Jeremy Dunbar International

7/31/2019 Jeremy Dunbar International

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From: Jeremy Dunbar

To: Richard Kelly, Sean McKittrick, Edward Hamm Jr., Jeff Culotta

CC: Todd Wagner, Mark Cuban

Date: 4/30/12

Re: International distribution ofGod Bless America

INTRODUCTION

Darko Entertainment is based in Los Angeles, California and creates, produces, and finances

director driven films (Worlds Greatest Dad, The Box,I Hope They Serve Beer in Hell,Donnie

Darko). Their goal is to support filmmakers and help independent films reach a wider audience

through Darkos brand (Darko, 2011). Magnolia Pictures is the theatrical and home

entertainment distribution division of the Wagner/Cuban Companies (Magnolia Pictures). The

company is able to release films simultaneously in the theater, on TV, and on DVD through

sister firms: Landmark Theaters, high definition TV network HDNet, studios 2929 Productions,

and HDNet Films (Hoovers, 2012). According to Clark (2011), Magnolia Pictures' genre label

Magnet has picked up the worldwide rights to distribute Bobcat Goldthwait's dark comedy satire

God Bless America produced by Darko Entertainment. The indie film, starring Joel Murray and

Tara Lynn Barr, will be distributed by Magnet Releasing in the U.S. and Magnet International in

foreign markets (Clark, 2011). God Bless America has already been released in 2012 through

Video On Demand on April 6 but is scheduled for theatrical exhibition on May 11 in the U.S.;

May 31 in Russia; June 21 in Indonesia; July 20 in Canada; and August 31 in the Netherlands

(IMDb). Although various international release dates have been announced, there still may be

potential for profitability through distribution of the movie in other foreign markets. According


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to Andrew Cripps (2011), president of Paramount Pictures International, more people are

watching films outside the U.S., with 60% of revenues coming from international markets.

COUNTRY IDENTIFICATION

Expanding God Bless America into Australia immediately comes to mind due to its linguistic and

sociocultural nearness to the U.S. In order to determine if the country is a viable target market, a

screening process will be used. First, a preliminary scan of the business environment will

determine market attractiveness. Second, an in-depth analysis of the Australian movie industry

and audience will determine relevance of the product to the market. Lastly, marketing strategies

and tactics necessary for entry will be presented along with a final decision of whether or not

God Bless America should be distributed in the Australian market through theatrical exhibition.

PRELIMINARY SCREENING

Before entering any foreign market, one must determine how attractive a country is based on

several factors including political risk and stability and the economic and legal environment.

Political Risk & Stability | CountryWatchs Political Risk Index is calculated based on political

stability, political representation, democratic accountability, freedom of expression, security and

crime, risk of conflict, human development, jurisprudence and regulatory transparency,

economic risk, and corruption (2011). A score of 0 marks the highest political risk, and a score of

10 marks the lowest political risk. Australia currently has a score of 9.5, thus it carries very little

political risk. CountryWatchs Political Stability Index is based on peaceful transitions of power,

ability of a government to stay in office and carry out its policies, and credible risks of

government collapse (coups, domestic violence and instability, and terrorism) (2011). A score of

0 marks the lowest level of political stability, and a score of 10 marks the highest level of

political stability. Australia currently has a score of 9.5, thus it has a very high level of political

stability.


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Economic Environment | According to CountryWatch (2011), Australia has one of the world's

strongest economies. The combination of wide-ranging structural reforms, sound

macroeconomic policies, and a stable external environment led to Australia enjoying almost two

decades of continuous economic expansion (CountryWatch, 2011).

