UNIVERSITY OF NEW YORK IN PRAGUE
European Business Administration
Analysis and Comparison of Marketing Strategies
for the Film Production Companies of France and
Russia
by
NATALIA SMIRNOVA
2016
Mentor: Dan Ravick Fiala
Table of contents
1. Executive summary……………………………………………………………….. 12
a. Methodology…………………………………………………………………3
b. Literature review……………………………………………………………..3
2. Section 1. French film market………………………………………………….......48
i.
Overview and trends…………………………………………………4
ii.
Financial
background………………………………………………...7
a. Gaumont………………………………………………………………… 9-24
i.
Historical overview…………………………………………………..9
ii.
Corporate
analysis…………………………………………………..11
iii.
Communication
with
the
audience………………………………….17
iv.
Finances…………………………………………………………….21
b. Studio Canal…………………………………………………………….25-33
i.
Historical overview…………………………………………………25
ii.
Corporate
analysis…………………………………………………..26
iii.
Communication
with
the
audience………………………………….30
iv.
Finances…………………………………………………………….32
3. Section 2. Russian film market……………………………………………….....3438
i.
Overview and trends………………………………………………..34
ii.
Financial background………………………………………………36
a. Mosfilm…………………………………………………………………39-48
i.
Historical overview…………………………………………………39
ii.
Corporate
analysis………………………………………………......41
iii.
Communication with the audience…………………………………44
iv.
Finances……………………………………………………………46
b. Central Partnership……………………………………………………...49-58
i.
Historical overview…………………………………………………49
ii.
Corporate
analysis…………………………………………………..51
iii.
Communication
with
the
audience………………………………….55
iv.
Finances…………………………………………………………….57
4. Section 3 Comparison of companies………………………………………….....5963
a. Comparison of French and Russian companies…………………………….59
5. Recommendations………………………………………………………………64-67
6. Societal
impact
…………………………………………………………………......68
7. References…………………………………………………………………........69-75
Abstract
For the more than a hundred years of history, cinematography became the essential part
of life, involving the enormous resources and millions of people in all levels related to
the production of films. Regarding this, the key purpose of this thesis is to analyze,
evaluate and give the recommendations for the future improvement for two film
markets – French and Russian. For this paper, I chose four major film production and
distribution companies – French Gaumont and Studiocanal, as well as Russian Mosfilm
and Central Partnership. The analysis includes the general overview of the corporate
strategies of companies, their methods of communication with the audience and their
finances. Moreover, both markets are observed regarding their specific trends and
finances.
During this thesis, I evaluated that there is a tendency which shows that younger
companies are more successful than the old ones. Notwithstanding, this thesis evaluated
that the French companies are more directed to the global expansion and increasing the
value of their national films. On the contrary, even though Russian companies also have
this direction, they are more concentrated on maximizing the revenues and have the
weak expansion strategy.
In the end, this thesis evaluated the differences and similarities of both markets and
gave the recommendations for the future improvements.
Executive Summary
The purpose of this thesis paper was to analyze, evaluate, to compare, and to give the
recommendations for the films companies, and markets in general of France and
Russian Federation regarding how they operate, their marketing and communication
strategies, and their financial sides.
For the analysis, I chose two major French companies and two Russian ones. My
criteria for choosing the companies was to have one old company from each country
and respectively two new ones. From French side, I performed the analysis of their
oldest film company, which is also the first company of such type in the world; and the
Studiocanal, which is the new one. And from the Russian side I chose Mosfilm, which
has around a hundred years of history, and the new, yet successful company Central
Partnership.
Through my analysis, I had a chance to learn that there is a tendency that modern
enterprises are relatively more successful, than old ones. It is evident from their
financial statements. For instance, the revenues of Studiocanal in 2015 were equal to
€563 million (Vivendi 2015, 2016) , and the incomes of Gaumont for the same period
were €217 million (Gaumont 2015, 2016) . And correspondingly to the Russian side at
the same time – Mosfilm just €3.5 million("About cinema concern", 2016) , however
Central Partnership earned €87 million. ("Central Partnership", 2016)
However, it is relevant to state that the most successful companies in the countries of
observation are not independent. They are owned by the larger conglomerates, who own
several companies. Studiocanal is owned by Vivendi; and Central Partnership by
Gazprom Media Holding.
1
Moreover, this thesis paper evaluated the main differences in French and Russian film
markets, providing the recommendations for improvements on the base of the Ansoff
matrix, which was created separately for French and Russian markets. The main
direction of improvement for both markets includes the development of global
expansion, diversity of national films, and increase of the overall value of French and
Russian films in the world market.
2
Methodology
The methodology used to conduct this thesis was based on collecting and analyzing of
the secondary data, based on the various reports of the observed companies and other
valuable and trustworthy resources. The methodology relies on the collecting and
analyzing the data from the annual reports of the companies. Moreover, the two
frameworks were used in this paper – the SWOT analysis, which gave me the structured
evaluation of the strong and weak sides of the companies, as well as the Ansoff matrix,
that was used to analyze the French and Russian markets, and give the
recommendations.
Literature review
Regarding the literature that was used in this thesis, I can state the two main sources that
I used. These sources are the annual reports of the observed companies and reports
presented by the Eurpean Audiovisual Observatory, Russian research center of
Nevafilm, the French National Center of Cinematography and the moving image.
Moreover, the additional information was used from the official websites of the
companies, since they contained the relevant material regarding their structure, history,
and operations.
3
French film market
Overview and trends
France is known as the country that gave birth to the cinema. It happened at the end of
the 19th century when brothers Auguste and Louis Lumière produced their first short,
silent, and black and white film in 1895. (Pulver, 2011) Many things have changed
since that time, but one thing stays the same – French cinema is one of the strongest and
respected in the world. Moreover, it is clear that France has significantly influenced by
the world cinema industry over more than a hundred years of history. Despite the
significant influence and quality of the produced films, French cinema market is not the
leader on the overall cinema market. Such countries like Untied States of America,
China, India, and Japan have the leading positions regarding market share and the
revenues.
However, French cinema is the leader of the European market. French cinema
companies produce about 200 full motion films per year. According to the statistics that
was presented by the European Audiovisual Observatory, the market share of French
films on the European market in 2015 equals 35,2% to, and the overall market share of
European films in the world is 26.1%. ("Cannes 2016 - Cinema market trends - Press
Room - European Audiovisual Observatory”, 2016).
4
(Source: European Audiovisual Observatory)
Such volume of market share clearly represents that France is one of the most
significant countries in the world cinema market. Moreover, the trends of the past
several years show that that the French internal film market is in a relatively stable
increase regarding the national market share.
A lot of successful projects were produced in France during the last few years, helping
to increase the national market share from 33.8% up to the significant 44%. ("Strong
performance in France and trend reversal in Spain slightly boost cinema attendance Industry Report: Market trends," 2015) This is the largest market share of the national
cinema in the country among all European countries. Therefore, it is possible to affirm
that France is the European leader in film production.
Even though France film sector has the overall success, film producers and distributors
state that there are challenges in making the audience attend cinema theaters. This is
5
related to the modern tendency among people to watch films from home – through the
television and paid video channels.
Moreover, it will be important to state that according to the report of CNC (The
National Centre for Cinema and the Moving Image) the main genres of the new
produced films shown in French cinema theaters during 2015 are: dramas (229),
documentaries (104), comedies (72), and animation films (34). (Centre national du
cinéma et de l’image animée, 2016)
6
Financial Background
It is not possible to say confidently that the past ten years were completely successful
for the French cinema. Yes, the market share of the French cinema has increased on the
national market. However, as the statistics show, the overall share of French films on
the European market has slightly decreased – from 44% to 34%. However,
correspondingly to the internal national market share, the European Audiovisual
Observatory stated that, in 2015, the share of national films on the French market has
increased from 33.8% up to 44%. Such increase made France the country with one of
the biggest national market shares in the European Union. ("Strong performance in
France and trend reversal in Spain slightly boost cinema attendance - Industry Report:
Market trends," 2016) This fact could be the bad sigh for France, to lose 10% of the
market share in Europe, and the positive sign and the same time regarding the national
market. Moreover, the statistics presented by CNC shows that the year 2015 was the
successful one regarding the international sales, as the revenues from the distribution of
French films to the foreign markets increases during the last years. In 2015 the French
sales companies had a chance to earn €216 mm from the selling of the rights for
showing the French films on the foreign markets. This number is by 11.3% higher than
in 2014. Moreover, it is the highest revenue from international sales since 2003. This
clearly shows that the French cinema nowadays has the increase of international
success.
