://www.congress.gov.ph/download/basic_15/HB00404.pdf

(Accessed August 13, 2013) 54 Ibid, 1 55Guillice-Felleo, L. “Implementing the Rules and Regulations of R.A. No. 9167”, (September 5, 2003).

http://www.lawphil.net/statutes/repacts/ra2002/ra_9167irr_2002.html (Accessed August 13, 2013).

PSIC Code (10) (11) (12) (13) (14) (15) Total

Motion Picture and

Video Production

- - - 30575 67932 18741 2202006

Motion Picture,

Audio, and Video

Projection

64 - 459 36 183364 27237 2633547

20

The Movie and Television Review and Classification Board (MTRCB) is a government

arm in charge of classifying film as Restricted, General Viewership, or Parental Guidance. The

MTRCB is in charge of classifying whether films are appropriate for the general public, ensuring

that no obscenity, such as rated X films are released and accessed by minors.56

Therefore, directors and production companies have to regulate the content of their film

projects in order for MTRCB to rate their films appropriate to a larger market. However, there

are controversies regarding the decision making of MTRCB in prohibiting and allowing the so

called ―objectionable scenes‖. The MTRCB is more lax and lenient to foreign films in terms of

consideration for the ―objectionable scenes whereas they are stricter for local films.57

.

One of the troublesome factors that usually plague the film industry in terms of

generating higher profits is the issue of piracy, which is the illegal and unauthorized sale of a

copyrighted film. Various government agencies such as the Videogram Regulatory Board

(VRB), the National Telecommunications Commission (NTC) are combating and trying to

reduce piracy.58

There are several bills pending for the strengthening of those agencies‘ power to

combat piracy, and therefore enable the film industry to realize all their profits.

Quotas on the number of foreign films to be screened in the country are a unique case in

the Philippines compared to other Southeast Asian countries. Since the 1960s, efforts to place

quotas on imports have failed regularly in the Philippine Congress. 59

One way for the film

industry in the Philippines to grow is to screen a larger number of locally produced films, and

minimized foreign imported films. There have been proposals such as Bong Revilla‘s statement

of ―show only one Hollywood movie a month‖.60

However, is can be observed that up until

today, Hollywood films usually dominate the cinemas, outnumbering the number of locally

produced films.

56Garcia, L and Masigan, C. ―An In-depth study on the film industry in the Philippines‖. (August 17, 2001). dirp4.pids.gov.ph/ris/taps/tapspp0103.pdf. (Accessed August 12, 2013). 33 57 Ibid, 33 58 Ibid, 34 59 Ibid, 13 60 Vera, N. ―Bong Revilla: ―show only one Hollywood movie a month‖. (January 3, 2010)

http://criticafterdark.blogspot.com/2010/01/bong-revilla-show-only-one-hollywood.html (Accessed August 12, 2013)

21

CHAPTER 3: INDUSTRY STRUCTURE

A. Industry Players

1. GMA Network Films, Inc.

It was established by GMA Network, Inc in 1995 and was formerly known as ―Cinemax

Films‖. Its studio partners are Regal Entertainment, Viva Films and APT Entertainment. It

wanted to produce one film per month but only managed to produce eight last 2012 and so far

the most it has ever done. Among its popular films are Muro Ami, Deathrow, and Jose Rizal61

2. ABS-CBN Film Productions, Inc (Star Cinema)

This film studio was established by ABS-CBN Corporations in 1993 and is popularly

known by its trade name, Star Cinema. Its films are known for a broad high-quality and value-

laden films with different genres and themes. With a pristine track record of these films, it has

maintained its dominance in the film industry. Its top grossing films include the following: It

Takes a Man and a Woman, No Other Woman, and The Mistress62

.

3. Viva Films

The production company was established in 1980 by the Viva Entertainment Group. Viva

Films was also known for its quality and diverse genres. The company partnered with Star

Cinema, GMA Films, On-Q 28 Productions, RGUTZ Production, MVP Films and it will start co-

producing films this year, 2013 with Regal Films. Some of its popular films are P.S I Love You,

It Takes a Man and a Woman and A Secret Affair63

.

4. Regal Entertainment, Inc

The production firm was established by Lily Monteverde in 1962 which has also

produced various genres. Some of its produced films include Scorpio Nights, Shake, Rattle and

Roll and Relasyon.

5. OctoArts Films

The company was founded during the 1980s by Orly R. Ilacad. Among its partners are

APT Entertainment, M-zet productions, Imus Productions, GMA Films, Lagarvista

Entertainment, Star Cinema and Quantum films. Some of its films include EntengKabisote film

series, My House Husband: Ikaw Na! andPak! Pak! My Dr. Kwak!

B. Market Structure

The Herfindahl-Hirschman Index (HHI) is used in determining whether the motion

picture industry falls under the structure of monopoly, tight or loose oligopoly, monopolistic

competition, or perfect competition. It indicates the level of competition the entire industry has.

61 GMA Network, GMA Network History, (2013), http://www.wattpad.com/10908764-gma-network-history-gma-films-history#.UdpRUDuomuI 62 Box Office Mojo, Philippines Yearly Box Office, (2013), http://boxofficemojo.com/intl/philippines/yearly/ 63 Viva Entertainment Management, Viva Films: When and How it Started, October 21, 2011, http://viva.com.ph/index.php?option=com_content&view=article&id=2980:viva-films-how-it-all-started&catid=1:news&Itemid=2 (Accessed July 8, 2013)

22

The analysis can be done through the summation of the squares of the market share each firm has

over the entire motion picture industry. A HHI that falls below 0.2 denotes a competitive

structure – be it of perfect competition or monopolistic competition. The intensity of price

competition is considered ―fierce‖ in the former while it varies as either fierce or light depending

on product differentiation on a monopolistically competitive market64

. An oligopolistic market is

characterized by HHI ranging from 0.2 to 0.6. Values closer to 0.6 indicate that the firm is in a

tight oligopolistic structure; otherwise, values closer to 0.2 indicate that the firm is in a loose

oligopolistic structure. The intensity of price competition may be considered fierce or light,

depending on inter-firm rivalry65

. Lastly, a monopoly has an HHI value of 0.6 above, implying

that the intensity of price competition is usually light given circumstances of being a price

maker66

.

In determining the film industry‘s market structure, the 5-firm concentration ratio is used.

Results have shown that the ranges fall from 0.367 to 0.478 in the years 1997 to 2000, implying

having a “tight oligopolistic structure‖. The 21st century motion picture industry also exhibits

ranges which imply a tightly oligopolistic market. The year 2012 had an HHI of 0.439. In

relation to the established market structure, there are only a few firms battling for power and

profit in the market and these local firms included ABS CBN Film Productions, Inc. (Star

Cinema), Viva Films, Regal Films, GMA Films, and OctoArts Films. Below is the table which

summarizes the Herfindahl-Hirschman Index from 1997 up to 2012.

Table 3.1:

Herfindahl-Hirschman Index (1997-2012)

Years Herfindahl-Hirschman Index (HHI)

1997 0.367

1998 0.420

1999 0.478

2000 0.421

2001 0.623

2002 0.453

2003 0.445

2004 0.477

2005 0.313

2006 0.335

2007 0.322

2008 0.338

2009 0.334

2010 0.340

2011 0.359

2012 0.439

64 David Besanko, David Dranove, and Mark Shanley, Economics of Strategy. (New York: John Wiley & Sons, Inc, 2000), 237. 65Besanko, Dranove, and Shanley, 237. 66Besanko, Dranove, and Shanley, 237.

23

C. Market Share

Star Cinema is considered one of the strongest players in the entire movie production and

distribution industry. This statement can be attested by the author‘s computations as regards each

firm‘s market share, computed by dividing the overall sales of the production and distribution

company by the industry revenues of the respective years (from 1997 to 2012). Since 2004, Star

Cinema has the highest market share from all the production and distribution outfits in the

country. More recently, its market share ranges from 30% to 43%, thus implying its dominance

in the said business venture.

It is also worth noticing that Viva Films, since 2004, has market shares close to the top

industry player, Star Cinema. In an oligopolistic structure, players can resort to collaboration in

order for them to gain a significant portion of the market. Based on the information gathered as

regards HHI and market share, it can be surmised that the two more dominant players in the

industry are undergoing cooperation so that the two of them can have a hold on the industry. This

is done in the process of film collaboration, when two production outfits share the costs of

producing a movie, so as to increase the chances of gaining revenues with minimal costs. In

economic terms, this is called coopetition.

Table 3.2

Market Shares of the Five Major Players in the Motion Picture Industry

Years Regal Viva Star Cinema GMA Octoarts

1997 10.94 20.75 6.73 0.14 1.83

1998 8.17 25.30 8.39 0.26 0.93

1999 4.97 20.45 5.53 0.13 0.40

2000 5.89 20.02 3.46 3.21 0.40

2001 2.45 25.21 3.64 0.75 0.39

2002 1.27 12.93 8.37 0.03 0.38

2003 1.77 7.35 2.36 0.01 0.40

2004 2.15 5.07 13.37 0.00 0.35

2005 2.61 6.04 9.60 1.64 1.25

2006 3.98 6.52 15.21 2.56 1.59

2007 6.79 14.02 20.05 1.84 2.37

2008 5.87 17.31 22.17 2.72 1.67

2009 9.45 24.87 29.51 2.98 2.23

2010 7.60 22.52 26.41 3.31 1.36

2011 6.21 25.37 35.22 3.43 3.37

2012 3.77 16.64 43.10 3.95 2.85

24

CHAPTER 4: PORTER’S FIVE FORCES ANALYSIS

A. Intensity of Rivalry

Table 3.3

Five Forces Analysis (Intensity of Rivalry)

Factors Affecting Rivalry Among Existing

Competitors

Characterization (current)

Degree of Seller Concentration High

Rate of Industry Growth Moderate

Significant cost differences among firms Moderate

Excess Capacity Yes

Cost structure of firms: sensitivity of costs to

capacity utilization

High

Degree of product differentiation among

sellers? Cross-price elasticities of demand

among competitors in industry?

Low

Buyer‘s costs of switching from one

competitor to another

Low

Are prices and terms of sales transactions

observable

Low

Can firms adjust prices quickly? Low

Large and/or infrequent sales orders Moderate

Use of ―facilitating practices‖ (price

leadership, advance announcements of price

changes)

High

History of ―Cooperative‖ pricing High

Strength of exit barriers High

High industry price elasticity of demand Low

Seller concentration can be measured by observing the market share of top production

and distribution companies (sellers). If at most two companies exhibit a large value of market

share, it may be inferred that the selling of the products is highly concentrated towards those two

industries. The market share of the top five producer/distributor companies in the film industry is

highly concentrated to two companies at a large varying degree. The market share of the top two

companies are Star Cinema and Viva Films with 43.1% and 16.64% respectively. The next three

companies exhibit relatively low market shared with GMA owning 3.95%, Regal with 3.77%

and Octoarts with 2.85%. The fact that only two companies pose double digits of market share

upholds the statement that the supplier concentration of the industry is high. Additionally, it may

also be regarded that the market share is highly concentrated to Star cinema despite Viva‘s

double digit market share due to the large 27% disparity in market share.

The growth rate of the industry is exhibited by the growth rate in revenues which stands

currently at 1.184 in the year 2012. The cost difference among firms is considered moderate due

to the fact that they produce the same final products, which are films. The only difference may

be attributed to the process and intermediary circumstances different production companies

25

partake in to produce a film, such as the wages of actors employed may differ for the different

production companies.

The 2008 Annual Census of Establishments portrays total compensation to be

P255,994,000 and total revenue at P3,000,750,000. Thus by calculation, the ratio of total

compensation is 0.085 which implies that 8.5% of revenues are used to pay the employees of the

industry. This value is considerably small when considering actors being part of the 8.5% of total

compensation. The film industry banks on star power as its main driver for gaining revenues and

thus should cover a dominant portion of total compensation and total revenue. This implies that

the stars of films possess a high bargaining power which can eventually affect the costs of the

production companies in means involving salaries that causes firms‘ sensitivity to costs to

become high.

The degree of product differentiation is considered low due to the fact that all production

and distribution companies produce and manage the same final product which is the movie itself.

On the other hand, the buyer‘s cost (exhibitors) of switching from one competitor to another is

considered low. The fact that a written contract concerning the terms of opening day and the

duration of the film exhibited in cinemas are pointed out in condition that the film generates the

standard number of ticket sales. If not, the exhibitor may pull out the film from its cinemas,

which implies that the bargaining powers of exhibitors are high.

Moreover, the prices and terms of sales transactions are not considered to be

observable.Firms cannot adjust prices quickly because the production companies sell their final

products at the market price. From that analysis, we can infer that the industry is cannot have

market dominance by being price-driven. Instead, firm players can resort to being quantity-

driven to possibly gain a larger market share. Since film players can only be quantity-dependent

and the costs of producing a film are high, the most feasible way is for coopetition to happen.

Coopetition is defined as a form of strategic alliance between firms which can lead to market

expansion and the formation of business relationships. In the case of the movie industry,

production outfits share costs of a film, as well as their respective contract stars, with the view

that it can generate more profit, thus benefitting both of them. Given the power of brand-related

variables and the sharing of stars that goes with it, there is a greater probability of increasing

revenues and even profit given minimal costs of production.

Meanwhile, the size of sales orders of the production companies are considered to be

moderate. From 2008-2013, production companies produce at least two films in the same month

of the same year. Usually, only one film is produced per month when considering Star Cinema,

while other production companies do not produce films on a regular basis.