Legal Environment | According to Global Road Warrior (2012), Australias egalitarian values

are reflected in the governments adoption of transparent and efficient business regulations. The

country generally does not regulate trade-related payments, transfers of royalties, profit

remittances, or capital repatriation (CountryWatch, 2011). CountryWatchs Foreign Investment

Index is calculated based on economic stability (sustained economic growth, monetary stability,

current account deficits, budget surplus), economic risk (risk of non-servicing of payments for

goods or services, loans and trade-related finance, risk of sovereign default), business and

investment climate (property rights, labor force and laws, regulatory transparency, openness to

foreign investment, market conditions, and stability of government) (2011). A score of 0 marks

the lowest level of foreign investment viability, and a score of 10 marks the highest level of

foreign investment viability. Australia currently has a score of 9.5, thus it has a very high level of

foreign investment viability. In fact, the Center for Entertainment Industry Data and Research

estimates that government incentives and exchange rate differentials save movie producers about

39% in Australia (IBISWorld, 2012).

IN-DEPTH SCREENING

After learning that the business environment of Australia encourages foreign investment, the

market size, market growth, competitive intensity, and the Australian consumers and moviegoers

will be analyzed to determine the market potential and willingness to buy a ticket to watch God

Bless America in theaters.


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Market Size | The following secondary research was provided by Australian supplier of screen

advertising Val Morgan Cinema Network and all refer to Australian moviegoers (2011):

Population | There are over 5 million frequent moviegoers making 1.3 million visits tothe movies each week.

Age Groups | The following represent the percentages of each age group that have beento the movies within 4 weeks prior to the survey being conducted:

Ages 14-17: 48% Ages 18-24: 48%

Ages 25-34: 35%

Ages 35-49: 30% Ages 50+: 23%

Disposable Income Per Capita | When real household disposable income increases,customers have more discretionary power to purchase items, such as movie tickets

(IBISWorld, 2012). After adjusting the average salary incomes surveyed across multiple

countries and years to constant 2005 international dollars, Australia ranked 8th by

disposable income with $14,185 (World Salaries, 2008). Assuming minor changes over

the past 7 years, Australia should remain among the top 10 countries by disposable

income.

Per Capita Spending on Product Category | Australia has an annual average of 4.3movie admissions per capita, the same as the U.S. (Pearce, 2011).

Current Stage of the Product Life Cycle | A movie is usually in theatrical exhibition fortwo months, though it could be less if the movie is in limited release/engagement or is a

failure; a movie may also be in exhibition for more than two months if it was in limited

release but expands due to popularity. Before, movies would move along the standard


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international product life cycle by starting in the producers market, then were later

exported into other developed countries where an entirely new marketing campaign and

positioning strategy to reflect the core attributes could be created. Now, global

communication has allowed general buzz to be created through social media, consumers

are instantaneously aware of every movie that is scheduled to release, so a part of the

marketing challenge is to either overcome some preconceived notion that the consumer

may already have about the movie or try and introduce something new to the consumer;

this is why a lot more movies release on the same day and date around the world

(Raghavendra, 2011). According to Andrew Cripps (2011), although DVD is on the

decline and more and more movies are being instantaneously streamed through Netflix

and iTunes to iPhones and iPads, etc., the theatrical window has maintained itself and is

still the pre-eminent place to go and see movies from the consumer point of view.

However, God Bless America was released through Video On Demand before theatrical

exhibition and may foreshadow simultaneous release/distribution across various media

(theatrical, DVD/Blu-ray, TV on-demand, and online streaming). This could be viewed

either as a strategy to segment movie audiences into theater watchers, home wathchers,

and online/mobile watchers, or as a threat to each division because customers will no

longer move along the multiple purchase timeline: theatrical DVD

mobile/computer.

Market Growth |

Moviegoing has increased against all age groups in the last few years, with the mostdramatic growth seen among those over 25 (Val Morgan Cinema Network, 2011).

Over the five years through 2012, revenue within the Global Movie Production andDistribution industry is estimated to increase at an annualized 0.8%. (Kaczanowska,


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2012).