Last ten years was the period when French cinema was strengthening its positions on
the world market. The relative revenues from the distribution of films to foreign
7
countries have increased by 30% for that period. Such increase is related to the
strategically proper work of sales companies, who distribute films in other countries,
opening to ways of international expansion to the new markets.
8
Historical Overview
Gaumont is the first, oldest and one of the most respectful film production and
distribution companies in Europe. It was established in 1895 as a Société Léon
Gaumont et Cie by Léon Gaumont it has more than a hundred years of history.
Although, in the beginning, Léon Gaumont was specializing in production and selling
camera equipment and film. (Variety, 2014)
In just a fifteen years Gaumont gets a chance to open its cinema theater in Paris on its
Montmartre. This cinema theater had the capacity of 5000 seats. That was unbelievable
and innovative and made it the largest in the world.
It will be relevant to notice that Gaumont was an innovative company in various
spheres. They not only were the first film production company or opened the largest
cinema theater but also they are known as the company which cooperated with the first
woman director - Alice Guy-Blaché. Madame Guy was the innovator in cinema and
narrative story films being a head of the production for Gaumont, and was responsible
directing almost all of the films of this company since 1900 until 1905. (Britannica,
2016).
9
Moving to the future, we can say that one of the moments of great success for Gaumont
was the selling of more than 8 million tickets for the film by Charlie Chaplin that was
called “The Great Dictator.” ("The Great Dictator (1940)", 2016)
Nowadays Gaumont is one of the largest and profitable film companies in Europe. The
Gaumont company in the produces films and performs their distribution. There are three
main divisions of a company – production of films and television films, and also a
distribution of films. Gaumont has in tis ownership more than 300 cinemas, much of
them are multiples, and most of them are based in France, however the company has
cinema theaters in Belgium, Switzerland, and the United States. ("Catalogue –
Gaumont, 120 years of cinema – Memory International Film Heritage Festival", 2016)
10
Corporate operation and strategy analysis
The main aim of the Gaumont company is to produce and to distribute films and
television series. There are four divisions of the enterprise which are related to the film
production, film operation, television production, and animation. Although the core
activity of the company related to films production and distribution, the television
department is becoming more significant to the company operation. Currently, Gaumont
is one of the largest film market-related businesses in France and Europe in general.
Although, Gaumont has a partnership with another French film production and
distribution company – Pathé, since 2000. Even though the Gaumont and Pathé produce
many films together as the Gaumont-Pathé, and have the joint video library, each of
these companies still produces and distributes film independently. ("Gaumont Pathé
Archives : Notre histoire", 2016)
For the last years, the Gaumont company faces strengthening of the position on the
market. And as the quarterly report of the year 2016 shows, the middle year revenues
of the company increased in comparison to the same period in 2015. The following
graph from the quarterly report represents that the company is in the period of growth in
their revenues, therefore success. Also, this chart shows that the primary source of
income of the company is its` original activity – film production and distribution.
However, the company is also concentrated on developing the television division that
was launched in 2011, in the United States of America in Los Angeles.
11
Revenue by business activity,
in thousands of Euros
80000
75496
60000
65305
60618
40000
38728
20000
2527 2500
7664 19390
other revenues
television production
and distribution
0
30.06.2016
film prodtion and
distribution
total reveneue
30.06.2015
(Gaumont, 2016)
The SWOT analysis is the useful framework that will help to evaluate the internal
strength and weaknesses of Gaumont, as well as its external opportunities and threats.
The evaluation of the weaknesses and threats is critically important since they show the
bottlenecks in the company’s operation and to make the offers for improvement both
internally and externally. However, the evaluation of strength and opportunities of the
company helps to understand the overall advantage that it has.
The following picture includes the SWOT analysis of Gaumont.
12
Concerning to the internal issues of Gaumont, the company has several strong sides,
which increase its competitive advantage. This is a multinational company with a big
number of subsidiaries. The complete list of branches can be found in the annual report
in the year 2011.
13
(Gaumont Annual Report 2011)
Such a broad range of subsidiaries is an advantage for a Gaumont company that lets it
operate in various spheres of media production. And the largest parts of the company
are production and distribution of motion picture, and television production. In the
expanding media market, it is important not only to produce the original films but also
to be able to conduct the distribution of the content and to have the effective
collaboration with other production companies. And as the leading global film markets
are presented by two countries – United States of America and China ("Leading film
markets worldwide by gross box office revenue 2015 | Statistic", 2016), Gaumont has
14
an enormous competitive advantage, being one of the largest film distributors in
Europe. The ability to do this requires the stable and proper company structure and high
skilled workforce. The Gaumont has a well-developed structure consisting of
subsidiaries that are responsible for operating on the certain side of the operation. And
as show the results of the past years, the Gaumont has the stable growth rate. Investing
in film production and television the company supports the development and
innovations. To make the investments more effective and efficient company is trying to
support the production of full motion original films, creating the proper production
strategies for new projects. Moreover, the Gaumont company is highly oriented in
developing their cinema theaters chain. Relevant to state that the Gaumont was the first
production and distribution company to present the digital cinema format. Such attitude
clearly represents the high valuing of innovation and development of the enterprise.
Although the Gaumont is a large company, it has 172 full-time employees in both
American and French subsidiaries; others are part-time or contract workers hired for
certain projects. (Gaumont, 2012)
However, the Gaumont company has several so-called “bottlenecks,” both internal and
external ones. First, there are challenges in the television production. Although the
management of Gaumont decided to invest and to develop their own television
production, and even some of their project were relatively prosperous, the overall
success of this part of the company is controversial. The reason for that is that the
Gaumont is the film production and distribution company in the first instance. The
company does not have enough background and specialization for this market segment.
The challenge of this is that the French market already has the such a television leader
like Canal+, which is owned by Vivendi and is the market leader in paid television in
France. (Noam, 2015) Even though the headquarter of Gaumont Television is in the
15
United States of America, this country also has its paid television leaders, for instance,
Netflix, which is a multinational company and one of the global leaders of television
side by side with Canal+.
16
Communication channels and target audience
The important part of the successful operation of the company is the strong
communication with customers. As the Gaumont is the global company, with the main
operation in France, it needs to have the proper strategy of communication with the
audience. However, in the beginning, it is relevant to know the target audience, which is
broad and covers the various segments of society. As the target audience of the
Gaumont company, we can observe all people from children to the middle-aged and
older generations. The start point of identifying the target audience is the particular
project that the company is going to launch. This is because each film that is produced
has its topic and problematic. Therefore the target audience will differ from film to film.
However, Ceclie Gaget, the head of the international department of Gaumont company,
states that “We want to try and come up with great stories; we won’t be doing lazy
French comedies or French drama that everyone’s bored with. We gave up doing these
kinds of movies two or three years ago. We’re already working on our 2015 lineup right
now.” (Keslassy & Hopewell, 2014)
From this, it is clear that the Gaumont is trying to reach the wide audience by making
films that will interest different people. For the communication with the audience,
Gaumont is using social networks which is logical since this is one of the most effective
ways to communicate with the audience and to provide them with information about
new projects and changes. In a sum, Gaumont has accounts in four social networks –
Facebook, Twitter, YouTube, and Instagram.
Despite the Gaumont is a multinational company it has a relatively small number of
subscribers. The biggest number of subscribers Gaumont has on Twitter – 62,988, and
the least in Instagram – 7,962. (The number of subscribers for the 18th of November,
17
2016). The following pie chart shows that the most active pages of Gaumont in social
networks are Facebook and Twitter. It can be correlated to the overall popularity of
these networks. Moreover, the Facebook gives an opportunity to the company to give
more full information about the upcoming projects and releases. And Twitter is a strong
tool to provide the audience with the newest information instantly.