The instances when there were two movies produced by a production company in the

same month in a year are: “Who‟s That Girl?‖ and ―Catch me… I‟m in Love‖ (Viva Films,

March 2011); ―Working Girls‖ and ―Babe, I Love You‖ (Viva Films, April 2011); ―Every Breath

You Take‖ and ―Born to Love You‖ (Star Cinema, May 2012); “Way Back Home” and

―Wedding Tayo, Wedding Hindi” (Star Cinema, August 2011); ―Sa Iyo Lamang‖ and ―I Do‖(Star

Cinema, September 2011); “This Guys In Love With You Mare” and “Suddenly It‟s Magic”

(Star Cinema, October 2012).

The industry price of elasticity is considered low which implies inelasticity of the

production/distribution companies‘ products to buyers (exhibitors). Despite the relatively high

26

prices of the films distributed, the exhibitors will still purchase the films due to the few

substitutes it can consider to replace movies in their cinemas.

The strength of exit barriers is high due to the fact that it would be costly to stop shooting

a film after having incurred expenses in the procedure of preproduction and/or production stage.

Thus, firms strive to complete producing a movie when expenses have already been incurred in

order to prevent losses. A more feasible strategy is for film players to collaborate so as to reduce

their costs. Given the high costs of production, there should be an assurance of a greater return

for the company. Therefore, it is safer to cut production costs into two or three through

collaboration, while at the same time gaining more revenues given the power of the stars to

influence their audience in watching their respective films.

B. Threat to Entry

Table 3.4

Five Forces Analysis (Threat to Entry)

Factors Affecting The Threat to

Entry

Characterization (Current)

Significant economies of scale Low

Importance of reputation or established brand

loyalties in purchase decision

High

Entrants‘ access to distribution channels Low

Entrants‘ access to raw materials Low

Entrants‘ access to technology/know-how High

Entrants‘ access to favorable locations Moderate

Experience-based advantages of incumbents High

Network externalities: demand side

advantages to incumbents from large

installed base

High

Government protection of incumbents Low

Perception of entrants about expected

retaliation of incumbents/reputations of

incumbents for ―toughness‖

Low

Economies to scale in the production/distribution firms are considered low, rightfully

because of the risks and uncertainties of producing more films. Not all films are guaranteed to be

blockbusters or generate high revenues, enough for compensating the costs of producing more

films. The fact that the film industry is considered a risky investment industry explains why

significant economies to scale are considered low.

The importance of reputation of established brand loyalties in purchase decision is

considered high which can be proven by instances when SMDC collaborated with Viva in

producing and promoting a movie starring Anne Curtis, entitled ―Who‟s That Girl?‖67

. SMDC

was said to have contributed to sunk costs in producing the movie of Anne Curtis and established

67 ―SM to invest in feel-good movies only,‖ Manila Bulletin, February 27, 2011 http://ph.news.yahoo.com/sm-invest-feel-good-

movies-only-20110226-214922-636.html Accessed 10/07/13

27

a 50-50 partnership with Viva. SMDC was said to have co-produced also in Anne Curtis‘ film ―A

Secret Affair”.

Network externalities are considered to be highly positive due to the fact that exhibitors

are integral for the production/distribution companies for the exposure of their film. Usually, the

demand for working with a renowned exhibitor (SM cinemas) is high due to numerous branches

and cinemas available for exhibiting films. If one company collaborates with SM cinema, other

companies would also prefer to do the same, and thus positive externalities are visible.

The government protection of incumbents is considered to be low, primarily because of

the large sum of taxes imposed on the companies. The Philippine movie industry at present

shoulders nine different kinds of taxes68

. Government protection slightly exists only for

companies that produces a film with an A grade which would exempt the company from paying

an amusement tax fee.

The reputation for incumbents such as the five production/distribution companies is not

known for retaliation or ―toughness‖. The fact that collaboration and coopetition is now the norm

for higher profits to be generated inclines companies to coproduce, and thus mutually benefit

each other. Therefore there are low perceptions on retaliation or toughness towards the

incumbent companies.

C. Pressures from Substitutes

Table 3.5

Five Forces Analysis (Pressure from Substitutes)

Factors Affecting or Reflecting Pressure

From Substitute

Characterization (Current)

Availability of close substitutes High

Price-value characteristics of substitutes High

Price elasticity of industry demand Low

Availability of close complements High

Price-value characteristics of complements High

There are other forms of media and entertainment which can be presented and easily

accessible by the market. Examples such as the internet and television play a large role of close

substitutes to films in cinemas. Many people engage in downloading or even accessing pirated

movies through the internet which reduces the potential revenues for the film industry.

Additionally, people can access their televisions and view movies without having to incur an

expense or leaving their homes and thus the high availability of close substitutes.

The price elasticity of demand can be considered as low due to the fact that exhibitors

(buyers) obtain the films only through the production/distribution companies. The price set by

the production/distribution companies on the films will be according to the market price which

the exhibitors will accept.

68 Angara, J. ―Explanatory Note‖

28

Complements to films in cinemas include food and drinks such as popcorn and soda. The

availability of those complements is usually readily available in stalls stationed near the cinemas.

Thus, there is a high availability of close complements.

D. Bargaining Power of Suppliers

Table 3.6

Five Forces Analysis (Bargaining Power of Suppliers)

Factors Affecting Or Reflecting Power Of

Input Suppliers

Characterization (Current)

Is supplier industry more concentrated than

industry it sells to?

Moderate

Do firms in industry purchase relatively

small volumes relative to other customers of

supplier? Is typical firm‘s purchase volume

small relative to sales of typical supplier?

Large

Few substitutes for supplier‘s inputs Yes

Do firms in industry make relationship-

specific investments to support transactions

with specific suppliers?

Yes

Do suppliers pose credible threat of forward

integration into the product market?

Low

Are suppliers able to price-discriminate

among prospective customers according to

ability/willingness to pay for input

Yes

The buyer industry can be considered more concentrated than the supplier industry due to

the fact that one out of the eight exhibition companies in the Philippines (SM cinemas)

dominates the market share with a total of one hundred ninety eight theatres available for film

screening69

. The supplier industry on the other hand also have Star Cinema as the most

concentrated firm in terms of production/distribution market share. However, there are more

numerous production/distribution companies aside from the top five companies which thus

makes the suppliers at least moderate in terms of concentration compared to the buyers

(exhibitors).

The volume of purchases by buyers highly outnumbers the supply volume of suppliers.

Exhibition companies such as SM cinemas and Ayala Cinemas purchase movies from varied

production companies while suppliers produce films that come from their own production

company. Thus the volume of shares in purchases by buyers is higher than the volume of sales

by suppliers.

When considering supplier inputs, it may be stated that the substitutes to inputs are low.

The main inputs of films are the actors and actresses that possess the star power to attract many

audiences to purchase tickets. Stars cannot be easily replaced as not all actors/actresses can

69―SM to invest in feel-good movies only,‖ Manila Bulletin, February 27, 2011 http://ph.news.yahoo.com/sm-invest-feel-good-movies-only-20110226-214922-636.html Accessed 10/07/13

29

generate high revenues for the film. On the other hand, the members of the crew, another

necessary input for producing a film cannot be replaced with another factor of input. Thus there

are few substitutes to supplier inputs.

The case of SMDC investing specifically on Viva films is an example of an industry

making relationship-specific investments to support transactions with specific suppliers.70

Suppliers do not pose threats to forward integration. There have not been any instances of

any production/distribution company venturing into the exhibition side of the industry. The

exhibitors remain to be the eight film exhibition firms of the industry with SM cinemas

dominating the film exhibition firm.

The most important indicator of high bargaining power of suppliers is through the

producer and distributor‘s price discrimination. In the written contracts between film distributors

and exhibitors, an anticipated blockbuster film will usually be given more screens than non-

blockbuster films in exchange of purchase by the exhibitors71

. Exhibitors will demand films from

distributors that are anticipated blockbusters and will thus comply with the film distributors‘

decision for pricing, as well as allocating the number of screens for the film. A John Lloyd-Sarah

film, a co-production of Star Cinema and Viva, can have more screens as bargained by the

producer-distributor as their big-screen team-up had already drawn massive audiences through

their A Very Special Love trilogy. Thus, price discrimination is high and applicable in the sense

that distributors can manipulate prices of movies (highly priced if anticipated blockbuster; a

lower price if it is not anticipated to be a blockbuster.

E. Bargaining Power of Buyers

Table 3.7

Five Forces Analysis (Bargaining Power of Buyers)

Factors Reflecting Power Of Buyers Characterization (Current)

Is buyers‘ industry more concentrated than

the industry it purchased from?

High

Do buyers purchase in large volumes? Does a

buyer‘s purchase volume represent a large

fraction of the typical seller‘s sales revenue

Moderate

Can buyers find substitutes for industry‘s

product?

High

Do firms in industry make relationship-

specific investments to support transactions

with specific buyers

Yes

Is price elasticity of demand of buyer‘s

product high or low?

Low

Do buyers pose credible threat of backward Moderate

70―SM to invest in feel-good movies only,‖ Manila Bulletin, February 27, 2011 http://ph.news.yahoo.com/sm-invest-feel-good-movies-only-20110226-214922-636.html (Accessed 10/07/13 )

71MetteHjort, ―Film Risk‖. Wayne State University Press, Mar 15,

2012 http://books.google.com.ph/books?id=xJw3ROtAyl0C&pg=PA194&lpg=PA194&dq=film+distributors+price+discrimination+towards+exhibitors&source=bl&ots=FJjSY40Gst&sig=qr7rlXQxH4M45nEr_QawWR2A2ec&hl=en&sa=X&ei=QiNSUvXnHoyQiQft14HgDQ&ved=0CCoQ6AEwAA#v=onepage&q=film%20distributors%20price%20discrimination%20towards%20exhibitors&f=false (Accessed 10/07/13), 194.

30

integration?

Does product represent significant fraction of

cost in buyer‘s business?

High

Are prices in the market negotiated between

buyers and sellers on each individual

transaction, or do sellers post a ―take it or

leave it‖ price that applies to all transactions?

Low

SM Cinemas have one hundred ninety eight (198) movie screens which highly

outnumbers the second highest concentrated film exhibition company (Robinsons Movie World)

with forty three (43) movie screens. On the other hand, Star cinema, the current leading

production company in terms of movies produced with double digits (17 for 2012) outnumbers

the second production company in terms of movies produced (Viva) with 7 films by ten for

2012. Thus, the concentration of buyers (exhibitors) in the industry is higher than the industry it

purchased from.

These imply that exhibitors have the power to dictate the number of screens for a film.

Given brand-related variables such as star power, theater owners have the final say as regards the

number of screens in the first-week theatrical run of a film. Allocation of screens is done in two

ways: by the bargaining of the distributor or by evaluating the brand-related variables such as

star power. A proven team-up in the big-screen then have higher chances of having more screens

and more chances of increasing their overall revenues.

Viva is an example of a firm in the industry that makes relationship-specific investments

to support transactions with specific buyers. SMDC, a conglomerate under SM, a film exhibitor

has agreed to support Viva in producing films starting 201172

. The price elasticity of the buyer‘s

product is low due to the fact that films are necessary for exhibitors to exhibit the films in their

movie screens. Especially if the film to be distributed is a blockbuster, the exhibition firms

would agree to a high price sold by the distributors in order for the film to be exhibited in their

screens.

Buyers can be considered to pose threats to backward integration due to its occurrence

already in the year 2011. SMDC collaborated with Viva films in coproducing the movie ―Who‟s

That Girl?‖. If other exhibition firms enter the film production/distribution market, then it is

possible for a monopoly in the entire film industry to occur with one company dominating both

production/distribution and the exhibition industry. However, the recent phenomena of SMDC

venturing into the production industry were in collaboration and not a sole endeavor. Thus the

threat is currently considered as moderate.

The product represents a significant fraction of cost in buyer‘s business particularly

because exhibitors require films to be distributed to them, and purchased by them in order to

exhibit films in their movie screens. If the film is an anticipated blockbuster, then the fraction of

cost increases due to a higher pricing decision by distributors.

72―SM to invest in feel-good movies only,‖ Manila Bulletin, February 27, 2011 http://ph.news.yahoo.com/sm-invest-feel-good-movies-only-20110226-214922-636.html Accessed 10/07/13

31

Prices in particular are determined by the distributors in collaboration with the producers

on how much exhibitors should pay to purchase the film for exhibition in their cinema movie

screens. Rather than negotiating prices, terms of agreement in the exhibition contract such as the

percentage of ticket sales received by the production/distribution firms and the exhibition firm.73

Thus negotiations regarding the prices between buyers and sellers are low.

73 Dave Roos, ―How Booking Agents Work‖. http://entertainment.howstuffworks.com/booking-agent2.htm Accessed 10/07/13

32

CHAPTER 5: INDUSTRY CONDUCT

Pricing Policies:

The determination of cinema prices are legally prepared by exhibitors but are also closely

monitored by distributors74

. This is because the revenues are shared by not only the exhibitors

during the exhibiting but also by distributors as well as producers.

Movie theaters do not offer different prices for different films showing at the same

time75

. It also remains the same price throughout its specific length to be showed in theaters

which makes the basis of selling more cinema tickets are in the length of runs and displays on

more screens or in larger venues76

. There has been always one price charged for all movies. One-

price-tickets have been the tradition of cinemas, when everybody would put a penny in a peep

show machine. Around 1910, movie prices varied according to their length, stars and popularity.