According to IBISWorld (2012), however, attendance has been negatively affected by theconvenience and privacy afforded by home media products like DVDs and Blu-ray, the

rise in digital piracy associated with broadband internet connection, and the increasing

penetration rate of pay cable and satellite TV. The major studios have sought to meet

internet demand for movies by introducing their own legal download websites: Disney,

Sony, MGM and NBC Universal offer movies and TV shows that can be burned and used

on other devices through CinemaNow. Meanwhile, Movielink offers movies to download

from Fox, Warner Bros., Sony, MGM, Paramount and NBCUniversal.

Competitive Intensity | Competition within the movie industry exists between major and minor

studios and also distributors (i.e., a distributor may attain the rights to release a competing

studios movie internationally). Competition and financial success can be on a movie-by-movie

basis not specific to market share (i.e., mini-major Lionsgate has currently bumped Disney out of

the Big 6 movie studios with the overwhelming success ofThe Hunger Games). There is no

information on whether Australia is one of Magnet Internationals markets, and Darko

Entertainment may need to license the rights to exhibit God Bless America to an already

established movie distributor in Australia, such as Paramount Pictures/Universal Pictures, 20th

Century Fox, Titan View, The Weinstein Company Australia, or Hoyts Distribution/Sony

Pictures Releasing. Although Darko Entertainment may be a smaller company, an indie movie

can be successful if given a proper release date that does not compete against better movies

within the same genre and/or blockbusters in any genre distributed by studios with massive

advertising budgets.

Australian Consumers | The success of U.S. movies in foreign markets underlines the global

nature of consumer "taste" for film, possibly due to the limited number of genre conventions and


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the universality of film genre (IBISWorld, 2012). Comedy is a difficult movie genre to

successfully distribute internationally because humor is heavily dependent on the peculiarities

and intricacies of language and cultural humor.

Language | God Bless America uses the English language, which is the most widely usedlanguage in Australia; therefore, neither subtitles nor overdubbing are required. However,

language is not the only issue with comedy, as direct translation will not necessarily

result in direct laughs, and the type of humor must be interpreted correctly.

Humor| The movie involves a man and a young girl, who are frustrated with thecelebrity-obsessed and shallow American public. The two decide to go on a killing spree

of pop culture caricatures (spoiled Sweet 16families, Glenn Beck, TMZ, and American

Idol types) and even go to the extreme of shooting people in a movie theater for the

relatively harmless act of talking on cellular phones and throwing popcorn. Therefore, the

audience must understand and appreciate satire and black humor.

The Australian government (2007) states the following:

Australian humor is dry, full of extremes, anti-authoritarian, self-mocking

and ironic. While in many cultures it is considered poor taste to find

humor in difficult circumstances, Australians have a very black sense of

humor. They also have a very strong anti-authoritarian sense of humor,

which may be their strongest reference to a brutal past, where humor was a

means of coping with bad situations. Mocking the wowser (someone who

is highly moral or politically correct) is another common element in

Australian humor. Lastly, Australians have a strong tradition of targeting

themselves as objects of humor.


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Australian Moviegoers | The following secondary research was provided by Australian supplier

of screen advertising Val Morgan Cinema Network (2011):

Age | Moviegoers are generally younger than the population with 48% of visits made bypeople in the 14 to 34 demographic. This may or may not be helpful because the movie

will be restricted to older audiences due to its vulgar language and violent content. The

older age groups are also well represented in the cinema audience with 51% of visits now

made by people aged 35+.

Gender| 47% of moviegoers are men; 53% are women. Frequency | 74% of a typical cinema audience go to the movies at least once every 4

weeks. 42% of big spenders have been to the movies in the last 4 weeks.

Education | Cinemagoers typically have good education levels. 37% of people with adiploma or degree have been to the movies in the last 4 weeks. This may be helpful due

to the satirical nature of the humor and sociopolitical commentary.

Genre Profile | Comedy movies generally have strong appeal to the under 25's andfemales (58% women; 42% men).