The small number of subscribers might be explained by the overall position of the
company. Gaumont tries to target various people, and the social networks are not the
primary tool to reach the audience. Although, the company produces a broad range of
films, the big part of the audience consists of people above 25 years old, and often they
are not so active in social networks.
In order to understand the ways how the company reaches the audience, it will be
important to state the basic value chain of the film industry. The detailed value chain
was presented by the companies Ffilm Cymru Wales and Creative Skillset in their
report in 2014. The value chain of production of films includes seven steps. The
following picture represents the basic steps that are used in the film production. (Ffilm
Cymru Wales and Creative Skillset, 2014)
18
Value chain for production of films
The important parts that influence the profitability and success of the film are the last
two ones – distribution and exploitation. Gaumont uses several distribution channels to
reach the audience. First, they distribute films to the cinema theaters. Second, they
apply the distribution to the television, through the Internet, and paid channels and
services. However, the company is highly oriented on distribution through the cinema
theaters. As it was written in the overview of the French market, the overall attendance
of cinema theaters in Europe is lower, than in, for example, the United States of
America. Therefore, it makes it challenging to the company to reach the audience in
terms of making them attend cinema theaters, as with the development of television
people prefer to watch films at home.
The basic methods of marketing the Gaumont uses can be evaluated the following:
• Screening of the trailers in cinema theaters
This part includes the trailers of new films in the cinema theaters prior the films that
will be shown. Screening of the trailers is a strong tool that informs all people who
attend the cinema theaters about the upcoming releases of films.
• Television and radio advertising
As the television relevance in the modern world is high, and statistically, people tend to
watch television more often than they attend cinema theaters, showing the advertising
about the new films is logical and can influence peoples` choice and to influence on
19
their attendance of cinema theaters. However, the radio advertising is no longer the key
way people get to know about the new films.
• Print advertising including film posters
The print advertising and posters are the traditional tool to promote the new project and
to inform the audience about it. The point is that such advertising must be catchy and
attract the attention to be able to influence the audience. And the Gaumont uses it
successfully.
• Social networks
Social networks are probably the strongest marketing tool to communicate with the
audience and to provide them with the information about the current and upcoming
project and changes. It gives the advantage of two side communication between the
company and the audience.
• Newspapers and magazines
These are also the classic tools to inform the audience. Newspapers and magazines give
the opportunity to provide with more information that might attract the audience.
20
Finances
As it was discussed in the previous part, Gaumont is the company with a long history
which contained moments of brilliant success and tragic failures. However, it will be
important to analyze the current financial situation of the enterprise. The overview of
key specifics of the Gaumont company will let us to evaluate and completely
understand the way of the company and to give recommendations for improvement.
At first, there is the analysis of the annual report of Gaumont for the year 2015. This
report contains all the financial statements about operations of the company and the
management information about the activities, achievements, and problems that were
faced during the reporting year.
The annual report for the year 2015 stated that Gaumont company had released 12
featured films for the observed financial year. (Gaumont, 2016) And according to the
same annual report, the sales related to the distribution of films in cinemas in France
equals to k € 15,614 on 31 December 2015 against € 25,662 k as at December 31, 2014.
(Gaumont, 2016) This data shows that the attendance of cinemas in 2015 decreased in
comparison to the year 2014. That means that Gaumont cinemas make nearly 6 million
entries per month. However, in order to know the financial aspects of Gaumont let us
take a look at the table with key figures of the company for the years 2015 and 2014.
The following table that was translated from French represents the key figures of
Gaumont for the years 2014 and 2015.
21
Key Figures
2015
In thousands In % of
of euros
sales
2014
In thousands In % of
of euros
sales
Variation
Turnover
217 004
100%
190 074
100%
14%
Operating income from
production, film, and
television distribution
activities
36 007
17%
31 679
17%
14%
Operating income from
operations rooms
23 796
11%
22 643
12%
5%
21 358
10%
21 219
11%
1%
17 905
8%
18 338
10%
-2%
Investments in film
production activity
47 938
22%
37 583
20%
28%
Investment in television
production activity
102 679
47%
88 044
46%
17%
Operating income after
sharing the profit of
associates
Consolidated net income
(Gaumont Annual Report 2015)
As we can see from the table the turnover of the company increased by the year 2015
from k € 190 074 up to 217 004. That means that the Gaumont began to use their
assets more efficiently and could increase the sales revenues for the year 2015. It is
positive news for the company because as the yearly revenue increases the total strength
of the company on the market increases making it more competitive. As we can see
from this table, the operating income of the company has grown in comparison to the
year 2014. Moreover, it is obvious that Gaumont decided to invest more in film
production and television production activities. And the amount invested in television
production activity is € 102 679 which is a bit more than twice higher concerning the
film production. Therefore, it is possible to conclude that the company came to a
decision to orient on the television production.
22
The television production sector of Gaumont company is quite a huge. With the three
offices in Paris, Los Angeles and London it covers a wide spectators’ auditoria mainly
concentration on serials television shows. The main target of the studio is to produce the
drama and comedy television series for the American and international markets. One of
the most successful projects of Gaumont Television is the serial “Narcos,” for which the
company took the award for the “Breakout International Drama” in Content Innovation
Awards in October 2016. ("Content Innovation Awards 2016 » Congratulations to the
2016 winners!", 2016).
As the table contains only the figures for the two years, it will be relevant to analyze the
revenues of the company for the last ten years from 2006 to 2015 presented by the web
site Morning Star. ("Growth, Profitability, and Financial Ratios for Gaumont (GAM)
from Morningstar.com," 2016) As we can see from the chart the Gaumont company is
now facing the stable increase in the revenues, which started in 2013. However, the
table also shows the increase in revenues in the year 2011. The least successful year for
the Gaumont company was 2007 when the revenues gained the lowest point of the
decade – 73 million euros. It was a dramatic decline after the successful year 2006 when
the revenues reached 131 million euros.
The profitability of the company has increased, and it can be related to the changes in
the market situation and the appearing of big and perspective projects. One of these
successful projects was the original film “Intouchables” which was produces by
Gaumont in 2011. ("The Intouchables (2011)", 2016) The Chief Executive Officer
Sidonie Dumas of the company stated in the annual report for the year 2011 that the
film “Intouchables” is a huge success of Gaumont company, which reached the mark of
more than 19 million tickets sold. This result is much higher than the previous success
of the company with the film “The Visitors,” that was released in 1993 and had 14
23
million of tickets sold in total. ("Les visiteurs (1993)", 2016) Moreover, according to
Mr. Dumas, the film “Intouchables” is the third most successful French film in box
office perspective of all the times. (Gaumont, 2012)
24
Historical Overview
Studiocanal which is the subsidiary of the large Canal+ group was founded in 1986 in
France as the film production and distribution company. During a not so long history,
the company had a chance to become one of the leading film market-related companies
in Europe. At the stage of creating the company, the idea was to focus on the French
and European films in general. However, the Le Studio Canal+ concluded a partnership
with American Carolco company in 1988. This partnership has opened the path to the
American film market and lets the company expand. ("Historical - STUDIOCANAL",
2016)
By the year 1996 Le Studio Canal had the first largest film library in France and the
second largest in Europe. Nowadays the company`s library is the third largest in the
world conceding just to Warner Brothers and Metro-Goldwyn-Mayer. The total number
of the titles in this library is more than 5000 ones from 60 countries. ("Library STUDIOCANAL", 2016)
The Studiocanal operates in several countries besides France. Those countries are
Germany, the United Kingdom, New Zealand, and Australia.
Nowadays Studiocanal is one of the leading producers and distributors of contemporary
films in Europe, and also the owner of the 3rd biggest video library in the world which
makes it one of the leaders of visual heritage. ("ABOUT US - STUDIOCANAL", 2016)
25
Corporate analysis
The Canal+ Group was founded in 1983 in France. However, the Studiocanal was
established in 1999 as the part of the Canal+ group for production and distribution of
films. The entire Canal+ group is owned and controlled by Vivendi, a French
multinational multimedia company.