By 1940s, exhibitors would have the rights to each movie within a certain location. One-price-

tickets started when Paramount anti-trust case broke up monopolies between producers and

distributors that led to multiplexes. The need to rely on fewer and more expensive movies led

towards this one-ticket-price. This system is a uniform practice for all the exhibitors until

today77

.

Different theories gathered to explain the said system all boils down to how consumers

react to prices when it comes to cinemas. First, cutting prices after a successfully opening

weekend would allow lesser moviegoers on the first week thus letting revenues go down78

. Of

course, consumers would want to spend less for a good that if they would know that prices will

eventually go down, they would want to wait for the succeeding weeks. Second, price is a sign of

quality79

. Some consumers base their consumption on goods solely on prices. They think that the

more expensive it is the more it has been researched on thus, a grade A quality. If exhibitors or

cinema theaters show a movie A less than Php 200, while movie B over Php 200, then

moviegoers would assume that movie B is better than movie A—thus more would want to watch

movie B. Movies also received grades ranging from A to C which corresponded with the prices

at these cinema theaters. The creation of multiplexes led to this such that some movies are being

showed with better facilities. Since theaters vary, this is where exhibitors practice price

discrimination wherein a grade A movie is shown in a renovated theater thus with better

technology, while a lower grade movie are usually in older theaters with smaller screens. Price

discrimination also offers more opportunities for other movies to attract more movie goers80

.

74Eliashberg, Jehoshua, Anita Elberse, and Mark A.A.M Leenders. "The Motion Picture Industry: Critical Issues in Practice, Current Research & New Researh Directions " HBS. (2009)

www.hbs.edu/faculty/Publication%20Files/05-059.pdf (accessed August 2, 2013). 75 Derek Thomson "Why Do All Movie Tickets Cost the Same? The Atlantic‖ News and analysis on politics, business, culture,

technology, national, international, and life http://www.theatlantic.com/business/archive/2012/01/why-do-all-movie-tickets-cost-the-same/250762/ (accessed August 2, 2013).

76Pascal Courty ―An Economic Guide to Ticket Pricing in the Entertainment Industry‖ London Business School.http://harbaugh.uoregon.edu/Readings/Ticket%20pricing/LER.pdf (accesed August 2, 2013). 77 Derek Thomson "Why Do All Movie Tickets Cost the Same? The Atlantic‖ News and analysis on politics, business, culture, technology, national, international, and life http://www.theatlantic.com/business/archive/2012/01/why-do-all-movie-tickets-cost-

the-same/250762/ (accessed August 2, 2013). 78 Ibid 79 Ibid 80 Ibid

33

Ticket prices also depend on the presence of other cinemas or other exhibitors nearby allowing

moviegoers choose a specific cinema81

.

Advertising/ Promotions:

A subset of film distribution is advertising and promotions as explained in the supply

chain of chapter 1 of this paper. Advertising and promotions from movie distributors may serve

as an indicator of a box-office success. If teasers and trailers are shown more often, the greater is

the chance of making it to the box-office. Advertisements generally help the movie to be the

subject of news articles, as well as the talks of the common people. Excitement grows in the

minds and hearts of people since they would want to know the reasons behind the teasers and

trailers. These create either a positive or negative word-of-mouth, wherein people would

disseminate the information they have of a certain movie, particularly, the positive or negative

attributes of it. Even film specialists affirm that good advertising and promotions result to

informational cascades and herd behavior82

. Promotions would be better if a mother network

back-ups a certain movie project. Every commercial break, a teaser of a movie may be viewed

for the public. Thus, the public would know more of the movie, and they could decide whether to

watch that film or not.

As what is observed in the present scenario, months before the release of a Hollywood

film, trailers are released so that the consumers can make evaluation of the expected flow of

story in a movie. Thus, consumers will be subjected to their own curiosity. Generally, trailers are

released 30 days before the release. There are different types of release strategies: exclusive

release is a non-commercial premiere of a movie in selected few locations only; saturation

booking is a film that is premiered in the widest and largest possible number of theatres as

possible; limited release comprises of films that are set to be released in major cities only; plat

forming refers to the distribution of films in ―gradually widening markets and theatres so that it

slowly builds its reputation and momentum through reviews and words-of-mouth‖.83

In the case

of our Filipino movies, trailers are released two to three weeks before its release in the market.

The differences briefly explain the phenomena in the country84

.

Convention-like events such as festivals offer opportunities to get attention especially for

independent film producer85

. A film festival is more than just the screening of films but there are

launch parties and press conferences as well as educational seminars and awards with judges and

prizes. It is also a way to organize in one event and location not only those who want to see new

and unique films but also those who are involved in the moviemaking process such as directors,

producers, and seasoned and emerging talent86

Production/ Marketing Strategy:

Partnerships in the film industry include coopetitionand being affiliated with a studio.

Financing is also seen as less problematic if the producer is affiliated with a studio. By signing a

81Eliashberg, Jehoshua, Anita Elberse, and Mark A.A.M Leenders. "The Motion Picture Industry: Critical Issues in Practice, Current Research & New Researh Directions " HBS. (2009) www.hbs.edu/faculty/Publication%20Files/05-059.pdf (accessed August 2, 2013). 82 G Pasadilla and A LantinCan the Philippines Follow Bollywood?.Philippine Institute of Development Studies Manila: (2005) 83Corrigan, T. & White, P.The Film Experience. USA: MacMillan Publishing Ltd (2009). 84 G Pasadilla and A LantinCan the Philippines Follow Bollywood?.Philippine Institute of Development Studies Manila: (2005) 85Mamer, B. Film Production Technique: Creating the Accomplished Image. (CA: Wadsworth Cengage Learning, 2009), 118 86Yager F. and Yager J. Career Opportunities in the Film Industry.(NY: Ferguson, 2009), 204

34

studio contract, a producer usually gives up a wide range of rights that has something to do with

sequels, spin-offs, merchandising, and other opportunities, however they may be able to increase

the chances of securing bank loans or tapping into the studio‘s own capital and securing

favorable distribution and exhibition deals for the series of movies. At the same time, studios are

also growing more dependent on companies that are able to tap into overseas subsidies and tax

incentives—efficient portfolio management strategies may help to secure product placements,

which can also help reduce costs and thereby risks87

.

Under coopetition, the process of film collaboration when two production outfits share

the costs of producing a movie so as to increase the chances of gaining revenues with minimal

costs, they also share their respective contract talents who have attained a significant stature or

fame in the industry. In the years following the market trend, stars usually increase their market

value, as well as their power to influence the audience. Since actors and actresses are contract

talents of a specific film production outfit, there is a need for players to cooperate, to share stars

with a high market value, in order to produce films which are blockbuster in nature.

Coopetition and sharing of stars is exemplified if we see examples of contract stars of

different film production outfits. John Lloyd Cruz is a contract talent of Star Cinema, whereas

Sarah Geronimo belongs to Viva. Before they can be a tandem in a movie, both Star Cinema and

Viva Films need to co-produce and share the costs of the film if a potential blockbuster is highly

expected with the two stars‘ team-up in the big screen. Below are the movies that were

coproduced and their corresponding gross revenues and ranks out of the 68 movies analyzed in

this paper:

Movie Production Outfits Rank (68

movies)

Gross Revenues

It Takes A Man And A Woman Viva and Star 1st 401.03

No Other Woman Viva and Star 2nd 278.42

You Changed My Life (w/ Viva) Viva and Star 4th 225.62

Catch Me…I'm In Love Viva and Star 13th 120.21

Here Comes The Bride Star and OctoArts 16th 117.16

Babe, I Love You Viva and Star 19th 96.19

You to Me Are Everything GMA and Regal 20th 93.82

When Love Begins Viva and Star 21st 91.27

Pak! Pak! My Dr. KwakKwak Star and OctoArts 28th 77.05

In Your Eyes GMA and Viva 32nd 63.59

Temptation Island GMA and Regal 33rd 62.78

One True Love GMA and Regal 37th 58.8

When I Met U GMA and Regal 39th 58.66

Wedding Tayo, Wedding Hindi Star and OctoArts 51st 37.46

Working Girls Viva and Star 53rd 31.99

Patient X GMA and Viva 60th 24.49

87Eliashberg, Jehoshua, Anita Elberse, and Mark A.A.M Leenders. "The Motion Picture Industry: Critical Issues in Practice, Current Research & New Researh Directions " HBS. (2009) www.hbs.edu/faculty/Publication%20Files/05-059.pdf (accessed August 2, 2013).

35

CHAPTER 6: INDUSTRY PERFORMANCE AND PROSPECTS

THEORETICAL FRAMEWORK

The motion picture industry is projected to be more sustainable, following the concept of

economies of scope. The latter is defined as a scenario wherein the joint output of a single firm is

greater than the output that could be achieved by two different firms producing a single

product88

. There are only five major production and distribution outfits in the current Philippine

motion picture industry. Despite their market share of more than 70%, there are two firms

namely, Viva Films and Regal Films that have incurred an average net loss instead of net profits

(See Appendix D). Given this circumstance, the question is, how do these major firms maintain

their market dominance?

This chapter contains the significant results gathered from two methods namely, factor

analysis and regression. Factor analysis is used to see which variables are highly correlated.

Artist-producer and producer-producer relationships that frequently work together are obtained

here. The results from this method are used in regression models to determine which factors have

a significant explanatory power in explaining the dependent variable, gross revenue. The

presentation of data will follow the structure of the conceptual framework below. Factors

affecting first week revenues include brand-related variables consisting of genre, rating and

producer reputation but mainly driven by star power.89

By the second week, word-of mouth

already takes effect and proves that it is an essential determinant of gross revenue. In the end, the

results will show what technique or strategy these firms may engage in over the years and will

determine the positive implications of the strategy that will sustain their market dominance.

Figure 6.1:

Conceptual Framework

88 Robert Pindyck and Daniel Rubinfield, Microeconomics, (Singapore: Pearson Education South Asia Pte. Ltd,

2009), 250. 89

Jovi Dacanay, Maia King-Calvo& Angelo Santos. Information Cascades as Social

Learning: The Case of Box-Office Ticket Sales in the Philippines, Proceedings of the

European Conference on Knowledge Management; 2010.

Word-of-Mouth

Star Power

Genre

MTRCB Rating Producer

Reputation

Competition

Days Cinema

Ticket Sales

Word-of-Mouth

Star Power

Genre

MTRCB Rating

IMDB

Producer Reputation

Competition

Days Cinema

Ticket Sales

Week 2 Overall

Star Power

Genre

MTRCB Rating

Producer

Reputation

Competition for 1st

Week

Week 1

Number of screens Number of screens

Ticket Sales

Number of screens

36

The table below shows the classifications of demand determinants namely, brand-

related variables, objective features, information sources and distribution-related variables90

. The

components under each classification are based on the conceptual framework. These are the

factors moviegoers consider whether to watch a film or not. These are used in the methods

mentioned earlier to explain gross revenues.

Table 6.1:

Summary of Demand Determinants

Brand-Related Variables Objective Features Information Sources Distribution-related

Variables

Actors Age Ratings IMDB Rating Competition

Producers Movie Genre Moral Rating Number of screens

Director Technical Rating

I. COOPETITION

In the analysis of industry revenues, the regression model incorporates the HHI of the

Top 5 and the Top 30 as possible determinants of total industry revenue. Other variables

included in the analysis of industry revenues from 1996 to 2010 include the average movie

projection revenue (per film), the average industry compensation (per film) and the average sales

of Star Cinema and Viva Films (per film). The table below summarizes the variables used in the

analysis of the regression model for industry revenues.

Table 6.2:

Description and Code of Variables for Industry Revenues

Variables Description Code

HHI Top 30 Represents the summation of the

market shares of the average 30 firm

players

HHITOP30

HHI Top 5 Represents the summation of market

shares of the top five industry movie

production and distribution players

HHITOP5

Average Movie

Projection Revenue

(per film)

Represents the average projection

sales per film released

INDMOVPROJVALUEADDED/VOLUMETOP5

Average Industry

Compensation (per film)

Represents the average industry

compensation per film released.

INDUSTRYPDCOMP/VOLUMETOP5

Average Sales of

Star Cinema and

Viva Films (per

film)

Represents the average revenues

generated by the top two film

production companies

SALESTOP2/VOLUMETOP2

Results show that HHITOP5 and the average compensation per film are highly significant

in explaining the total industry revenue (refer to Table 6.3). These are consistent with the results

of the Pairwise Granger Causality Test, a process which determines the relationship between

variables with a specific lag period. Some variables then, may have a high explanatory power in

90Ibid

37

determining industry revenues only after a year, two years, or three years depending on the lag

period stated.

The Granger Causality Test suggests that average industry compensation significantly

explains industry revenues only after a lag period of three years. It takes three years before it can

have an impact on industry revenues given that talents of respective film production outfits are

tied in a contract of three years – hence, having a fixed amount of income which may vary on the

number of projects the talent will have in the succeeding three years after signing such. By the

time the contract has lapsed, the talent may have either increased or decreased his market value.

A higher market price entails that the talent is now more marketable in terms of attracting a large

number of audience to watch his film. Hence, his succeeding contracts may demand greater

compensation, but through the test of time, his bankability as an actor can positively contribute

to industry revenues and even profits.

Since talents are bounded by contracts with their respective film production outfits,

talents with high market values cannot star opposite a highly in-demand contract talent of

another. Given the profit-oriented nature of the film industry, production outfits can share their

highly-valued stars by co-producing a movie with a view that the collaboration may further boost

sales and profits for both firms, while at the same time decreasing the overall costs of production.