MARKETING STRATEGIES/TACTICS

After learning that the Australian movie market shows great potential and willingness from

Australian moviegoers to buy a ticket to watch God Bless America in theaters, strategies and

tactics regarding segmentation, product, pricing, distribution, will be discussed.

Segmentation | With satirical comedies, there are two main psychographic segments:

1. Smart comedy:those who appreciate social and political criticism2. Broad comedy: those who appreciate or even agree with the outrageous behavior

and dialogue (i.e., Anti-American sentiment specific to God Bless America)

These segments can be reflected through standard demographic segmentation.


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Age | According to Johansson (2009, p. 260), there are young people in Australia readyfor new global markets and there is an older generation nostalgic for what was. An

American style might be more appealing to the younger age groups, whereas the older

generation tends to be much more tradition-bound and in this case feels more empathy

with British ways (Johansson, 2009, p. 260). Therefore, younger moviegoers would be

placed in the smart comedy segment, and older moviegoers in the broad comedy

segment.

Education | Those with higher levels of education, global minds, etc. would be placed inthe smart comedy segment, while less-educated resisters of globalization would be placed

in the broad comedy segment.

Through the testing of TV spots and trailers and movie preview screenings with the two

proposed segments, it can be determined whether the two segments even exist and if tailored

campaigns need to be developed, otherwise the comedic material and media placements can be

mixed throughout a single campaign.

Product | According to Johansson (2009, p. 261), most global products and services need only

slight adaptation to appeal to customers in Australian markets, and the markets are very up-to-

date technologically. However, God Bless America is a comedy, and there may be less eagerness

to see the movie in a theater rather than at home; unlike action movies, for example, comedies do

not often showcase visual and sound effects, which are valued and characteristic of the

moviegoing experience. The core benefits to Australians of watching comedy product in theaters

theater need to be researched and promoted in order to create the most appeal and intent to buy.

Pricing | Despite an average movie ticket price in Australia being A$12.89 (US$14.18 based on

the exchange rate as of July 31), moviegoing remains one of the most popular cultural activities

of the population (Pearce, 2011). Ticket prices are set by the theaters exhibiting the movie, and


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Darko Entertainment and whichever company would distribute God Bless America in Australia

(Magnet International or not) will only have flexibility in leasing film prints to the exhibitors.

Distribution|

Channel| Colmano (2001) explains typical theatrical movie distribution in thefollowing:

Theatrical distribution of motion pictures principally involves (1) the licensing

and booking of the films for exhibition in theaters on a rental basis; (2) the

creation, development and dissemination of advertising, publicity and

promotional exploitations; and (3) the purchase, delivery, storage, inspection and

repair of positive prints used in exhibiting the films. Box office receipts, minus

the share retained by the exhibitors, are referred to as gross receipts. With respect

to distribution in theaters, a distributor licenses films to exhibitors/theaters in

return for either a sliding scale percentage of box office gross receipts or a flat

rental or a modified percentage or variations thereof. Under a percentage

arrangement, the exhibitor agrees to pay the distributor a percentage of gross box

office receipts. Under a modified percentage arrangement, the exhibitor may

agree to pay the distributor a percentage of such receipts in excess of a specified

amount, or guaranteed minimum. In the case of flat rental, the exhibitor agrees to

pay a flat price without regard to box office receipts. These film rental agreements

may provide for guarantees and/or advances from the theater operators, a portion

of which may be non-refundable notwithstanding the box office results of a

particular film. While it is not possible to accurately predict what portion of box

office receipts is payable to a distributor over the entire theatrical run of a film, in


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general theaters pay approximately 50% of box office receipts to distributors as

film rentals.

Location | Australias prime markets are clustered around the coastline and a fewmetropolitan areas, including Sydney, Melbourne, and Perth; shopping malls and busy

streets offer same amenities as elsewhere in developed countries (Johansson, 2009, p.

261).

