The interaction of the market forces of demand and supply play an important role in determining the price of goods and services. According to NetMBA (2016), the forces of demand and supply are influenced by different factors. This essay evaluates the factors that influence demand and supply of movies.
Factors affecting demand of film/movie
The demand for film is affected by a myriad of factors as evaluated herein.
One of the major economic factors that influence the demand for film or movies includes the price of a movie or film ticket. This element is in turn affected by the consumer’s purchasing power, which is dependent on the consumers’ disposable income. According to Rahimi et al. (2013), income limitation reduces the consumers’ demand for a particular product or service. Therefore, in setting the price point of a movie, it is important for firms in the movie business to evaluate the income level of their target customers. The graph below illustrates the changes in demand for movie due to change in price.
Figure 1; impact of price changes on quantity demanded
Source: (NetMBA 2016)
The demand for movie is also influenced by the amount of free time that consumers have. Demand for film is also influenced by price of other services that have substitutionary or supplementary effect compared to movies. In making a purchase decision, consumers undertake a comprehensive market search to understand the available products and services. One of the dimensions that consumers consider in the analysis entails the price of related products. The findings of the comparative analysis play a major role in influencing the choice of product (Rahimi et al 2013).
The demand of movie is also affected by the side costs involved in watching a film in a theatre. Examples of such costs include transportation cost, cost of snacks and food products (Suwarto 2011). If the side costs associated with watching movie is high, the demand for movie is negatively affected, which means that the demand reduces.
Cultural factors; demand for movie is impacted by cultural dimensions such as the society’s values, norms and beliefs. The demand for a product or service varies depending on the prevailing cultural trainings with reference to lifestyle. For example, a particular movie may be against the cultural and religious beliefs of a particular society. Therefore, cultural beliefs and norms have a significant impact on the size of demand of a particular product.
The demand for movie is influenced by the personal characteristics of the target consumers such as age, gender, income, level of education and job. The demand for movie is considerably high amongst the educated and individuals with a relatively high level of income. Moreover, demand for movie is also relatively high amongst men compared to women (Herlina 2012).
The prevailing environmental characteristic has a direct impact on the demand for movies. One of the major environmental factors entails availability and accessibility of facilities such as movie theatre (Rahimi et al 2013). Moreover, if the film theatre has additional facilities such as salons, the likelihood of such a theatre attracting a large number of consumers is increased.
Factors affecting supply of movie/film
Number of movie producers
One of the major factors that influence the supply of movie entails the number of producers. According to Suwarto (2011), the number of producers in a market is positively correlated to the volume of supply. Therefore, an increase in the number of movie producers increases the supply of movies/films. An increase in the volume of supply for movies tends to reduce the price of movies.
The supply for movies is influenced by availability and price of requisite resources involved in movie production. Some of the resources necessary in the movie production process include human and financial capital. If the price of human and financial capital increases, the production of movie might be affected due to increase in the cost of production hence leading to reduction in the supply of movies. Increase in cost of resources translates into an increase in the cost incurred in producing a unit of a movie.
State of technology
The production and supply of movie is affected by technological progress. Increase in technological innovation positively impacts the capacity with which firm’s involved in movie/film production undertakes their production processes. Subsequently, the size of supply for movies is increased. Moreover, technological development with reference to the internet has positively influenced the supply of movies. The internet technology and pay television services have improved accessibility of movies through different platforms. For example, Netflix is one of the renowned firms that have adopted the internet and pay televisions as some of its platforms in distributing its movies/films (Fritz 2010). Through this approach, Netflix will be able to increase the supply of its movies.
Producer price expectations
The supply of movies/films is influenced by future price expectations. If suppliers expect the price of movies to increase in the future, they are likely to reduce their current volume of supply in anticipation for the future high prices. One of the ways through which this goal can be achieved entail reducing the current production capacity in order to save the production resources for future use. By reducing the current volume of supply, the producers stand a high chance to make high profits in the future. Expectation of future price increase leads to an increase in the volume supplied as illustrated by the graph below.
Figure 2; Impact of price increase on volume supplied
Source: (NetMBA 2016)
Price of related products
Similar to demand, the supply for movies is influenced by the price related products. For example, if the price of a related product such as entertainment products increases, a firm may be required to reduce its price in order take advantage of competition.
The analysis indicates that the demand and supply of movies/film is influenced by different factors. Therefore, it is important for firms in the movie/film sector to develop a comprehensive understanding of the prevailing factors affecting the forces of demand and supply. Gaining this knowledge is critical in informing a firm on how to adjust its production activities.
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Rahimi, A, Mousai, M, Azad, N & Syedaliakbar, M 2014, ‘Impacts of economic, cultural, social, individual and environmental factors on demands for cinema; case study of Tehran’, African Journal of Business Management, vol. 8, no. 13, pp. 480-494.
Suwarto, H 2011, Identifying key factors affecting consumer decision making behaviour in cinema context; a mixed method approach. [Online]. Available at: <http://staff.uny.ac.id/sites/default/files/penelitian/Dyna%20Herlina%20Suwarto,%20M.Sc/%20Identifying%20Key%20Factors%20Affecting%20Consumer%20Decision%20Making%20Behavior%20in%20Cinema%20Context_A%20Mix%20Method%20Approach.doc.pdf> (Accessed November 6, 2016)