This is what coopetition calls for – production outfits can resort to the sharing of their contract

talents for profit-maximization and cost minimization. Ultimately, the success of coopetition

leads to the increase in the star‘s respective market value, in simpler terms, their star power.

Table 6.3:

Summary of Results on the Effect of Coopetition on Industry Revenues

Variable Significance

HHITOP30 +

HHITOP5 +++

IndMovProjValueAdded/VolumeTop5 ++

IndustryPDComp/VolumeTop5 +++

Average Sales per Film (Top 2) ++

R2 92.12%

Adjusted R2 85.22%

Note: +++ Highly Significant (p-value is less than 0.01); ++ Very Significant (p-value is from 0.01 to 0.05; +

Significant (p-value is greater than 0.05); ns otherwise

The local film industry is dominated by collaboration among firms, in the likes of Star

Cinema and Viva Films, as well as that of GMA Films and Regal Films. Films, under the co-

production of Star Cinema and Viva, have produced most of the movies in the Top 10 Highest-

Grossing Local Films of all Time. These films are presented in a table below:

Table 6.4:

List of Highest-Grossing Films Co-Produced by Star Cinema and Viva

Movie Year Gross Revenue (in million pesos)

1. It Takes a Man and a Woman 2013 401.03

2. Sisterakas 2012 391.01

3. The Unkabogable Praybeyt Benjamin 2011 331.61

4. No Other Woman 2011 278.39

38

Ln industrypdrevit = β0 +β1 hhitop30it + β2 hhitop5it + β3indmovprojvalueadded/volumetop5 it +

β4(profittop2+profitnext3/salestop2+salesnext3)it+β5genrei + β6screenweek2it + β7

revweek2factor11/grossrev – β8 competeweek2

5. This Guys In Love With You Mare 2012 249.09

6. You Changed My Life 2009 225.21

7. A Very Special Love 2008 179.25

Source: Box Office Mojo (Philippines)

Moreover, the Granger Causality Test suggests that HHITOP5 is highly significant in

explaining industry revenues in the sense that the interaction among these outfits characterize

their overall market share and eventually HHI. Results show that Star Cinema and Viva Films,

are not prime movers; in fact, their reaction is dependent on the performance of the Regal, GMA,

and OctoArts. The assertion of dominant firms cannot also serve as a firm basis of industry

revenues, given that the average profit of Viva and Regal is negative based on the data gathered

on their financial statements from 1996 to 2010. Their negative profits imply that at certain

points from 1996 to 2010, Viva and Regal needed to co-produce and share their contract talents

with more stable firms -- Star Cinema, GMA, and OctoArts. In the process of coopetition,

production costs are cut, and the chances of earning increases, although it can be really small

nominally speaking. Hence, the presence of the five firms in their entirety characterizes the

overall industry revenues.

Figure 6.2:

Granger-Causality Test

Regression results suggest that HHITOP5 and average industry compensation have high

explanatory power on the overall industry revenues. Together with other variables, and using the

formula below, the adjusted R2 is 85.22%.

39

Total industry revenue can be explained by the interaction between firms, as indicated by

the HHI Top 30 and HHI Top 5, as well as the average movie projection, and return on sales. It

is expected that HHITOP5 can positively contribute to the overall industry revenue, given the

interaction among firms. The HHI can actually be a representation of the collaborative power

between industry players, in the likes of Star Cinema and Viva Films, GMA Films and Regal

Films.

II. STAR POWER and WORD-OF-MOUTH

Apart from coopetition, it is also important to note the effect and significance of star power

to overall gross revenues on its own before going into its contribution to a film‘s weekly sales

along with other factors. In table 6.5, the regression results yielded John, Sarah and Anne as

highly significant in the equation. This implies that films wherein these stars were one of the

actor or actress explains the film‘s gross revenue. In effect, having John, Sarah and Anne in film

may raise the film‘s gross revenue.

Table 6.5:

Summary of Results on the Effect of Star Power on Overall Gross Revenues

Variable Significance

John +++

Sarah +++

Anne +++

Angel +

Bea +

Dingdong +

Marian NS

Toni NS

Ai Ai NS

R2 59.59%

Adjusted R2 52.50%

Note: +++ Highly Significant (p-value is less than 0.01); ++ Very Significant (p-value is from 0.01 to 0.05; + Significant (p-value is greater than 0.05); ns otherwise

A. First Week Sales

Table 6.6:

Description and Code of Variables for First Week Sales

Variables Description Code

Star Power Veteran: Sharon Cuneta, Maricel Soriano,

Aga Muhlach, Vilma Santos

Rising Stars: John Lloyd Cruz, Bea Alonzo,

Sarah Geronimo, Angel Locsin, Toni Gonzaga, Dingdong Dantes, Marian Rivera

Quality indicators, indicator of a film‘s

strength in drawing a good number of

audience

John, Sarah, Bea, Angel, Toni,

Anne, Dingdong, Marian

(1 is assigned when films have stars

and 0 when otherwise)

Genre Target Market Comedy, Drama, Romantic, Horror

(1 is assigned when a film falls in a

particular category and 0 when

otherwise)

MTRCB Rating General Patronage (for all viewers) PG, PG1318, R

40

Ln saleswk1it = β0 +β1starpoweri + β2ratingi + β3produceri+β4genrei + β5screenweek1it -

β6competeweek1

P-13 (Parental Guidance is required for

children 13 years old and younger)

R-13 (Limited to viewers 13 years old and

above)

R-18 (Limited to viewers 18 years old and

above)

(1 is assigned when a film falls in a

particular category and 0 when

otherwise)

Producer Signal of quality and Reputation Starcinema, Viva, Regal, GMA,

Octoarts (1 is assigned when a film falls in a

particular category and 0 when

otherwise)

Screens for the 1st week Number of theaters that a local film is

allotted to

Screenweek1

Demand Competition for

the 1st week

Number of local films which compete at the

same time in the market

CompeteWeek1

The regression equation to be used in the analysis of 1st week sales is illustrated below:

Figure 6.3:

Regression Equation for First Week Sales

Following the conceptual framework, Table 6.7 contains the variables that explain gross

revenue for the first week of exhibition. It can be seen that production and distribution outfits,

John Lloyd, Sarah Geronimo and other artists are relatively significant compared to other factors

such as genre and rating. Analyzing the significance of each variable, it turns out that brand-

related variables, most especially the stars, have the highest explanatory power in determining

first week sales. From a sample of 68 films, star power, producer‘s reputation, and the number of

screens are highly significant in explaining first week sales. These results are consistent with the

results of the factor analysis, with the number of screens, John Lloyd, Sarah, and Star Cinema

receiving the highest factor loading and communality. This imply that the aforementioned

variables have a high explanatory power on revenues. Results of the regression, however, shows

that the model does not entirely encapsulate the dependent variable because the Adjusted R2 is

only at 49.71%. This means that first week sales can only explain 49% of gross revenues.

Table 6.7:

Summary of Significant Variables for First Week Sales

Variable Significance

Screenweek1: Number of Screens (Week 1) ++

Log (Competition) NS

John +++

Sarah +++

Anne ++

Bea +

Angel +

Star +++

Regal +

GMA ++

41

Viva NS

OctoArts +

PG +

PG1318 +

Romantic +

Drama NS

Horror +

Comedy +

R2 63.97%

Adjusted R2 49.71%

Note: +++ Highly Significant (p-value is less than 0.01); ++ Very Significant (p-value is from 0.01 to 0.05; +

Significant (p-value is greater than 0.05); ns otherwise; highlighted (factor11)

The following films exhibited the highest first-week earnings that could have been

explained by brand-related variables such as star power.

Figure 6.4

First Week Ticket Sales as explained by Star Power

B. Second Week Sales

Table 6.7:

Description and Code of Variables for Second Week Sales

Variables Description Code

Star Power Films that starred both John Lloyd Cruz and Sarah

Geronimo

Films that starred John Lloyd alone

Films that starred both Bea Alonzo and Angel

Locsin

Actor*John+Actress*Sarah

Actor*John

Actress*(Bea+Angel)

Word-of-Mouth Proxy variable representing forecasted sales or

fraction of total revenue gained in 1st week model.

Percentrevweek1 or

revweek2factor11/Grossrev

Days Cinema Number of days that the film was shown in

cinemas

Dayscinema

Genre Target Market Comedy, Drama, Romantic, Horror

020406080

100120

It Takes A Man And A

Woman

UnOfficially Yours

For The First Time

No Other Woman

You Changed My

Life

The Mistress

1st Week Sales

1st Week Sales

42

(1 is assigned when a film falls in a

particular category and 0 when

otherwise)

MTRCB Rating General Patronage (for all viewers)

P-13 (Parental Guidance is required for children 13

years old and younger)

R-13 (Limited to viewers 13 years old and above)

R-18 (Limited to viewers 18 years old and above)

PG, PG1318, R

(1 is assigned when a film falls in a

particular category and 0 when

otherwise)

IMDB Rating Consumer rating which ranks from 1-10 IMDB

CBCP Rating Film rating by Catholic Bishops‘ Conference of the Philippines (CBCP)

Moral, Technical

Producer Signal of quality and Reputation

When producers collaborate

Starcinema, Viva, Regal, GMA,

Octoarts

Star+Viva, GMA+Regal

(1 is assigned when a film falls in a

particular category and 0 when

otherwise)

Screens for the 1st

week

Number of theaters that a local film is allotted to Screenweek1

Demand

Competition for the

1st week

Number of local films which compete at the same

time in the market

CompeteWeek1

The regression equation to be used in the analysis of 2nd

week revenues is illustrated

below:

Figure 6.5:

Regression Equation for Second Week Revenues

Table 6.8 contains the variables that explain gross revenue for the second week of

exhibition. Although, there are less variables in this model, this explains gross revenue more due

to a higher Adjusted R2 of 73.92% as compared to Week 1 of only 49.7%. This can be attributed

to the introduction and incorporation of a new variable which is PercentRevWeek1, the proxy for

Word-of Mouth. Indeed, the effect of information cascades is at its peak during the second

week.91

An explanation for the second week sales is the signaling effect of demand determinants

causing information cascades. When the signals are strong enough, it may result to follow these

signals whether or not it coincides with their personal signals.92

Viewer feedback or response is

not the only manifestation of word-of-mouth but in this case, the increase or decrease in the

number of screens in Week 2 and the number of days a film is shown, which ultimately affects

gross revenues. Moreover, since information cascades can either be caused by positive or

negative externalities, individuals would want to find out for themselves what the film is about

and formulate their own judgment about it after watching it. Since movies are experience goods,

91

Maia King. The Dynamics of Informational Cascades of Local Films in Theaters: A

Demand Study. MasteralThesis.University of Asia and the Pacific. May 2004. 92 ibid

Ln revwk2it = β0 +β1starpoweri + β2dayscinema β3 ratingi + β4produceri+β5genrei +

β6screenweek1it + β7 percentrevweek1 – β8 competeweek1

43

every person has a unique experience and has his own perception on a film. Those who do not

watch in the first week will be influenced by brand-related variables and entice them to watch to

experience the film themselves. Thus, there will always be an increase in ticket sales as long as

word-of-mouth is present.

Table 6.8:

Summary of Results for Second Week Sales

Variable Significance

Days Cinema +++

PercentRevWeek1 (proxy for Word-of-mouth) ++

Screenweek1: Number of screens +++

IMDB +

Star +

Viva ++

GMA +

Regal NS

OctoArts NS

Actor*John + Actress*Sarah +++

R2 78.20%

Adjusted R2 73.92%

Note: +++ Highly Significant (p-value is less than 0.01); ++ Very Significant (p-value is from 0.01 to 0.05; +

Significant (p-value is greater than 0.05); ns otherwise

An example is the film ―It Takes a Man and a Woman”, by Star Cinema and Viva Films.

The first regression contained John Lloyd and Sarah Geronimo, main stars, and despite having

high explanatory power, it was not sufficient to explain the P400 Million gross revenue of the

film. But in this model, it was already captured. It can be inferred that significant brand-related

variables specifically star power present in the first week such as actors and production outfits

are movie signaling indicators that affect word-of-mouth in the second week as manifested in the

drastic increase in box-office revenues.

The following films exhibited more than 80% growth increase from the 1st week:

Figure 6.6:

Revenue Growth from 1st week to 2

nd week of Selected Films

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Love Me Again

Sundo

It Takes A Man And A Woman

Tenement 2 (T2)

Babe, I Love You

Pak! Pak! My Dr. Kwak Kwak

BFF: Bestfriends Forever

Here Comes The Bride

In The Name of Love

Bromance: My Brother's Romance

Kimmy Dora and the Temple of Kiyeme

Four Sisters and A Wedding

Temptation Island

Wedding Tayo, Wedding Hindi

Yaya and Angelina: The Spoiled Brat Movie

Tiktik: The Aswang Chronicles

Ang Tanging Pamilya… A Marry Go Around

My Amnesia Girl

1st week

2nd week

44

Ln grossrevit = β0 +β1starpoweri + β2dayscinema β3 ratingi + β4produceri+β5genrei +

β6screenweek2it + β7 revweek2factor11/grossrev – β8 competeweek2

With the regression model, the word of mouth phenomenon explains the increases in 2nd

week revenues especially those which include the outliers of previous regressions that does not

include the word of mouth variables such as ―Kimmy Dora and the Temple of Kiyeme”, “Four

Sisters and A Wedding”and ―It Takes A Man and A Woman.”