The Studiocanal is not only a French cinema production and distribution company. It is
one of the largest multinational groups which operates in five countries. The company
had divisions in France, Germany, United Kingdom, New Zealand, and Australia. The
company's primary values are the same in each of these countries. All the values of the
company are clearly stated on the website of Studio Canal. The five fundamental values
which are indicated there give us a clear understanding of the backbone of this
company. These values include diversity, passion, agility, innovation, and quality.
("VALUES - STUDIOCANAL", 2016) These values mean that the company is very
dynamic and open-minded, ready for changes and brand new ideas. Such attitude is
critical for the company in the film industry as the trends in this market are changing
fast and the ability to fit the new waves can keep the company’s competitive advantage.
And as the Studiocanal is focused on the new trends and shifts in the market,
implementing new ideas and highly valuing the quality of the content, it makes the
company highly respected and strong among all film production companies in the
world. Also, it is the reason for the growth of success of Studiocanal since the moment
of its establishing One relevant aspect that can be stated is also a part of the company’s
success is that the Studiocanal controls all the stages of film production. However, the
company is not directly involved in making films, providing all new projects with the
budget, creating sales, marketing and distribution strategies. (Scoffier, 2014) However,
26
the company itself does not have their own distribution unit, making the contracts and
relying on the local distribution companies to distribute their titles.
To the point, this studio produces approximately up to 50 films each year in the three
main countries of operation – France, United Kingdom and Germany. However, this
company is also active in New Zealand and Australia. According to the Studiocanal
CEO Didier Lupfer, those countries represent a large market of about 240 million
people who would potentially attend the cinema for a film produces by the Studiocanal.
(Toumarkine, 2016)
Going back to the total control over all of the stages of the film production, it is evident
that such attitude to the production is robust and gives a competitive advantage to the
company. The reason for this is that when a company has the complete control over the
product, it helps to keep the production in the frames of corporate values and to make it
in the most proper way. Moreover, it means that the company also controls the
management, marketing, advertising and public relations campaigns related to the
production of the particular film. Although it might be observed as a strong strategy, it
also has the weak sides. The threats of such an autonomous approach might be
concentrated on the lack of fresh ideas and difficulties in analyzing the external
situation; that can influence on a production and distribution of the film. Since that, it is
important to analyze the company using the SWOT analysis framework. This study will
show the internal strengths and weaknesses, as well as external opportunities and threats
that Studiocanal might have.
27
One of the strongest sides of the Studiocanal is that this company is multinational. The
company opened the new division in the United Kingdom in 2006, entering the British
market. After that, Studiocanal continued to open new branches in other countries –
New Zealand, Australia, and Germany. The geographic expansion is the part of their
marketing strategy. The purpose of such strategy is to get the privileged access to the
medium-sized dynamic markets. The former (until 2015) CEO and chairman of
Studiocanal Oliver Courson explained the position that the company has on the world
market in his interview for the Stratégies Journal – “We have our own distribution
policy in a very broad market with a direct distribution mix in France, Germany and the
28
United Kingdom, where we exploit the rights ourselves in cinemas, video, TV and new
media, and Sales to film distributors in the rest of the world” (Rochegonde, 2012)
Important to say is that the Studiocanal is concentrated on the development of the
strategy that is related to the increasing of international value and potential of the
European films. For this purpose they invest in development and production of
European works, that will be discussed in the following part.
29
Communication channels and target audience
Studiocanal as the part of Canal+ group occupies the leading positions on the French
film market. As the management of the studio state, they produce around 20 original
projects each year. Moreover, if we look at the activities of Studiocanal, it will be clear
that the company also works in the direction of television. It releases up to 100 various
video content, as such: humor shows, short programs, and original content by the
Canal+. ("FRANCE ACTIVITIES - STUDIOCANAL", 2016)
Such a broad range of activities requires a lot of effort from the company to become
successful and rentable. Therefore, the Studiocanal needs to have the proper marketing
promotional strategy and communication with the audience.
It is not possible to indicate the overall target audience for all projects that the
Studiocanal produces, due to the wide range of genres and types of the content. The
target audience is evaluated for each project individually. However, the Studiocanal
produces films and animations for all age categories. For instance, their cartoon “Ernest
et Célestine,” which was produced in cooperation with other film companies has the
rating PG (Parental guidance recommended), and the overall target audience includes
all ages. On the contrary, the other film called “Senna” (documentary about the Formula
1 pilot Airton Senna), has the rating PG-13, and the overall target audience for this film
are people at the ages of 16 or above.
Even though the Studiocanal has the broad audience, they need to contact with them.
Besides the classic and ordinary methods of communication with the audience and
informing about new projects – print advertising, online trailers, trailers in cinema
theaters, television advertising, press conferences, and other standard tools, the
company uses one of the most popular methods of communication – social networks.
30
Studiocanal has the profiles in 4 most popular social networks – Twitter (146911
followers), Facebook (605314 likes), YouTube (19344 subscribers), and Instagram
(3030 followers).
Studiocanal Social Networks
YouTube
3%
Twitter
19%
Instagram
0%
Facebook
78%
The ring chart shows that the largest number of subscribers the Studiocanal has on
Facebook, and the least in Instagram. The Facebook is the great tool for Studiocanal to
communicate with their audience, as they can post the photo, video, and text content
about their projects online, making it available for everyone who reaches their page.
Moreover, Facebook gives an opportunity of two ways communication, because the
users can leave their comments, becoming a valuable source of information relevant to
the company – opinions, wants, needs, attitudes and so on.
However, it is important to understand that the social networks are counted on the
teenage to middle aged audience, therefore other classic tools that are more habitual for
the older generation, also need to be used by Studiocanal in order to reach all the target
audience that they need.
31
Finances
Studiocanal is the subsidiary of the Canal+ group owned by the multinational
conglomerate Vivendi. According to the technical report presented by the Joint
Research Centre of the European Commission, the Vivendi group ranks the sixth
position among ten leading media groups of the world. The research was comparing
media groups regarding their audiovisual turnover in 2009. The turnover of Vivendi
group for that year was 17.133. (Vinck & Lindmark, 2012)
rank
1
2
3
4
5
6
7
8
9
10
company
Sony
Walt Disney
country
Japan
USA
film subsidiary
Sony Pictures
Walt Disney
Studios
Time Warner
USA
Warner Bros.
News Corp.
USA
20th Century Fox
Direct TV group
USA
Vivendi
France
Canal+ Group
(StudioCanal +
20% stake in
NBC)
Nintendo
Japan
NBC Universal
USA
Universal Studios
Viacom
USA
Paramount
Pictures
CBS corp.
USA
(Vinck & Lindmark, 2012)
turnover
30.254
25.482
22.769
22.699
21.565
17.133
15.474
15.436
13.619
10.684
Moreover, Studiocanal as the part of Canal+ is the leading film and audiovisual
production and distributor in the European Union since the last years till the current
time. The present financial situation of Studiocanal is provided in the annual report of
the Vivendi. The year 2015 was significantly successful in the company increasing its
revenues for 5.7% by 31 December of 2015 in comparison to the ratios of 2014 for the
same period. (Vivendi. Annual Report 2015, 2016) This increase relates to the
production of several successful films that were produced in 2015. The most attractive
32
to the audience was the original film “Paddington.” This film had the success both in
France and in other countries where it was distributed. By March 2015 this film got the
worldwide box office of $236 million. (Vivendi. Annual Report 2015, 2016). Such a
significant amount made “Paddington” the most financially successful film of al ones
which were produced by Studiocanal. Such a successful project helped the company to
increase its revenues significantly and to strengthen the leading positions on the
European market.
In addition to the successful projects, worldwide success, and expansion strategy,
Studiocanal is also focused on the development of the contemporary French films.
Studiocanal invested €134 million development of European works. (Vivendi. Annual
Report 2015, 2016). The management of Studiocanal considers that the relevance,
quality, and share of European works should be increased. Therefore, it is important to
support the new attractive and creative projects. Luckily, the company being the
European leader has enough assets for investments, that gives them an opportunity to
support those new projects, by this increasing the quality and value of the French
modern films.