Promotion: According to Johansson (2009), the relative isolation of [Australia] in the past

because of government policies and distance from the Northern hemisphere has made global

communications particularly welcome. Because of this, a combination of traditional (TV

commercials and outdoor billboards) and nontraditional (social media and online pre-roll video)

can be used to develop a simple yet effective campaign. The media placements for young age

segments may even utilize the American-style media and global program vehicles, including

CNN, The Simpsons, and theLate Show with David Letterman; older segments are likely to favor

the familiar humor and verbally adept British commercials and sitcoms (Johansson, 2009, p.

262).

FINAL DECISION

After determining that Australia has an attractive business environment, a movie industry and

audience relevant to God Bless America, and does not require too much marketing adaptation, it

would seem that expanding the movie into Australia would be profitable; however, the

information provided is based mainly on movies in wide release, and God Bless America is only

scheduled for limited release so far. A film's success in the U.S. is typically the predictor of

international audience interest in the film, how much critical attention the movie receives, and

how much screen time the movie gets from exhibitors (IBISWorld, 2012). God Bless America

has not yet released in the U.S., so there are not enough indicators of whether or not it will be


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REFERENCES

Australian Government. (2007, Dec 17). Australian humour. Retrieved April 25, 2012, from

http://australia.gov.au/about-australia/australian-story/austn-humour

Box Office Mojo. Retrieved April 30, 2012, from boxofficemojo.com

Clark, K. (2011, Sept 14).Indie Film Company Magnolia Pictures Will Distribute Black Comedy

"God Bless America."Retrieved April 25, 2012, from complex.com/pop-

culture/2011/09/indie-film-company-magnolia-pictures-will-distribute-black-comedy-

god-bless-america

Colmano, M. (2001). A Motion Picture Production Overview. Retrieved April 30, 2012, from

marinocolmano.com/aboutproduction.html

CountryWatch. Country Review: Australia (2011). Retrieved April 29, 2012, from

countrywatch.com/cw_country.aspx?vcountry=9

Darko Entertainment. (2011). Retrieved April 20, 2012, from darko.com

Global Road Warrior. Australia: The Business Experience (2012). Retrieved April 29, 2012,

from globalroadwarrior.com/ContentInfo.asp?iso3ltr=AUS&nid=13.12&cid=7&

next_nid=13.13&parent=Business%20Culture

Hoovers Company Profiles. Magnolia pictures inc. (2012). Retrieved April 29, 2012, from

search.proquest.com/docview/230588378?accountid=10351

IBISWorld. (2012, Apr). Global Movie Production & Distribution. IBISWorlddatabase.

Retrieved April 15, 2012

IMDb. God Bless America (2011) IMDb. Retrieved April 25, 2012, from

imdb.com/title/tt1912398

Johansson, Johny K. (2009). Global Marketing(5th ed.). New York, NY: McGraw-Hill/Irwin

Kaczanowska, Agata. (2012, Feb). Movie & Video Production in the US. IBISWorlddatabase.


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Retrieved April 15, 2012

Magnolia Pictures. About Magnolia. Retrieved April 25, 2012, from

magpictures.com/about.aspx

Pearce, D. (2011, Aug 12).High ticket prices don't dissuade Australian moviegoers. Retrieved

April 30, 2012, from filmjournal.com/filmjournal/content_display/columns-and-

blogs/day-and-date-down-under/e3idd2427564cf33f09aec4b32fb48d8bba

Raghavendra, N. (2011, May 28).More people are watching films outside of the US: Andrew

Cripps, Paramount Pictures. Retrieved April 25, 2012, from

articles.economictimes.indiatimes.com/2011-05-28/news/29594004_1_hollywood-films-

viacom

Val Morgan Cinema Network (2011). Audiences. Retrieved April 29, 2012, from

valmorgan.com.au/audiences

World Salaries (2008). Total Personal Average Income - International Comparison. Retrieved

April 30, 2012, from worldsalaries.org/total-personal-income.shtml

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Jeremy Dunbar International