C. Overall Gross Revenues

Table 6.9:

Description and Code of Variables for Overall Sales

Variables Description Code

Star Power Veteran: Sharon Cuneta, Maricel Soriano, Aga

Muhlach, Vilma Santos

Rising Stars: John Lloyd Cruz, Bea Alonzo, Sarah

Geronimo, Angel Locsin, Toni Gonzaga, Dingdong

Dantes, Marian Rivera

Quality indicators, indicator of a film‘s strength in

drawing a good number of audience

John, Sarah, Bea, Angel, Toni,

Anne, Dingdong, Marian

(1 is assigned when films have stars

and 0 when otherwise)

Word-of-Mouth Proxy variable representing forecasted sales or

fraction of total revenue gained in 1st week model.

Percentrevweek1 or

revweek2factor11/Grossrev

Genre Target Market Comedy, Drama, Romantic, Horror

(1 is assigned when a film falls in a particular category and 0 when

otherwise)

Days Cinema Number of days that the film was shown in cinemas Dayscinema

IMDB Rating Consumer rating IMDB

MTRCB Rating General Patronage (for all viewers)

P-13 (Parental Guidance is required for children 13

years old and younger)

R-13 (Limited to viewers 13 years old and above)

R-18 (Limited to viewers 18 years old and above)

PG, PG1318, R

(1 is assigned when a film falls in a

particular category and 0 when

otherwise)

Producer Signal of quality and Reputation Starcinema, Viva, Regal, GMA,

Octoarts

(1 is assigned when a film falls in a

particular category and 0 when

otherwise)

Screens for the 2nd

week

Number of theaters that a local film is allotted to Screenweek2

Demand

Competition for the 2nd week

Number of local films which compete at the same

time in the market

CompeteWeek2

The regression equation used in the analysis of overall gross revenues of selected films is

illustrated below:

Figure 6.7:

Regression Equation for Overall Gross Revenue

By incorporating the effects of sales in Week 1 and Week 2, the summary of the

regression model below captures, 86.36% of gross revenue. The variables that significantly

explain gross revenues are the following, number of days shown, word-of-mouth, number of

45

screens, Star Cinema and the artists, John Lloyd Cruz and Sarah Geronimo, in particular. These

factors have to be considered if producers/distributors want to generate revenues.

Table 6.10:

Summary of Results for Overall Gross Revenues

Variable Significance

Days Cinema +++

Word-of-mouth: Revweek2Factor11/Grossrev +++

Screenweek2: Number of screens +++

IMDB +

Star +++

Viva ++

GMA +

Regal ++

OctoArts +

Actor*John + Actress*Sarah +++

R2 88.60%

Adjusted R2

86.36%

Note: +++ Highly Significant (p-value is less than 0.01); ++ Very Significant (p-value is from 0.01 to 0.05; +

Significant (p-value is greater than 0.05); ns otherwise

The figure below illustrates the number of days in cinema and gross revenues of selected

films, as determined by specific variables such as star power, word-of-mouth, and coopetition.

Figure 6.8:

Gross Revenues and Number of Days in Cinema of Selected Films

The table below encapsulates three mechanisms by which the five major firms maintain

market dominance. The top 5 production/distribution firms cooperate instead of compete which

results to higher significance level for all of them unlike when taken in isolation (Tables 6.7, 6.8

and 6.10). By doing so, they strengthen their hold on the artists regardless of which outfit they

belong to or are in contract with. Co-production allows for the firms to share artists and in the

0

50

100

150

200

250

300

350

400

450

You Changed

My Life (w/ Viva) (49)

It Takes A Man And A

Woman (49)

No Other Woman

(42)

The Mistress

(35)

UnOfficially Yours (28)

Gross Revenues 225.62 401.03 278.42 262.82 157.25

in P

hP

Mill

ion

Gross Revenues and Number of Days in Cinema of Selected Films

46

Philippines‘ case seems to be very crucial to determining a movie‘s revenue. Consequently, since

stars are the main drivers for the effect of word-of-mouth, by having a grasp on stars who are

known for blockbuster movies, the major industry players ensure that despite some firms having

an average net loss, the Top 5‘s consolidated gross revenues are positive and in general, have

average profits. With this, they secure their dominant position in the market.

Table 6.8:

Summary of Results on the Effect of Coopetition, Word-of-Mouth, and Star Power as Explanatory Variables

to Gross Revenues

Variable Significance

Days Cinema +++

Word-of-Mouth: Revweek2Factor11/Grossrev +++

Screenweek2 +++

Competeweek2 NS

Moral + IMDB +++

Technical +

Actor*John +++

Actress*(Bea + Angel) +++

Star + Viva +++

GMA + Regal; +++

OctoArts +++

Romantic +++

Horror NS

PG +

R2 90.36%

Adjusted R2 87.58%

Note: +++ Highly Significant (p-value is less than 0.01); ++ Very Significant (p-value is from 0.01 to 0.05; +

Significant (p-value is greater than 0.05); ns otherwise

47

CHAPTER 7: SWOT ANALYSIS

Strengths The market of film industry is not limited to a specific group or class. It

caters to different social classes or different groups of individuals. This

involves the principle of broad strategy that in order to regain the costs the

industry incurred.

With the idea of star power in the market, there would still be revenues for a

low quality film if a popular actor or actress stars in it.

There is a large access for consumers towards the movie with the different

malls and cinemas found in different areas.

Movies are also a means to endorse different products; thus more sources of

income for the producers as well as distributors.

Both positive and negative word of mouth makes the people want to watch

the movie.

Weaknesses There is a lack of creative minds in the industry that would be able to

produce a quality story that can guarantee box office success

There is a lack of incentive to work in the industry due to the high

amusement tax.

There are high levels of advertisement expenditures incurred.

The actual cost of production is greater than the expected cost of production.

Opportunities The rise of creative industry in the coming years according to Dr. Villegas

attracting more people to be involved in the industry.

Online business models that develops the idea of subscription

Venturing into improvement of quality of films produced.

The use of Internet as social network advertisement

Threats The use of Internet to download pirated movies—Piracy

Preference to download and pirate foreign films watch movie download

48

CHAPTER 8: CONCLUSIONS AND RECOMMENDATIONS

The sustained market dominance of the top 5 production distribution firms in the motion

picture industry can be attributed to the three major circumstances they engage and utilize when

producing a movie: coopetition, star power and word-of-mouth. Over the years, there have been

numerous coproduced movies specifically and more frequently between Star Cinema and Viva,

and GMA-Regal. Coopetition entails benefits in the direction towards generating more revenues

from a film, and at the same time spreading the production costs through the division of

expenses.

Greater revenues are usually generated through the practice of coopetition due to the fact

that they are able to share their star power in a movie. Famous actors and actresses under

contracts of different production companies can star in the same movie given coproduction takes

place. As a result, the companies are able to attract the fans of the movie stars and to a wider

degree, due to the sharing of star power. Star power as mentioned is the most important brand

related variable that audiences usually consider when choosing a film to watch. Thus, the number

of people watching in the first weeks of the film is partly subjected to the main actor and actress

who star in the film. The better known, the more the first week ticket sales in regards to the

combined star power. Additionally, the word of mouth phenomenon becomes intensified

depending on the star power available in the movie. People will be talking about the brand

related variables along with the film itself which will attract more audiences to purchase tickets

in the second and following weeks. As observed, the three practices are intrinsically knotted

together, beginning with the practice of coopetition. Coopetition, star power and word of mouth

phenomenon are the major explanatory indicators towards gross revenues. The constant

engagement of the top five firms in the industry towards the three major variables enables them

to maintain their market dominance in the industry.

With all this being said, it may be concluded that the top five firms are successful in

terms of sustaining their market dominance through their frequent engagements. However, the

fact that two of the five firms are experiencing overall profit losses rather than gains from 1997

until 2011 cannot imply that the industry is generally experiencing success. Thus, in order for the

top five players to sustain their market dominance and at the same time generate enough

revenues for general profit gains, the group recommended the following actions they may

partake in; recommendations that may serve as opportunities for the industry to perform better.

Perhaps the production/distribution companies may try to experiment on new genres,

plots, locations and other technicalities in the films that are different from the typical movies that

are present today. Perhaps experimenting on new themes or even new technology may enable to

merit the produced film being of export quality. Films of export quality would attract multiple

investors from abroad in order to gain the permit of exhibiting the local films in other countries.

With this, there will be more sources of revenues from different countries that will compensate

for the experimentations conducted in order to produce a different film than usual.

The industry may take advantage of the modern and most famous medium for

communication in the social media websites. Advertisements of films and certain projects may

be channeled through the social media which would likely be seen by multiple people who are

part of the social media. More awareness of the movies would entail an intensified word of

mouth phenomenon as more people are informed about the upcoming films. Thus, the

49

expectation of increased ticket sales for a movie that utilizes the social media is not impossible as

word of mouth will be intensified.

According to Dr. Bernardo Villegas, in the next ten years, there will be a higher demand

for creative industries due to the rise of multidisciplinary research dialogues among individuals.

He believes in the premise that creativity is already embedded in the Filipino character; hence,

developing such may contribute to possible large employment opportunities in these sectors. In

spite of the prevalence of such optimism, he asserts that ―economic development occurs in cycles

revolving around a series of innovations. The innovator is the key to a rise in income after a

period of relative stagnation.‖ Industries expecting to boom in the next decades comprise of

fashion, music, entertainment, animation, filmmaking, graphic design, storytelling, culinary arts,

wood carving, furniture making, and architecture. In line with this statement, the researchers

propose the use of a step-by-step framework as a response to the expected boom in the creative

industries in the next few years. The primary constraint involves then the sustainability of the

entire motion picture industry.

Given the goal of providing a sustainable environment for the industry, researchers have

identified three key solutions to address the short-sightedness of the motion picture industry.

First, the Philippines can follow the procedures currently aiding the Korean film market. The

government, through its aim to propagate Hallyu, provides incentives for local firms that

incorporate tourist attraction location spots in the films they produce. Taxes have been reduced at

a much lowered rate. What happens in the Philippines is the total opposite, given that taxes are

gradually killing the industry through expensive amusement taxes, cultural taxes, value-added

taxes and other forms of taxes. The fact that the Philippine motion picture industry will be highly

significant can be taken advantage of in order to boost the industry‘s gains along with other

industries. Tourist spots in the Philippines may also be selected as shooting locations in order to

also promote the tourist industry, another creative industry that is currently growing and will

continue to be significant in the next ten years. One two way benefit that will be experienced by

both the industry and the economy is if the taxes are reduced for the motion picture industry in

order to hasten its growth through the incentive of minimized taxes.

Second, to reduce production costs, dominant players in the industry can actually resort

to the production of films with branded content as well as study the backward integration that

could explain the outlier, „A Secret Affair‟ whether it could be more profitable for both the

industry players and different outfits. Another would be to focus on the strong appeal to the

country‘s tourism. These can be done by establishing contracts between a specific distributor of a

product and a film production outfit. Instead of spending millions of pesos for advertisement

places in between commercials of the programs of rival networks, the latter may only ask for a

certain ‗lower‘ amount of money under the condition that production costs will be divided

among selected parties as a compensation for the total amount of time allocated for advertising

and promotions of the product in specific segments of the film. This also holds true for

agreements between the firm and the local government units in the use of tourist destinations as

one of a film‘s strategic shooting location. Featuring such locations can increase the overall level

of industry employment in the long-run. In exchange for such, a specific amount will come from

government funds that then reduce the overall level of production costs.

Given that some of the stars have exclusive contracts with their respective managements,

the researchers think that co-production is still the best way to generate greater profits. It

50

empowers independent film makers to produce quality films which can be distributed

commercially. Despite such arrangements, every producer should know the distribution process

so as to avoid misunderstandings that can damage relationships between production and

distribution outfits. It enables firms to project which combination of artists when put together in

a film can project higher revenues with a minimum possible cost structure.

According to the analysis in the Porter‘s five forces in relation to factors affecting the

threat to entry, the government protection of incumbent industries is currently low. High taxation

on the film industry is a significant barrier for more entries to the film production and

distribution industry. The fact that the production of a movie normally accumulates costs higher

than its initial production budget implemented does not help the industry‘s cost especially if the

government protection of incumbent firms remains low. For the filmmaking industry to

successfully maximize its productivity as it approaches the period for high demand, it would be

supportive if the number of taxes imposed were reduced at present so as to speed up the growth

of the film industry.

At the present, dominant players in the industry choose the path of being profit-oriented –

releasing films patterned in a certain formula with greater probability of success. For instance, in

the last five years, Star Cinema has already produced three films starring John Lloyd Cruz and

Sarah Geronimo, all of which follow the original love story of the lovers. These films are

released in 2008, 2009, and 2013, respectively. Its 2009 movie, „You Changed My Life‟ can be

analyzed using the first regression seen in the model which greatly stresses out the importance of

star power. However, its 2013 movie, „It Takes A Man and A Woman‟ as calculated in the

different regressions can only be captured in the model with the word of mouth incorporated in

the regression equation. The forecasted revenues expected for the movie was exceeded by almost

half its amount by the actual revenues gained at P401 million. The researchers suggest that a

further study be done on the variables that were explained in the section of Factor Analysis and

Part 1 Regression model of this paper—evaluating the herding behavior.

Next, the role of the audience is limited in the encoding process as formulae have already

been fixed by the management. Usually, audience participation is called for by testing

projections in each movie where stars and directors have already proven their box-office power.