33
Russian Film Market
Overview and Trends
The modern Russian cinema began its formation in 1989. This date was related to the
changes in the market conditions and the Russian market reform. Moreover, the Soviet
Union stopped its existence in 1991, that also had the influence on the cinema market.
The beginning of the 90s were the hard times for the Russian cinema, making the
largest film concerns fall into the crisis and to decrease their production to the
minimum. However, with the Russian accession to the ranks of the Berne Convention
for the Protection of Literary and Artistic Works in 1995 here comes the tendency to the
future rise. In addition to this, the Russian government enacted the Law on State
Support of Cinematography in 1996, which determined the main directions for the
activities of the government with the purpose of saving and development of
cinematography and established the order of governmental support of cinematography.
("Federal Law on State Support of Cinematography," 1996) From this time the
development of the Russian cinema has begun.
Nowadays, after the increase the Russian cinema faces the regression and the list of
problems that are connected to the unstable political and economic situation. The year
2016 was announced as the year of the Russian cinema. Based on the thematic of the
previous years, when they were dedicated to the main problems of the social life –
family, youth, and literature, it can be assumed that the government accepted the fact of
the crisis of native cinema. How did it happen that the Russian cinema faced the crisis
again? It is related to the tension between Russian Federation and other countries. The
complicated economic situation in the country consequently effected to the amount of
investments and the overall attitude to the cinema. The base of the crisis and
34
concentrating the attention on the native cinema is seen in the decree of the Russian
president Vladimir Putin about the strategy of national security. On the first view, this
decree is not connected with the cinema. However, this document includes the part
which has the thesis of the necessity of formation of state order for the creation of
cinematographic production as the guarantee of the security. (President of Russian
Federation, 2015).
Films were often used as the source that united people, increased the national spirit and
as generally as the propaganda. Although such tendency was evident in the years of
Soviet Union, nowadays such tendency appears again. The sphere of cinema has the
high ideological potential. However, the optimistic description of this issue is that the
national cinema can influence on peoples` minds, provoke them to be loyal and increase
the spirit of the national unity. According to the research of the Guardian, Russian
society demands the pure patriotic and anti-extremist films, that will contain the topics
of traditional national values, history, and national heroes. (Child, 2016)
Despite the decree that was created with the purpose of support of the domestic
production of films, the Russian cinema is in the crisis. The amount of money invested
in the production of films exceeds the revenues of box offices. The share of the national
cinema in the Russian cinema market decreases.
35
Financial Background of Russian Cinema
The financial aspects of Russian cinema are complicated. The financing and support of
the film industry in Russian Federation are provided by the Ministry of Culture, its`
department of cinema. Nevertheless, the financial support is provided to the films that
correspond to the strategic goals of the country. That represents that the government is
interested in producing the films that will be useful for the national potential and
patriotism. On the contrary to the Ministry of Culture, the another organization provides
the rest of the Russian film industry with financial and economic support. It is the
Federal Fund for Social and Economic support of Domestic Cinema. The activities of
this fund are concentrated on providing financial support for the companies that
produce, distribute, and promote films, as well as the support of masters of cinema. One
more important goal of the fund is to attract the Russian and Foreign investors for
investing in production and distribution of national films.
Even though there are such organizations which provide the cinema companies with
support, the Russian cinema market is now in the condition of regression. The following
table, created on the base of the data from the authoritative Russian website of the
cinema data, called Kinodata shows the box offices of Russian cinema for the last three
years. ("Preliminary results of 2015: The share of the Russian cinema in distribution is
decreasing the second year in a row.", 2015)
Year
Films
Produced
Box Office
2013
2014
2015
59
84
126
258,000,000 219,000,000 116,000,000
(Source Nevafilm Research)
36
The table clearly shows that despite there is an increase in the films produced per year,
there is a steady decrease in the revenues. By the year 2015, the production and
distribution of Russian films became unprofitable. To make these numbers more clear
and demonstrative, it is necessary to show the overall share of Russian cinema from the
whole cinema market in Russia, which also includes the distribution of foreign films.
The data is also provided by the Kinodata website.
(Source Nevafilm Research)
This chart represents that the overall market share of the national cinema is significantly
smaller in comparison to the foreign films that are distributed in Russia. Those numbers
give the clear vision of the crisis in Russian cinema. It is not a healthy practice when the
market share of foreign films is that much bigger than a share of the domestic ones. This
fact can be related to the vast number of successful foreign films and the shortage of the
high competitive films from the Russian side. However, there were several successful
films produced by the Russian studios in 2015. First of all, it is the animation film
called “Three heroes: knight's move” produced by the Melnitsa Animation Studio,
which gained $17,12 million with the budget of $3.5 million. It also became the leader
regarding the number of sold tickets. The second successful film was the romantic
37
comedy by Central Partnership called “The eight new dates.” This film gained $7,46
million with the budget that was equal to $2,3 million. And the last leader of the box
office of Russian films is “Soulless” – budget is $4 million, and box office is $8,04
million. ("50 most successful films in Russian Box Office", 2016)
38
Mosfilm
Historical Overview of Mosfilm
It is commonly accepted to take as the date of foundation of the Mosfilm the 30th of
January, 1924. The first full motion film by Mosfilm was called “On the wings up” by
Boris Mikhin was released that became the start point for the concern. ("History of
Mosfilm", 2016)
The best directors of the whole country were working on the Mosfilm during its` long
history. Sergey Eisenstein, Mikhail Romm, Eldar Ryasanov, Leonid Gaidai, Andrej
Tarkovsky and other famous directors created their films on this film studio. Many
films that were produced there became the classics of the world cinema. ("History of
Mosfilm", 2016) Moreover, Mosfilm owns its film library which includes more than
2500 films produced there and a large number of books and the wide range of cinema
inventory.
The most productive decade for Mosfilm was the 60s when the Stalin regime was gone,
and the country was coming back to normal life after the World War 2. During these
years, the studio was releasing dozens of films per year. However, after the period of a
great success, the Mosfilm had a time when it was on the border of bankruptcy in the
90s. The change of the political regime, fall of Soviet Union negatively affected on the
39
company. The production of films was stopped for that period. It was a hard time for the
country, and therefore for the studio based on the fact, that the Mosfilm is the state
enterprise.
However, the recession that Mosfilm faced during the 90s is now over. During the last
ten years, the company has increased its productivity. ("About cinema concern", 2016)
And now it one of the leading film production companies in Russia, and of the world.
Modern equipment, skilled employees, the variety of services and governmental
financial support became the strong benefits of the Mosfilm Cinema Concern making it
the largest cinema companies in Russian Federation.
40
Corporate Analysis
Mosfilm Cinema Concern is one of the largest film production companies in the world.
It was created as the state cinema company by the Council of Ministers in USSR.
(Nevafilm, 2012) And nowadays it is still a state organization which produces,
distributes films and offers various services. Moreover, Mosfilm provides services for
the production of approximately more than 200 films per year (Nevafilm,2012), that
makes it a large company with a high production power. Since Mosfilm is a state
organization, it is supported by the Russian government. Therefore, most of the
investments that the company receives come from the state actives of the ministry of
Culture that are directed to the development and support of national culture and arts.
The whole Mosfilm concern is divided into 19 divisions, each of them is responsible for
the particular type of work. Here are the departments responsible for the foreign
relations and distribution, television rights and online projects, camera and lighting, and
other activities. The full list of the departments and their responsibilities are listed on
the official website of the concern. ("Subdivisions & Studios", 2016)
One of the most important divisions of Mosfilm is foreign relations and distribution
department. This department is responsible for creating the relation with foreign
companies and distribution of films produced in other countries, organizing festivals
and all the copyright issues that appear. ("The service of international contacts and
distribution", 2016) The main countries of distribution of films produced on Mosfilm
are the Russia itself and the CIS countries (The Commonwealth of Independent States).
The distribution to these countries helps the company to broaden its audience and to
increase the popularity of the Russian cinema.