Once a ―romantic formula‖ has been accepted widely by the public, there is much greater

assurance that the plot of future films only revolve around the same concepts and story lines. In

the Philippine film industry, the boom of ‗No Other Woman‟ paved the way for adult-oriented

films in the likes of „A Secret Affair‟, „The Mistress‟, and ‗My Neighbors‟ Wife‟. To avoid

isolation from other reviews, production and distribution companies must consider the weight of

both positive and negative reviews from critics as this would entail greater diversification of

offered products that can in turn fully maximize consumer behavior. The researchers would want

industry practitioners to have a striking balance as regards the usage of established formulae to

increase the possibility of widening profit margins. Other experimentations may possibly lead to

wider profit margins. Doing such can open opportunities to increase the quantity of future

exports and with that, the country may experience an influx of award-winning and critically-

acclaimed projects in the future.

If the planning stage has already been successfully established, practitioners in the

industry can now take a look at an alternative market which caters to avid moviegoers who prefer

to watch movies in their respective households. To experience a good and strictly preferred than

51

low-to-medium quality Internet downloads, individuals can open a market for possible

subscriptions of high-quality local and foreign films distributed in the country.

i

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vi

Appendix A: Aggregated Input-Ouput Matrix

CRTCC 234 235 #1-33 34-42

234 Motion picture and video production

and distribution 12529.1653 1192047.57 0 0

235 Motion picture projection 9195.46473 867.273304 0 0

1-33 Agriculture, Fishery, and Forestry 0 0 50470083.9 43524.5154

34-42 Mining and Quarrying 0 0 0 398415.81

43-176 Manufacturing 1206423.73 1260411.9 88355345 6294098.83

177 Construction 0 0 990495.984 484447.223

178-180 Electricity, Steam, and Water 42831.5451 704376.98 6480362.26 2061787.36

181-197 Tranportation 10752.724 11629.5498 2821864.23 512777.397

198 wholesale and retail trade 20047.0466 66998.1945 5275301.02 233037.65

199 Repairs of motor vehicles and personal

and household goods 1582.95083 156.575862 129805.669 34001.2338

200-204 Finance 2224.31397 6366.38946 5718328.04 664537.363

205-206 Real Estate and Ownership of Dwellings 26179.3804 90927.2396 309234.323 55516.2954

207-209 Government Services 0 0 0 0

210-233, 236-

240 Private Services 184871.175 377238.347 10384246.2 2861778.24

TII Total Intermediate Inputs 1516637.49 3711020.02 170935067 13643921.9

CE Compensation 546163.019 630558.557 181603589 5037885.56

DEPN Depreciation 320032.29 467933.191 43006668.2 1599109.54

IT-S Indirect Taxes-Subsidies 165790.467 300856.353 16241517.3 1278910.82

OVA Operating Surplus 393042.965 123211.016 274958059 16227776

TPI Total Primary Inputs 1425028.74 1522559.12 515809833 24143681.9

TI Total Inputs 2941666.24 5233579.14 686744900 37787603.9

CRTCC 177 178-180 181-197 198 199 200-204 205-206 207-209

234 0 0 0 0 0 0 0 0

235 0 0 0 0 0 0 0 0

1-33 14838.19038 336.002428 256446.029 14168486.8 0 0 0 3310951.85

34-42 7553154.189 13283698.2 22111.8017 5007990.44 0 0 138894.026 16898.9497

43-176 81424452.72 21138781.9 170759123 108104789 3954406.34 21104480.6 6819051 46978072.3

177 1739583 248569.798 558892.768 151824.319 0 1031294.9 2509619 11076968.5

178-180 695295.0017 14995342.2 2240973.14 2183879.99 1652781.86 4499345.25 434121.417 5434935.67

181-197 26405769.06 2026162.71 12978732.2 90523888 238880.899 17543145.6 952056.905 9248764.41

198 3529497.55 3849239.11 3146105.48 0 837962.758 253503.606 270351.883 1629195.21

199 25261.94846 57577.2087 2042747.69 0 215054.697 120044.744 44469.8205 406459.678

200-204 4679114.904 364765.541 16195646.7 26985824.8 214178.396 56955.893 9169861.13 13386463.3

205-206 1969800 4824.19913 4675777.54 4861492.18 14036.8323 9206054.02 241621.692 3794000

207-209 0 0 0 0 0 0 0 0

210-233, 236-240 5981497.23 4422955.25 22558438.6 12079683.2 516312.866 49670115.1 9960843.58 27054089.2

TII 134018263.8 60392252.1 235434995 264067859 7643614.65 103484940 30540890.5 122336799

CE 70365920.44 23822554 67808756.2 136618814 4373127.98 41992085.6 7247605 303784515

DEPN 20856799.8 30717510 95180838.2 45529801.1 3767941.27 11264034 5341440.85 14667000

IT-S 3937388.015 6157474 7036433.71 8427829.83 208034.245 16541546 3769112.4 1216000

OVA 60181752.74 75614357 108629595 331793392 1088185.59 127287738 243861430 0

TPI 155341861 136311895 278655623 522369837 9437289.08 197085404 260219588 319667515

TI 289360124.8 196704147 514090617 786437696 17080903.7 300570344 290760478 442004314

vii

CRTCC TID PCE GGCE GFCF CS E M TFD TO

234

4751230.82 2360306.3 0 0 0 174843.21

-

4344714.1

-

1809564.6 2941666.2

235

611839.241 4697207.3 0 0 0 45658.745

-

121126.11 4621739.9 5233579.1

1-33 450687737 195304295 0 28438089 17219717 29441974 -34346914 236057162 686744900

34-42

189387215 2598092.9 0 0 523326.53 5688841.4

-

160409872

-

151599611 37787604

43-176 1798019595 920528724 0 267191305 48326454 1.575E+09 -1.31E+09 1.501E+09 3.299E+09

177 19873825.7 0 0 270679595 0 4286915 -5480211 269486299 289360125

178-180 128034662 68669485 0 0 0 0 0 68669485 196704147

181-197

197225685 389309889 0 20728831 0 51960238

-

145134026 316864932 514090617

198 286918725 450943891 0 19790525 0 40231125 -11446570 499518970 786437696

199 4851750.75 12229153 0 0 0 0 0 12229153 17080904

200-204 115435045 206570032 0 0 0 6452470 -27887203 185135299 300570344

205-206 34655291.3 256105187 0 0 0 0 0 256105187 290760478

207-209 0 2039800 439124814 0 0 1635214.9 -795514.5 442004314 442004314

210-233,

236-240 228388780 404337193 0 0 0 110778439 -91747401 423368231 651757011

TII

3458841382 2.916E+09 439124814 606828345 66069497 1.826E+09

-

1.792E+09 4.062E+09 7.521E+09

CE 1338209153 0 0 0 0 0 0 0 1.338E+09

DEPN 392018997 0 0 0 0 0 0 0 392018997

IT-S 180093000 0 0 0 0 0 95245000 95245000 275338000

OVA 2151449992 0 0 0 0 0 0 0 2.151E+09

TPI 4061771141 0 0 0 0 0 95245000 95245000 4.157E+09

TI

7520612523 2.916E+09 439124814 606828345 66069497 1.826E+09

-

1.697E+09 4.157E+09 0

viii

Appendix B: LEONTIEF COEFFICIENTS

DISTRIBUTION DEMAND STRUCTURE

i. General distribution structure

Motion picture and

video production and

distribution

Motion picture

projection

TID 4751230.824 161.51%

TFD -1809564.588 -61.51%

TO 2941666.236 100.00%

ii. Intermediate Demand Structure

CTRCC

Motion picture and

video production and

distribution Motion picture projection

234

Motion picture and video production

and distribution 12529.16535 0.26%

235 Motion picture projection 1192047.573 25.09%

43-176 Manufacturing 3546654.086 74.65%

178-180 Electricity, Steam, and Water 0 0.00%

181-197 Transportation 0 0.00%

198 wholesale and retail trade 0 0.00%

205-206

Real Estate and Ownership of

Dwellings 0 0.00%

210-233,

236-240 Private Services 0 0.00%

TID 4751230.824 100.00%

CRTCC

Motion picture and

video production and

distribution Motion picture projection

234

Motion picture and

video

production and

distribution 0.004259207 0.227769093

235

Motion picture

projection 0.003125937 0.000165713

43-176 Manufacturing 0.410115775 0.240831726

#178-180

Electricity, Steam, and

Water 0.014560301 0.134588006

181-197 Tranportation 0.003655317 0.002222103

198

wholesale and retail

trade 0.006814861 0.012801602

205-206

Real Estate and

Ownership of Dwellings 0.008899507 0.017373816

210-233,

236-240 Private Services 0.062845734 0.072080375

total excluding

(govtserv, finance,

repairs, construction) 0.514276641 0.707832433

ix

iii. Final demand structure

Motion picture and

video production and

distribution

Motion picture

projection

PCE 2360306.261 -130.44%

GGCE 0

GFCF 0

CS 0

E 174843.2072 -9.66%

M -4344714.057 240.10%

TFD -1809564.588 100.00%

iv. Cost production structure

Motion picture and video

production and distribution

Motion picture

projection

Total Intermediate

Inputs 1516637.495 51.56%

Total Primary Inputs 1425028.741 48.44%

Total Inputs 2941666.236 100.00%

v. Intermediate Input Structure

Motion picture and video

production and

distribution

Motion picture

projection

Motion picture and video production and

distribution 12529.16535 0.83%

Motion picture projection 9195.464725 0.61%

Manufacturing 1206423.729 79.55%

Electricity, Steam, and Water 42831.54514 2.82%

Tranportation 10752.72399 0.71%

wholesale and retail trade 20047.04664 1.32%

Real Estate and Ownership of Dwellings 26179.38045 1.73%

Private Services 184871.1749 12.19%

TII 1516637.495

vi. TPI Structure

Motion picture and video

production and distribution

Motion picture

projection

CE 546163.0191 38.33%

DEPN 320032.2905 22.46%

IT-S 165790.4671 11.63%

OVA 393042.9646 27.58%

TPI 1425028.741 100.00%

x

Appendix C: Gross Revenues of Selected Films

#

Movie Year

shown

Month

shown

Number of

Films

Shown for

the month

Gross Revenues

1 Status: Single 2009 1 2 10.68

2 Love Me Again 2009 1 2 66.89

3 Paano Na Kaya 2010 1 1 82.02

4 When I Met U 2009 2 2 58.66

5 You Changed My Life 2009 2 2 225.62

6 Miss You Like Crazy 2010 2 1 143

7 UnOfficially Yours 2012 2 1 157.25

8 A Moment in Time 2013 2 1 64.54

9 Sundo 2009 3 1 46.22

10 Who's That Girl? 2011 3 2 58.68

11 Catch Me…I'm In Love 2011 3 2 120.21

12 Corazon: AngUnangAswang 2012 3 1 51.14

13 It Takes A Man And A Woman 2013 3 1 401.03

14 Manay Po! 2: Overload 2008 4 2 31.39

15 When Love Begins 2008 4 2 91.27

16 Tenement 2 (T2) 2009 4 1 86.45

17 Working Girls 2010 4 2 31.99

18 Babe, I Love You 2010 4 2 96.19

19 Pak! Pak! My Dr. KwakKwak 2011 4 1 77.05

20 Ikaw pa rin: Bonggaka boy! 2008 5 2 24.67

21 Caregiver 2008 5 2 139.54

22 BFF: Bestfriends Forever 2009 5 1 107.69

23 You to Me Are Everything 2010 5 2 93.82

24 Here Comes The Bride 2010 5 2 117.16

25 Tumbok 2011 5 2 6.79

26 In The Name of Love 2011 5 2 117.23

27 The Mommy Returns 2012 5 3 30.85

28 Every Breath U Take 2012 5 3 50.2

29 Born to Love You 2012 5 3 52.37

30 The Bride and the Lover 2013 5 2 11.15

31 Bromance: My Brother's Romance 2013 5 2 73.85

32 I'll Be There 2010 6 1 42.17

33 Forever and a Day 2011 6 1 44.73

34 Kimmy Dora and the Temple of Kiyeme 2012 6 1 133.61

35 Four Sisters and A Wedding 2013 6 1 145.05

36 My Monster Mom 2008 7 1 29.28

37 Villa Estrella 2009 7 1 47.18

38 Hating kapatid 2010 7 1 82.01

39 Temptation Island 2011 7 2 62.78

40 The Adventures of Pureza 2011 7 2 19.84

41 The Healing 2012 7 1 104.6

42 For the First Time 2008 8 1 134.70

43 Tarot 2009 8 2 16.51

44 And I Love You So 2009 8 2 54.09

45 Mamarazzi 2010 8 2 21.17

46 In Your Eyes 2010 8 2 63.59

47 Wedding Tayo, Wedding Hindi 2011 8 1 37.46

48 Just One Summer 2012 8 1 6.16

49 NanditoAko...NagmamahalSa'Yo 2009 9 3 4.91

50 Yaya and Angelina: The Spoiled Brat Movie 2009 9 3 59.77

51 In My Life 2009 9 3 135.73

xi

#

Number of Days

shown in

cinemas in NCR

Viva

Producer

(1,0)

Star

Cinema

Producer

(1,0)

GMA

Producer (1, 0)

Regal

Producer (1,

0)

OctoArts

(1,0)

1 21 1 0 0 0 0

2 35 0 1 0 0 0

3 42 0 1 0 0 0

4 35 0 0 1 1 0

5 49 1 1 0 0 0

6 42 0 1 0 0 0

7 28 0 1 0 0 0

8 28 0 1 0 0 0

9 35 0 0 1 0 0

10 35 1 0 0 0 0

11 35 1 1 0 0 0

12 35 0 1 0 0 0

13 49 1 1 0 0 0

14 28 0 0 0 1 0

15 42 1 1 0 0 0

16 35 0 1 0 0 0

17 21 1 0 1 0 0

18 35 1 1 0 0 0

19 28 0 1 0 0 1

20 14 1 0 0 0 0

21 35 0 1 0 0 0

22 35 0 1 0 0 0

23 35 0 0 1 1 0

24 42 0 1 0 0 1

25 21 1 0 0 0 0

26 35 0 1 0 0 0

27 7 0 0 0 1 0

28 21 0 1 0 0 0

29 35 0 1 0 0 0

30 7 0 0 0 1 0

31 28 0 1 0 0 0

32 35 0 1 0 0 0

33 28 0 1 0 0 0

34 42 0 1 0 0 0

35 21 0 1 0 0 0

36 21 0 0 1 0 0

37 28 0 1 0 0 0

38 35 1 0 0 0 0

39 28 0 0 1 1 0

40 28 0 1 0 0 0

41 28 0 1 0 0 0

42 42 0 1 0 0 0

43 21 0 0 0 1 0

44 35 0 1 0 0 0

45 35 0 0 0 1 0

46 42 1 0 1 0 0

47 28 0 1 0 0 1

48 7 0 0 1 0 0

49 21 0 0 0 1 0

50 42 0 0 1 0 0

51 42 0 1 0 0 0

xii

#

Main Actress

(Veteran 3,

Rising Star 2,

Starlet 1)

Director (1

One or Two

awards, 2

More than 2

awards)

PG or G (1,

0)

PG 13 or

PG-18 (1,

0)

R Moral Rating

1 1 2 0 1 0 2

2 2 0 0 1 0 2.5

3 2 1 1 0 0 3

4 2 2 1 0 0 3

5 2 1 1 0 0 4

6 2 1 0 1 0 2.5

7 2 1 0 0 0 2

8 1 0 1 0 0 3

9 1 0 0 0 1 3

10 2 1 0 1 0 2.5

11 2 0 1 0 0 3

12 2 2 0 0 0 2.5

13 2 1 1 0 0 3.5

14 2 2 0 1 0 2

15 2 2 0 1 0 2.5

16 3 2 0 1 0 3.5

17 2 2 0 1 0 2.5

18 2 0 0 1 0 3.5

19 2 1 1 0 0 3.5

20 2 1 0 1 0 2.5

21 3 2 0 1 0 3

22 3 1 0 1 0 2.5

23 2 1 1 0 0 2.5

24 2 2 1 0 0 3

25 2 0 0 1 0 1.5

26 2 2 0 1 0 2.5

27 2 2 0 1 0 2.5

28 2 0 0 1 0 2.5

29 1 0 0 1 0 3.5

30 2 2 0 0 0 2

31 2 1 0 1 0 3

32 2 2 0 1 0 3

33 2 1 1 0 0 4

34 2 1 0 1 0 2.5

35 2 1 0 1 0 3

36 2 0 1 0 0 2.5

37 2 0 0 1 0 2.5

38 2 1 1 0 0 3

39 2 2 0 1 0 2

40 1 1 0 1 0 2.5

41 3 2 0 0 0 2

42 2 1 0 1 0 3

43 2 2 0 1 0 3

44 2 0 0 1 0 3

45 2 2 1 0 0 2

46 2 0 0 1 0 2

47 2 2 0 1 0 3.5

48 1 0 0 1 0 2.5

49 1 2 1 0 0 3

50 2 0 1 0 0 2.5

51 2 2 0 1 0 2.5

xiii

#

IMDB

rating

Comedy (1,

0)

Drama

(1, 0)

Horror/Suspense

(1, 0)

Action

(1, 0)

Romantic

(1, 0)

John

Lloyd

(1, 0)

Anne

Curtis

(1, 0)

1 6.2 1 0 0 0 1 0 0

2 5.4 0 0 0 0 1 0 0

3 6.1 0 1 0 0 1 0 0

4 5.1 1 0 0 0 1 0 0

5 6.9 1 0 0 0 1 1 0

6 5.9 0 0 0 0 1 1 0

7 6.6 0 0 0 0 1 1 0

8 6.1 0 0 0 0 1 0 0

9 6.1 0 0 1 0 0 0 0

10 6.3 1 0 0 0 0 0 1

11 6.7 1 0 0 0 1 0 0

12 6.1 0 0 1 0 0 0 0

13 7.4 1 0 0 0 1 1 0

14 6.1 1 0 0 0 0 0 0

15 4.6 0 0 0 0 1 0 1

16 6.4 0 0 1 0 0 0 0

17 5 1 0 0 0 0 0 0

18 6.6 0 0 0 0 1 0 1

19 6.3 1 0 0 0 0 0 0

20 6.6 1 0 0 0 1 0 0

21 6.9 0 1 0 0 0 0 0

22 5.6 1 0 0 0 0 0 0

23 7.4 1 0 0 0 1 0 0

24 6.5 1 0 0 0 0 0 0

25 4.7 0 0 1 0 0 0 0

26 6.8 0 1 0 0 1 0 0

27 6.2 1 0 0 0 0 0 0

28 7 1 0 0 0 1 0 0

29 6.5 1 0 0 0 1 0 0

30 3.3 1 1 0 0 0 0 0

31 6.3 1 0 0 0 0 0 0

32 4.7 0 1 0 0 0 0 0

33 7.2 0 0 0 0 1 0 0

34 6.5 1 0 0 0 0 0 0

35 7.7 0 0 0 0 0 0 0

36 5 1 0 0 0 0 0 0

37 5.9 0 0 1 0 0 0 0

38 6.4 1 0 0 0 1 0 0

39 6 1 0 0 0 0 0 0

40 4.8 1 0 0 0 0 0 0

41 7.4 0 0 1 0 0 0 0

42 6.8 0 0 0 0 1 0 0

43 7 0 1 1 0 0 0 0

44 6.3 0 1 0 0 1 0 0

45 6.9 1 0 0 0 0 0 0

46 5.3 0 1 0 0 1 0 1

47 6.8 1 0 0 0 0 0 0

48 7.5 0 1 0 0 1 0 0

49 5.4 0 1 0 0 1 0 0

50 6.1 1 0 0 0 0 0 0

51 6.9 0 1 0 0 0 1 0

xiv

#

Bea

Alonzo

(1.0)

Angel

Locsin

(1,0)

Ding

Dong

(1,0)

Marian

Rivera

(1,0)

Kim

Chiu

(1,0)

Sarah

Geronimo

(1,0)

Toni

Gonzaga

(1,0)

1 0 0 0 0 0 0 0

2 0 1 0 0 0 0 0

3 0 0 0 0 1 0 0

4 0 0 0 0 0 0 0

5 0 0 0 0 0 1 0

6 1 0 0 0 0 0 0

7 0 1 0 0 0 0 0

8 0 0 0 0 0 0 0

9 0 0 0 0 0 0 0

10 0 0 0 0 0 0 0

11 0 0 0 0 0 1 0

12 0 0 0 0 0 0 0

13 0 0 0 0 0 1 0

14 0 0 0 0 0 0 0

15 0 0 0 0 0 0 0

16 0 0 0 0 0 0 0

17 0 0 0 0 0 0 0

18 0 0 0 0 0 0 0

19 1 0 0 0 0 0 0

20 0 0 0 0 0 0 0

21 0 0 0 0 0 0 0

22 0 0 0 0 0 0 0

23 0 0 1 1 0 0 0

24 0 0 0 0 0 0 0

25 0 0 0 0 0 0 0

26 0 1 0 0 0 0 0

27 0 0 0 0 0 0 0

28 0 0 0 0 0 0 0

29 0 0 0 0 0 0 0

30 0 0 0 0 0 0 0

31 0 0 0 0 0 0 0

32 0 0 0 0 0 0 0

33 0 0 0 0 0 0 0

34 0 0 0 0 0 0 0

35 1 1 0 0 0 0 1

36 0 0 0 0 0 0 0

37 0 0 0 0 0 0 0

38 0 0 0 0 0 1 0

39 0 0 0 0 0 0 0

40 0 0 0 0 0 0 0

41 0 0 0 0 1 0 0

42 0 0 0 0 0 0 0

43 0 0 0 1 0 0 0

44 1 0 0 0 0 0 0

45 0 0 0 0 0 0 0

46 0 0 0 0 0 0 0

47 0 0 0 0 0 0 1

48 0 0 0 0 0 0 0

49 0 0 0 0 0 0 0

50 0 0 0 0 0 0 0

51 0 0 0 0 0 0 0

xv

#

Movie Year

shown

Month

shown

Number of

Films

Shown for

the month

Gross Revenues

53 I Do 2010 9 2 42.44

54 My Neighbor's Wife 2011 9 2 27.80

55 No Other Woman 2011 9 2 278.42

56 The Mistress 2012 9 1 262.82

57 Mag-ingatKa Sa... Kulam 2008 10 2 78.45

58 My Only U 2008 10 2 79.19

59 Patient X 2010 10 2 24.49

60 Till My Heartaches End 2010 10 2 60.48

61 A Secret Affair 2012 10 3 118.24

62 Tiktik: The Aswang Chronicles 2012 10 3 83.35

63 Suddenly It's Magic 2012 10 3 47.2

64 Aswang 2011 11 2 31.77

65 The Road 2011 11 2 36.85

66 One True Love 2008 11 1 58.8

67

Ang Tanging Pamilya… A Marry Go

Around 2009 11 1 60.2

68 My Amnesia Girl 2010 11 1 144.82

#

Number of Days

shown in

cinemas in NCR

Viva

Producer

(1,0)

Star

Cinema

Producer

(1,0)

GMA

Producer (1, 0)

Regal

Producer (1,

0)

OctoArts

(1,0)

53 28 0 1 0 0 0

54 21 0 0 0 1 0

55 42 1 1 0 0 0

56 35 0 1 0 0 0

57 35 0 0 0 1 0

58 35 0 1 0 0 0

59 14 1 0 1 0 0

60 28 0 1 0 0 0

61 28 1 0 0 0 0

62 28 0 0 1 0 0

63 21 0 1 0 0 0

64 21 0 0 0 1 0

65 28 0 0 1 0 0

66 35 0 0 1 1 0

67 42 0 1 0 0 0

68 35 0 1 0 0 0

xvi

#

Main Actress

(Veteran 3, Rising

Star 2, Starlet 1)

Director (1 One or

Two awards, 2 More

than 2 awards)

PG or G

(1, 0)

PG 13 or

PG-18 (1,

0)

R Moral

Rating

53 2 2 1 0 0 2.5

54 2 2 0 0 0 2.5

55 2 1 0 0 0 3

56 2 2 0 0 0 2.5

57 2 2 0 1 0 3

58 2 1 1 0 0 3

59 2 2 0 0 0 1.5

60 2 2 0 1 0 3

61 2 1 0 0 0 1.5

62 2 1 0 1 0 2.5

63 2 0 1 0 0 3

64 2 2 0 1 0 2.5

65 2 2 0 0 1 3

66 2 0 0 1 0 3

67 2 1 1 0 0 2

68 2 1 1 0 0 2.5

#

IMDB

rating

Comedy (1,

0)

Drama

(1, 0)

Horror/Suspense

(1, 0)

Action

(1, 0)

Romantic

(1, 0)

John

Lloyd

(1, 0)

Anne

Curtis

(1, 0)

53 6.1 1 0 0 0 1 0 0

54 6.7 0 1 0 0 0 0 0

55 5.7 0 1 0 0 0 0 1

56 4.2 0 1 0 0 0 1 0

57 6.8 0 1 1 0 0 0 0

58 6.8 1 0 0 0 1 0 0

59 4.8 0 0 1 0 0 0 0

60 5.6 0 1 0 0 1 0 0

61 5.5 0 1 0 0 0 0 1

62 6.1 0 0 1 0 0 0 0

63 4.2 1 1 0 0 0 0 0

64 5 0 0 1 1 0 0 0

65 5.4 0 0 1 0 0 0 0

66 6.4 0 0 0 0 1 0 0

67 5.8 1 0 0 0 0 0 0

68 5.6 1 0 0 0 1 1 0

xvii

#

Bea

Alonzo

(1.0)

Angel

Locsin (1,0)

Ding Dong

(1,0)

Marian

Rivera

(1,0)

Kim Chiu

(1,0)

Sarah Geronimo

(1,0)

Toni

Gonzaga

(1,0)