41
However, the production and distribution of films are not the only spheres of Mosfilm
activity. Being the oldest film company in Russia, it has the wide range of activities.
The concern provides other film companies with technical assistance and casting of
actors.
Moreover, the concern has the competitive advantage by educating students and thereby
creating the new workforce for the industry. This activity is the point that differs the
Mosfilm concern from other film companies. Moreover, it gives an understanding of the
general strategy of this concern.
The core activity of Mosfilm is based on the providing other film companies with
various services – from film sets up to audio and video studios.
The SWOT analysis of the Mosfilm concern will clearly evaluate the main strong and
weak sides of the company both internally and externally. Since Mosfilm is oldest and
one of the largest film companies in Russian Federation, the analysis of internal and
external issues is the key element of the overall understanding of this concern, its
failures, and successes.
42
Since Mosfilm is the state enterprise, the main directions for company activities are
declared by the government. However, the fact that the concern is supported by the
government gives the competitive advantage, that helps to the enterprise to stay active
and save their position as one of the leading film companies in Russian Federation.
One of the key benefits of Mosfilm is that even though the concern almost does not
produce their own feature films, they support other companies in their production by
being the full cycle company. The point that differs Mosfilm from other film companies
is that the company operates autonomously having the whole range of services required
for production of films. Moreover, the concern functions as the distributor of films,
television and video content.
43
Communication channels and target audience
Since the Mosfilm is an old, vast and well-known cinema production and distribution
company, this fact makes a benefit to the company and simplifies in its communication
process with the target audience. A strong brand image makes it respected and
attractive to the audience of all ages. The company produces various genres of films that
can be appealing to different audiences. The target audience is determined for each
certain film that is going to be produced.
The cinema concern uses various methods for communication with their audience.
Apart with the normal in the modern age social networks, Mosfilm provides people with
the excursions to their concern. It might be observed as the reliable tool that increases
the awareness about the Mosfilm, and about the history of cinema in general. Moreover,
the excursions can have the long run benefits as to the company itself as also to the
people who attend these excursions. People who attend these excursions might become
interested in working in the film industry, and in this case, Mosfilm has the list of
various courses created to train and educate the new generations specialist over the wide
range of spheres related to the film production process.
However, the ordinary methods of communication with the audience include the social
networks. In this case, it will be important to notice that despite the concern has
accounts on five different social networks, the most developed account is on the
YouTube. The Facebook page of Mosfilm includes the posts and news about the latest
updates related to the cinema concern, its film crew areas, and various events. The
Twitter page of the concern is similar to the Facebook one, as well as the page in
Vkontakte. Notwithstanding, the page in YouTube is the most developed and has the
biggest number of subscribers – 451,000.
44
YouTube is a strong tool of communication with the audience for Mosfilm that helps
them to interest people with their films. Such goal is achieved by Mosfilm because they
let the audience to see not just trailers or additional materials related to their films, but
the complete versions of films for free. This feature is made with the purpose of
increasing the awareness of people about the classic films and attaching them to the
Russian cinema increasing its popularity among younger generations. Many of the films
have subtitles both in Russian and in English languages. The subtitle in the English
language is an advantage of Mosfilm, which lets them target the international audience.
As for a such a huge concern like Mosfilm, it is important to have connections and to
attract the multinational audience to be able to broader the area of distribution.
45
Finances
The financial side of cinema concern Mosfilm is complicated and disputable. As it was
written above, the concern is owned by the government, and therefore the funding of
Mosfilm is provided by the audit chamber of Russian Federation. Relevant to say is that
the government of Russian Federation supports the production of films directed to the
increase of the cultural values and can improve the culture in the country. Nevertheless,
Mosfilm itself almost does not produce films, providing various cinema companies with
different services instead. These activities bring the revenues to the company, even
though not so high.
Unfortunately, the Mosfilm, as the state organization does not have their annual reports
in the open access that make it difficult to analyze the financial statements and the
overall situation of the company. However, some trends and numbers can be found in
the reports made by the analytical department of the Russian cinema company
Nevafilm, articles of authorized media and the report of the audit chamber of Russian
Federation.
The question whether Mosfilm is profitable or not is disputable. The head of the
concern Karen Shakhnazarov states in most of his interviews that the last ten years were
the time of the increase of success of Mosfilm, that the profitability has risen more than
in ten times. Moreover, he states, that the overall situation in the concern, meaning the
technical and organizational structure, got much better than in was by the end of 90s.
(Jokhova, 2012)
However, the report of the audit chamber includes the information that the investments
to the operations of Mosfilm exceed the actual outputs. The cinema concern takes part
in production of about 200 films each year, nevertheless the box offices of them are
46
small. That means that the rentability of them is negative. The following graph, created
on the base of report of the audit chamber clearly represents the situation of the past
years. According to the report of the audit chamber, the economic effectiveness of
films produced with the support of Mosfilm for the period from 2012 to 2014 was on
the low level. As we can see from the graph, the money invested to the production were
rapidly higher, that the revenues that were received from those films. In a total, the
overall revenue for all the films produced with the support of Mosfilm for the observed
period was equal to 61.4 million rubles (approximately €1.5 million), which is just
15.5% of the money spent on the production. ("Financial collapse of Mosfilm", 2015)
(Source Rueconomics)
Even though an amount of revenues was low for the observed period, the share of all
revenues that the Mosfilm concern got from providing other cinema companies with
services was the main part of the overall revenues of the concern. In total Mosfilm
provided with their services 530 films during 2012, 2013, 2014. The relation of the
revenues that were received from the services provided to these films to the overall
revenues of the concern is the following:
2012 – 93.7%, 2013 – 99%, 2014 – 99% This clearly shows that the services are the
main source of the revenues for Mosfilm. And the number of films produced by
47
Mosfilm itself is just five original films that were produced during the observed period.
("Financial collapse of Mosfilm", 2015)
(Source Rueconomics)
However, it is important to note that even though, the Mosfilm is invested by the state,
some of the activities that the concern takes part in are paid by the concern itself. For
instance, Mosfilm participated in 5 film festivals for the past year, which were assigned
by the plan of the year of film culture in Russian Federation. And Mosfilm has paid for
the participation in them from the assets that the concern had from its operational
activities.
Moreover, as it was stated in the chapter which described the Russian cinema market,
2016 is the year of cinema in Russian Federation. This fact has the negative influence
on the effectiveness of Mosfilm. The head of the concern Karen Shakhnazarov
convinced that the year of Russian cinema has the direct negative impact on the
company due to the point that films are shown in the cinema theaters for free.
Therefore, the company does not get any revenue from the distribution of their films.
("Shakhnazarov convinced the losses of Mosfilm because of the year of Russian
cinema.", 2016) All of these factors indicate the complicated and problematic financial
situation of Mosfilm.
48
History of Central Partnership
The film production and distribution company Central Partnership was founded in 1996.
However, the company was operating only as the television programs distributor till
2000. ("Central Partnership: History", 2016) Since that time the company began
gradually add the new directions of work, such ones like film distribution, video, and
DVD distribution as well as film production.
Nowadays, Central Partnership is the film distribution leader on the Russian market. It
was the undisputed leader on the market in 2010 and 2011. Moreover, it is relevant to
state that Central Partnership has signed the contract with Paramount Pictures in 2009 to
become the official film distributor of this company in Russia.
Apart this Central Partnership has the leading positions in the Russian film market
regarding the film production. The company has released a big number of successful
films, which became the leaders of the box office in Russia among the films produced
there. The most famous films by Central Partnership are “Wolfhound,”
“Shadowboxing,” “The Brest Fortress,” “Taras Bulba,” and many others. ("Central
Partnership [ru]", 2016)
By the year 2007 Central Partnership became one of the largest rights owners in Russia.
Such position was the reason why the company decided to create their media library.