53 0 0 0 0 0 0 0

54 0 0 0 0 0 0 0

55 0 0 0 0 0 0 0

56 1 0 0 0 0 0 0

57 0 0 0 0 0 0 0

58 0 0 0 0 0 0 1

59 0 0 0 0 0 0 0

60 0 0 0 0 1 0 0

61 0 0 0 0 0 0 0

62 0 0 1 0 0 0 0

63 0 0 0 0 0 0 0

64 0 0 0 0 0 0 0

65 0 0 0 0 0 0 0

66 0 0 1 1 0 0 0

67 0 0 0 0 0 0 1

68 0 0 0 0 0 0 1

xviii

Appendix D: Financial Highlights of Industry Players

Year

s

Sales

Regal

Sales

Viva

Sales

StarCinem

a

Sales

GMA

Sales

Octo

Profits

Regal

Profits

Viva

Profits

Star

1990 48634 61009 504 1384

1991 55222 67969 326 2431

1992 53621.3005

6 74907 8418

264.128756

5 1212

1993 52067 86053 24279 214 1325

1994 69845 12158

1 21532 463 1371

1995 99332.0254

8

26630

6 79726 13536

1485.47708

5 2825 13044

1996 141267.825

7

25678

0 109882 0 20269

4765.96581

1 37185 8208

1997 200908 38109

8 123633 2616 33534 15291 4195 7970

1998 157921 48900

2 162130 5049 17986 6983 12212 5939

1999 102315 42118

7 113843 2766 8233 3179 -11963 2756

2000 129268 43956

2 75936 70501 8774.661707 273 -98441 258

2001 59174 60903

7 87854 18080 9351.960169 528 37814 15307

2002 33384 34106

7 220833 804 9967.239983 74 -158341 -98739

2003 46642.0106

4

19405

1 62207 319 10623

195.691037

4 -153832 -2679

2004 65165.2635

1

15378

1 405472 49 10623

517.499758

5 -37389 54995

2005 91044.7793

6

21055

8 334435 56999 43658

1368.51438

6 55953 54453

2006 127202 20814

6 485466 81661 50607 3619 57517 68144

2007 198502 40990

5 586332 53688 69429 7010 113317

95836.9495

3

2008 157207 46390

1 593959 72958 44757 2353 -25381 134784

2009 197235 51921

0 616107 62298 46590 -492177 -24146 87898

2010 183855 54498

7

639080.871

7 79992 33035 -11021 29901 57321.7771

2011 179125 39573

6 1016734 99009 97292 77013

41644.9228

4

61546.2157

1

2012 129085 38202

3 1474204 135120 97370 77013 58001.3912

66081.98245

xix

Year

s

Profits

Octo

Volume

Regal

Volume

Viva

Volume

Star

Volume

GMA

Volume

Octo HHI-top5

HHI by

volume

1990 41 23 1

0.52331360

9

1991 -1123 27 18 2

0.47849705

7

1992 -113 26 21 4

0.43560169

2

1993 215 22 18 4 4

0.36458333

3

1994 -1648 20 28 8 2 6

0.31445312

5

1995 -6178 17 20 14 2 7

0.26055555

6

1996 -1515 19 23 18 1 3

0.29882812

5

1997 -621 17 24 22 0 7

0.36713469 0.28530612

2

1998 -5924 35 22 20 6 9 0.41985779

2

0.26299621

9

1999 -5654 21 20 18 4 3 0.47794109

1 0.27318641

2000 -2707 22 13 8 2 0 0.42106702

2

0.35604938

3

2001 -2050 20 20 11 0 0 0.62319687

7

0.35409457

9

2002 -752 15 11 9 2 1 0.45278262

6

0.29916897

5

2003 114 6 16 8 0 2 0.44482587

3 0.3515625

2004 2474 12 17 7 1 2 0.47705576

2

0.32018408

9

2005 9810 8 4 6 4 1 0.31254744

6

0.25141776

9

2006 5546 14 8 10 3 3 0.33512060

7

0.26177285

3

2007 4192 8 5 8 3 2 0.32181658 0.24556213

2008 3958 9 5 8 4 2 0.33779703

7

0.24234693

9

2009 3360 6 4 10 5 2 0.33407311

6

0.24828532

2

2010 2573 5 5 14 5 2 0.34047219

6 0.28616025

2011 21895 6 6 13 5 4 0.38845026

7

0.24394463

7

2012 23316.68 5 7 17 6 1

0.4805429 0.30864197

5

xx

Year

s

SM

TicketSales

Ayala

TicketSales

Eastwood Ticket

Sales

IndMovProdandDistR

ev

IndMovProdandDistCo

mp

1990 440838.2926 109290.5583

1991 590974.0082 129618.4317

1992 791960.1572 157150.6634

1993 898198.0386 186757.9807

1994 4681 990185.0154 209726.5276

1995 12358 1091592.636 235519.8754

1996 14396 1589878.726 271611.9013

1997 15516 1836656.24 311191.0567

1998 15601 1932924.833 324960.5795

1999 745271 32579 2059945.978 383383.5639

2000 776891 8516 2195314.252 452310.115

2001 910543 13733 2416147.252 689084.8127

2002 1004557.45

8 8534 2636980.252 1049806.015

2003 1108279 8800 792 2640832.093 515118.9439

2004 1232705 9475 59252 3033473.222 589405.8433

2005 1075752 24881 61059 3484492.563 674405.8868

2006 1311481 24541 62145 3192339.396 464792.3311

2007 1495037 25115 68267 2924681.466 320329.219

2008 1491702 29246 72711 2679465 220767

2009 1694943 34070 113344 2797904 360084

2010 2263792 43997 124194 3242968.265 417362.7775

2011 3868058.524 497810.4987

2012 4583161.78 589842.6917

xxi

Years IndMovie Projection Revenues MovProj Compensation MovProjValueAdded

1990 784302.2958 126178.4202 160261.8584

1991 1051411.094 149647.4097 294367.0439

1992 1408988.693 181433.9935 459128.0577

1993 1597998.168 215616.3107 554009.3563

1994 1761653.636 242134.0173 598342.6639

1995 1942069.519 271913.0205 646223.6411

1996 2828578.088 313582.0803 957478.6293

1997 3267623.821 359277.11 1122986.176

1998 3438896.778 375174.3353 1162885.742

1999 4242374.095 443173.346 1330624.723

2000 5233579 630559 1522559

2001 5048733.024 618378.8881 1011123.285

2002 4870415.664 606434.0517 1086714.231

2003 4698345.649 594716.4658 1167956.309

2004 5396899.617 680482.3706 1298564.993

2005 6199315.175 778616.8423 1443779.213

2006 4687182.252 511519.749 1088804.331

2007 3543887.808 336047.7701 821105.375

2008 2679465 220767 619219

2009 2797904 360084 1049349

2010 3242968.265 417362.7775 1216269.574

2011 3868058.524 497810.4987 1450708.582

2012 4583161.78 589842.6917 1718906.807

xxii

Appendix E: Results of Factor Analysis - Communality of Quantitative and Qualitative

Variables

Sorted Rotated Factor Loadings and Communalities

Variable Factor1 Factor2 Factor3 Factor4 Factor5

Gross Revenues 0.849 0.063 -0.061 -0.180 -0.021

Number of Days shown in cinemas 0.651 -0.058 -0.101 -0.217 -0.016

John Lloyd (1, 0) 0.625 0.056 -0.049 0.057 -0.072

Sarah Geronimo (1,0) 0.582 0.108 -0.327 -0.138 -0.089

Star Cinema Producer (1,0) 0.510 0.471 0.103 0.163 -0.243

Moral Rating 0.427 0.154 -0.114 0.222 -0.092

IMDB rating 0.366 -0.070 0.065 0.232 -0.082

Ding Dong (1,0) 0.081 -0.750 0.050 0.084 -0.050

GMA Producer (1, 0) -0.277 -0.686 -0.080 -0.113 -0.026 Marian Rivera (1,0) 0.078 -0.666 0.026 0.144 0.023

Technical Rating 0.247 0.412 0.221 0.170 0.298

PG 13 or PG-18 (1, 0) -0.112 0.029 0.903 0.011 -0.031

PG or G (1, 0) 0.138 -0.016 -0.895 0.120 -0.200

Anne Curtis (1, 0) -0.004 0.025 0.107 -0.806 -0.063

Viva Producer (1,0) 0.138 0.096 -0.040 -0.801 -0.102

Romantic (1, 0) 0.232 -0.050 -0.131 -0.032 -0.669

Director (1 One or Two awards, -0.012 0.157 0.029 0.163 0.558

Main Actress (Veteran 3, Rising 0.279 0.032 0.115 -0.038 0.447

Month shown -0.206 -0.178 -0.072 0.001 0.379

Angel Locsin (1,0) 0.119 0.060 0.217 0.191 -0.341 R, R13 or R16 -0.020 -0.019 -0.114 -0.164 0.289

Year shown 0.064 0.218 0.010 0.113 -0.141

Toni Gonzaga (1,0) 0.044 0.054 -0.076 0.124 -0.024

Ai Ai (1,0) -0.055 0.005 0.046 -0.088 0.066

OctoArts (1,0) 0.032 0.154 -0.113 0.128 0.115

Drama (1, 0) -0.061 0.185 0.047 -0.043 0.137

Main Actor (Veteran 3, Rising S 0.222 -0.028 -0.045 -0.034 0.050

Comedy (1, 0) 0.001 0.050 -0.282 0.051 -0.033

Horror/Suspense/Action (1, 0) -0.173 -0.169 0.101 0.057 0.447

Regal Producer (1, 0) -0.227 -0.375 -0.092 0.292 0.320

Number of Films Shown for the m -0.280 0.029 0.014 -0.188 0.069

Kim Chiu (1,0) 0.005 0.128 -0.069 0.087 0.010 Bea Alonzo (1.0) 0.201 0.130 0.140 0.170 -0.033

Variance 3.1038 2.3075 2.0842 1.9180 1.9069

% Var 0.094 0.070 0.063 0.058 0.058

Variable Factor6 Factor7 Factor8 Factor9 Factor10

Gross Revenues 0.139 -0.035 -0.104 -0.011 -0.000

Number of Days shown in cinemas -0.257 -0.202 -0.202 -0.172 0.000

John Lloyd (1, 0) 0.190 0.035 -0.028 0.075 -0.000

Sarah Geronimo (1,0) -0.087 0.197 0.478 0.161 0.000

Star Cinema Producer (1,0) -0.044 -0.365 -0.264 -0.311 -0.000 Moral Rating -0.354 0.047 -0.050 -0.152 0.000

IMDB rating -0.194 0.037 0.070 -0.036 0.000

Ding Dong (1,0) -0.089 0.030 -0.055 0.023 0.000

GMA Producer (1, 0) 0.054 0.019 0.190 -0.071 -0.000

Marian Rivera (1,0) -0.116 0.167 -0.119 0.096 0.000

Technical Rating 0.026 0.100 -0.158 -0.117 0.000

PG 13 or PG-18 (1, 0) -0.392 0.040 0.050 0.109 0.000

PG or G (1, 0) -0.272 -0.194 0.022 0.112 -0.000

Anne Curtis (1, 0) 0.015 0.066 -0.285 0.029 -0.000

Viva Producer (1,0) -0.005 0.181 0.360 0.145 -0.000

Romantic (1, 0) -0.172 0.207 -0.018 0.043 0.000

Director (1 One or Two awards, 0.092 0.123 -0.107 0.154 -0.000

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Main Actress (Veteran 3, Rising -0.113 -0.189 -0.110 -0.130 0.000

Month shown -0.069 -0.018 -0.303 -0.083 0.000

Angel Locsin (1,0) 0.212 0.032 -0.076 -0.072 -0.000

R, R13 or R16 0.867 0.185 -0.095 -0.285 0.000

Year shown 0.460 0.029 0.037 0.064 -0.000

Toni Gonzaga (1,0) -0.027 -0.467 -0.067 -0.003 -0.000 Ai Ai (1,0) -0.027 -0.378 0.074 0.082 -0.000

OctoArts (1,0) -0.060 -0.324 -0.005 0.014 -0.000

Drama (1, 0) -0.014 0.457 -0.536 -0.033 0.000

Main Actor (Veteran 3, Rising S 0.023 0.026 -0.416 0.006 -0.000

Comedy (1, 0) -0.045 -0.480 0.306 0.624 -0.000

Horror/Suspense/Action (1, 0) 0.060 0.199 0.295 -0.506 0.000

Regal Producer (1, 0) -0.025 0.363 -0.122 0.471 0.000

Number of Films Shown for the m -0.096 0.207 -0.167 0.385 0.000

Kim Chiu (1,0) -0.002 0.087 -0.100 -0.288 0.000

Bea Alonzo (1.0) 0.031 -0.048 -0.195 -0.096 -0.000

Variance 1.6321 1.5941 1.5240 1.5129 0.0000 % Var 0.049 0.048 0.046 0.046 0.000

Variable Communality

Gross Revenues 0.792

Number of Days shown in cinemas 0.661

John Lloyd (1, 0) 0.448

Sarah Geronimo (1,0) 0.786

Star Cinema Producer (1,0) 0.879

Moral Rating 0.430 IMDB rating 0.249

Ding Dong (1,0) 0.594

GMA Producer (1, 0) 0.612

Marian Rivera (1,0) 0.536

Technical Rating 0.447

PG 13 or PG-18 (1, 0) 1.000

PG or G (1, 0) 1.000

Anne Curtis (1, 0) 0.753

Viva Producer (1,0) 0.865

Romantic (1, 0) 0.597

Director (1 One or Two awards, 0.422

Main Actress (Veteran 3, Rising 0.371 Month shown 0.327

Angel Locsin (1,0) 0.274

R, R13 or R16 1.000

Year shown 0.302

Toni Gonzaga (1,0) 0.250

Ai Ai (1,0) 0.173

OctoArts (1,0) 0.176

Drama (1, 0) 0.558

Main Actor (Veteran 3, Rising S 0.230

Comedy (1, 0) 0.801

Horror/Suspense/Action (1, 0) 0.658 Regal Producer (1, 0) 0.757

Number of Films Shown for the m 0.347

Kim Chiu (1,0) 0.130

Bea Alonzo (1.0) 0.158

Variance 17.5835

% Var 0.533

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Appendix F: Dendogram for Cluster Analysis

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