49
Nowadays, in 2016 Central Partnership already owns the rights for more than 700 full
motion films and more than 3300 hours of serial production. The important note is that
Central Partnership highly values the genre differentiation, and the library of the
company includes not only the best films of national production but also films of the
biggest American and European studios. ("Central Partnership: History", 2016)
50
Company analysis
Central Partnership is one of the leading Russian film production and distribution
companies. Besides, those primary activities the company is also oriented on the
licensing of rights creation of the video library. Nowadays the company owns the rights
to more than 700 original films. ("Central Partnership", 2016)
It will be relevant to state the organizational structure of the company which consists of
several parts. Central Partnership includes three main divisions – the management
company, the film production studio “Central Partnership Production,” and the
distributor of cinema and television rights “Central Partnership Sales House.”
However, the Central Partnership is entirely owned by the Gazprom Media Holding
since 2012. Therefore, the principal directions of the improvements and the activity of
the company are managed by the holding. ("Ruben Dishdishian sold his share in Central
Partnership," 2014) Nevertheless, the company had several stages of development
before it was bought by the Gazprom Media.
Originally, after the foundation, the only direction of Central Partnerships` operation
was the distribution of films and television programs from the various small American,
European and Asian films and television serials. The year 2000 can be observed as the
beginning of the way to success for Central Partnership. After the crisis on the 90s, the
successful operation of the Russian film market was challenging not only in terms of the
economic instability but also because of the preferences of the audience. By the year
2002, the general manager of Central Partnership Ruben Dishdishian analyzed the
Russian film market and evaluated that the segment of national films is empty, and there
is the shortage of worthy content produced by the Russian film companies. It was the
key point that changed the direction of the Partnership. In 2002 the company decided to
51
become the producer of their own original films. Moreover, the management of the
company decided to conclude the contracts with television channels with the purpose of
distribution films. (Nepomniaschij, 2008)
In general, the whole marketing strategy of Central Partnership bases on the holding the
rights to various projects. The management of the company realized that because of the
unstable economic conditions it is strategically risky to build their own studio, purchase
inventory, and build pavilions. (Nepomniaschij, 2008) Therefore, Central Partnership
became in some way the investment company. The key elements of the strategy that
they use are:
Such strategy lets the company produce the new film with the help of the other film
studio, at the same time keeping all the rights to the final product.
Even though the Central Partnership has the strict and clear strategy of the production of
their films, it is relevant to evaluate the strong and weak sides of the company, to get the
better understanding of how it works. For this evaluation, it is necessary to conduct the
SWOT analysis.
52
Besides the production of original films, the Central Partnership is the largest film
distributor in Russia. Moreover, it has the exclusive agreements with Paramount
Pictures (since 2009) and with Summit Entertainment (since 2012) for distributing their
films in Russia. ("Central Partnership: History", 2016) The contracts with such large
film companies are the competitive advantage for Central Partnership, which lets it
provide the Russian film market with qualitative and durable films, which raises the
company’s rentability and strengthen its position on the market. However, the tough
economic conditions make the successful operation harder, due to the low attendance of
cinema theaters rise in production and distribution costs in Russian Federation.
53
Such situation in the country provoked the Central Partnership to slightly change their
direction, sigh the contract with the Yellow Black and White Russian media holding,
and concentrate on the production of more profitable serials.
54
Communication with the audience
Central Partnership film company has strong relations with their audience. Even though
the target audience can be different for a particular project that the company is going to
release, there are several basic strategies that the company uses to reach the exact
audience that they need. Like many other companies, Central Partnership widely uses
social networks. The company has the official accounts in four most common social
networks – Vkontakte (26739 subscribers), Facebook (7069 subscribers), Instagram
(16200 subscribers), YouTube (12148 subscribers).
With the increase of importance of social networks, the Central Partnerships` advantage
is that they widely use the opportunities that are provided by them. The usage of social
media networks gives an opportunity to provide the audience with the latest news fast
and conveniently and make the message viral in the shortest period. The observation of
the Central Partnership networks shows that the most developed page that is used by the
company is the Russian network Vkontakte. The fact that it is most used profile is
logical from the demographical perspective because this network is one of the most
popular in Russian Federation, and therefore gives an opportunity to cover the wider
audience.
55
However, this is not the only part of the marketing communication strategy of the
Central Partnership. The company positions itself as the innovative one, and what is
relevant creative. Every new bright project is supported by various media channels and
unique promotional campaigns. For instance, the marketing campaign that was used for
promotion of one of the most successful films that were produced by Central
Partnership “Shadowboxing” includes such parts like – television commercials, press
conferences, outdoor billboards, trailers, printed media and special features like
the video game based on the film. (Shevchenko, 2014) Most of these strategies can be
observed like common ones, which are widely used for promotion of any film.
However, the campaign that was made for “Shadowboxing” clearly represents the level
of importance that the Central Partnership applies to the creating of marketing strategy
for each film they produce or distribute.
The part of the general strategy that the Central Partnership uses to communicate with
the audience concludes in the choice of the films the company produces and distributes.
The overall analysis of the audience preferences shows that people no longer want to
watch the old-fashioned actions or spaghetti westerns, or too serious historical films.
The audience demands films with more complicated storylines, produced with the use
of modern technologies and graphics. That is why Central Partnership is oriented on the
production of modern films, with the use of the modern technologies that will fit the
preferences of the audience. The key strategical line of the company is based on the
understanding of the latest tendencies in the world cinema and the desires of the
audience. Such strategy of adaptation coupled with the understanding of the audience
gives the company the possibility to create the strong connections with their target
audience and to keep the positions as the leading film production and distribution
company in Russian Federation.
56
Finances
The Central Partnership is the most profitable film production and distribution company
in Russian Federation. Even though it was founded not so long ago – in 1995, for the
relatively short period it had a chance to become the leader in the industry.
The challenges of the Central Partnership company are related to the difficult situation
on the Russian film market, and the economic situation in the country in general.
Typically the company produces several original projects each year and distributes the
films of the companies with which it has the contract. For Central Partnership, it is the
primary strategy, which gives the opportunity to have relatively stable success and to
keep the leading positions on the market. However, since the company became a part of
Gazprom Media holding, the additional direction that the Central Partnership is
developing, is the production of television serials. That was a strategically logical
decision, although it had several issues, due to the unstable economic situation in
Russian Federation. As we can see from the following chart, after the two years of a
high success – 2010 and 2011, the company faced the dramatic decrease in the revenues
in
2012.
(Source Nevafilm Research)
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Such a problematic situation was influenced by two key issues:
1. Changes in the management of the company.
Since 2012 Central Partnership is owned by the Gazprom Media holding. And such a
sharp change was the tough time for the company when it was going through several
lawsuits and several changes of managers on the position of CEO.
2. Shortage of strong projects by Paramount Pictures and Summit Entertainment.
The valuable percentage of all revenues that the Central Partnership receives comes
from the distribution of films. Therefore, when the original company does not have
worthy and successful projects, it influences on distributors. The reason is that the lesser
audience is interested in the film, the smaller profit the company will receive. And the
current CEO of Central Partnership Pavel Stepanov understands that, explaining the
decrease in success with this issue – “The last year for Paramount was very good, this
one is not so striking, and during the next year the studio is going to release the strong
projects again.” ("The largest Russian film distributor loses the market share.", 2015)
Therefore, according to Pavel Stepanov, the production of successful projects has the
cyclical tendency. One year there might be a lot of successful films, the other year not.
58
Comparison of film companies
The last part of this thesis is going to include the comparison of all companies that were
observed. Since, four companies have been analyzed in the paper, it will be crucially
important to compare them, to evaluate what is the same in them, and what is
completely different. Moreover, this part will contain the recommendations for
improvement for each company.
Foremost here is the table which contains the key information about each company.
This table will give the opportunity to compare the companies and to evaluate their
differences.
59
Revenues. 2015
Key activities
Number of films
produced per a
year
Television
Production
Gaumont
€217.0 M
Film production;
Film distribution;
Television
programs;
Heritage video
library
Studiocanal
Mosfilm
Central Partnership
€563 M
€3.5 M
€87 M
Film production; Film production;
Television
Film production Film production;
pograms; Film
services;
Film distribution;
distribution;
Television
Television programs;
Heritage video
programs;
Video library
library
Education
Around 12
Around 15
5 (2012-2014)
Up to 18
Yes
Yes
Yes
Yes
More than 700 full
More than 900
More than 5000 More than 2500 motion films. Plus
Video Library
titles
titles
titles
3300 hours of serial
production
Instagram;
Instagram;
Instagram; Twitter; Instagram; Twitter;
Twitter;
Facebook;
Social Networks
Facebook;
Facebook;
Facebook;
YouTube;
YouTube
YouTube
YouTube;
Vkontakte
Vkontakte
France; Germany;
Markets
France;
United Kingdom;
Russian
(Countries of
United States of
Russian Federation
Australia;
Federation
operation)
America
New Zealand
Vivendi mass
Gazprom Media
Ownership
Independent
media
State
holding
conglomerate
(Created by the author of this thesis)
Profitability comparison
It was decided to compare the observed film companies by several key criteria. What I
have noticed is the tendency that younger companies are more successful than the older
ones. For my general analysis, I decided to choose the leading companies from France
and Russian Federation. It is relevant to notice that two of them are the oldest in those
countries, and two ones were established no longer than 25 years ago, that means that
these countries may be called young.
60
If we look at the recent revenues of those four companies, it will be clear that young
ones have significantly higher incomes than the old companies. The highest revenue has
the French Studiocanal, which is a part of Canal+ Group. The income of this company
for the period of 2015 is €563 million. And the lowest revenue for the same period had
the Russian Mosfilm concern – €3.5 million. However, it is also evident that the
revenues of Russian companies are in general significantly lower than the incomes of
the French ones. And here comes the question – How did it happen that there is such a
huge gap in revenues?
Here are the two key factors for such situation.
1. Economical
From the economical perspective, France, as the part of the European Union, has more
stable and strong economy, which allows to the companies to have more opportunities
to produce worthy projects and to distribute them to international market. On the
contrary, the Russian economic situation is unsustainable. First, there was a crisis of
90s, when the country was trying to fix the economy after the collapse of the Soviet
Union. And after several years of relatively stable economy here comes the crisis of
2008, which also destroys the economy of Russian Federation.
2. Strategical
As it is written in the table, Russian companies do not have subsidiaries in other
countries. On the contrary, French companies have divisions in other countries. This
fact gives a competitive advantage to Gaumont and Studiocanal, as this makes the
expansion to other markets easier, and makes the sales and distribution of films more
direct. From the other side, Russian companies need to find distributors in other
countries from the level zero. The Mosfilm and Central Partnership do not have the
61
clear strategy for the expansion and entering the new markets. Moreover, even if they
had, each of the leading world film markets has strong competitors, that will make it
difficult to enter.
Comparison of films
Continuing the comparison of the companies, it is necessary to notice about the films
that are produced by these enterprises. Films that the companies distribute are not
included into the comparison because they are almost not related them. Therefore, one
of the indicators of the company’s success and value regarding the quality of the
content.
As it is written in the table each company except Mosfilm produces around 12 to 18
feature films per year. Some of the films are targeted to the broad audience, some of
them are presented in various cinema festivals. However, each company was able to
produce successful films; that collected huge box offices. For instance, the most
profitable film of Central Partnership is “The Flight Crew” (€22.13 M), Studiocanal –
“Paddington” (€258.4 M), Gaumont – “The Intouchables” (€339.5 M). Nevertheless, it
is impossible to say that Mosfilm has successful films nowadays. The reason for this is
that this company almost does not produce films by themselves. Most of the films that
Mosfilm presents on festivals and in cinema theaters were created during the years of
the Soviet Union. Of course, many of these films are classics of the world cinema.
However, it is not enough for the success. In the constantly changing world companies
need to adapt to the conditions, analyze the market shifts, as well as the customers.
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Television Production and additional activities
All companies that were analyzed have the similar activities. The first and primary
activity of all film companies is the production of films. They operate in the direction of
production of original full motion films. Besides this activity, the distribution of films
produced by other film companies is the second valuable part of the activities, which
lets them to integrate and to show the new films for the national audience. Moreover,
the substantial additional direction of all companies is the television production, which
is one of the most important parts of their activities. For instance, Gaumont has their
corporate division of production of television series. Studiocanal, as the part of the large
television channel chain Canal+ Group also works in the direction of production and
distribution of television programs, serials, and films. The Russian Central Partnership
has reorganized during the past few years to put more force into the television
production assigning the contract with Yellow Black and White, producing content in
that direction. Moreover, Mosfilm also engaged in television production.
Notwithstanding it is there is one company which has the direction, which others do not
have. Mosfilm also is a full-service company which provides many other film
companies with various services related to all levels of film productions. Relevant to
state that on the contrary to other companies, services is the primary activity of this
enterprise, which differs it from other companies.
.
63
Recommendations
To make the comparison more clear and easy for understanding, make the final
evaluation, and to be able to five the recommendations for improvement it will be
important to perform the Ansoff matrix, which analyzes the two observed markets –
French and Russian. This matrix is also known as the product and market expansion
grid. The Ansoff matrix evaluates the strategies for the future growth. There will be
given the recommendations for markets on the base of this matrix.
On the first place, here is the Ansoff grid for the French market.
The Ansoff matrix shows that France is highly oriented on the production of their
original films and developing methods of distribution them in other countries.
Moreover, French film producers continually implement the modern technologies to
64
their production processes. However, despite the significant concentration on the
production of national films, the major part of the market is represented by the foreign
films, which are distributed by the local companies. Notwithstanding France had a
chance to increase the market share of the national films, becoming one of the European
countries with the highest national films share.
And the following picture is the Ansoff matrix for the Russian Market.
The Russian film market differs in some way from the French one regarding the
orientation of production. For the local companies, it is important to produce such kind
of films, that in the first place would be commercially successful. Therefore, the major
part of all films produced there are in entertainment genres. Since entertainment types
of films are usually more preferable for the audience, the Russian companies decided to
65
concentrate on this kind of films to maximize the revenues. However, some nonentertainment films are also produced, but they cannot reach the same success.
Despite the Russian companies produce few hundreds of films per year, the central part
of the market share belongs to the foreign films. This fact makes the market share of
national films very low. In average eight films, out of 10 on the Russian market have
the foreign origin.
Concerning the recommendation and implementation of certain parts from one market
to another, it is relevant to understand that France and Russian Federation are two
completely different countries, with different levels of economy and values regarding
film production.
However, there are some points which can be implemented for the development of both
markets.
1.
International market expansion
Both countries need to have more proper strategies for the global expansion. France is
more developed in this direction since the Gaumont and Studiocanal have their
subsidiaries in other countries, which relatively makes the entering new markets easier.
It is not enough only to try to distribute films to other countries; the intervention must
be more directed. And Russian companies need to make more connections with the
foreign markets and try to open divisions abroad. Such activity will increase the overall
potential of Russian cinema.
2.
The production of original films.
One relevant thing that the French companies do successfully, and what can be applied
to the Russian market is the variety of films that they produce. The French companies
are highly oriented on the quality of the content they produce and its variety. On the
66
contrary, the Russian companies show the tendency to produce films on the assumption
of their future profitability, and the highest Box Office is usually gained by the
entertainment films. In opposite to Russian companies, French ones tend to produce
films not only for maximizing the profit, but they create films of different genres.
Therefore, it is possible to say that at this point, the strategy of French companies is
diversity and concentration on the quality of the content. Such approach should also be
applied to the Russian companies.
In the end, it is necessary to evaluate the overall recommendations for both markets.
There are the four key recommendations.
1. Develop the quality and diversity of the national films.
2.
Increase the market share of the national films.
3. Expand and enter the new markets. Improve those strategies to enhance the value of
French and Russian films on the world market.
4. Make robust and mutually beneficial connections with foreign film production
companies.
67
Societal Impact
Cinematography became the essential part of the life. The film production is the
multibillion business, which involves millions of people all over the world. Therefore,
the knowledge of how it works has a significant societal impact. And the key aim of this
thesis was to analyze various aspects of the two important film markets – French and
Russian, which had the huge impact on the overall history of cinema.
Therefore, the social relevance of my thesis concludes in providing the society with
understanding of how does the film industry works on the base of French and Russian
film production and distribution companies.
68
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