May 7th 2024.
A recent analysis has revealed that Hollywood may have missed out on a staggering $49.4 billion over the course of a decade by not fully engaging with the Black American community in their projects. This figure was calculated by Creative Investment Research, which looked at the potential revenue that could have been generated if the industry had placed more value on projects that cater to diverse audiences. The report also estimates that the film industry is losing $15.3 billion every year by not collaborating with Black filmmakers, studios, and their audiences.
These findings come on the heels of a report by McKinsey & Co., which stated that Hollywood is missing out on $30 billion annually by not tapping into the potential of Black, Latinx, and Asian-American/Pacific Islander communities. In fact, the report claims that simply closing the gap in Black representation could bring in an additional $10 billion each year.
William Michael Cunningham, an economist and owner of Creative Investment Research, believes that the economic success of Hollywood is closely tied to its ability to diversify and include more diverse content and creators. He explains that by addressing current disparities, the industry not only stands to gain financially, but also secure a more sustainable and innovative future.
To quantify the potential revenue impact of increased diversity in Hollywood, Cunningham's firm conducted a thorough analysis. They looked at various areas such as audience expansion, global market reach, ancillary products, risk mitigation, longevity and loyalty, and brand value enhancement. Cunningham believes that the biggest impact could come from risk mitigation through diversity, as the industry could save billions by avoiding box office flops through consistent engagement with diverse content.
Cunningham also believes that an increased focus on diversity could have a significant social impact and enhance the value of major studios. He predicts that this could lead to an increase in stock value, attract better talent, and secure more favorable deals, potentially adding billions to the valuation of major studios.
The potential for global market reach is also promising, as films with diverse casts and culturally resonant stories, such as "Black Panther," have shown the ability to significantly increase box office revenue. Cunningham estimates that if diverse films captured just 2% more of the global box office market, which was around $42 billion before the pandemic, it could mean an extra $840 million in revenue every year. Over a decade, this could add up to a significant $8.4 billion.
Additionally, Cunningham believes that increased audience engagement and consumer spending on ancillary products in the overall U.S. merchandising and entertainment markets could bring in an extra $6 billion in revenue. He also points out the potential for diversely represented content to have a longer lifespan and generate revenue through syndication, reruns, and streaming rights. If diverse content could extend its average revenue-generating lifespan by just 20%, it could bring in an additional $5 billion over a decade, based on the current revenue of the U.S. film and TV industry from these sources.
In conclusion, the potential for Hollywood to benefit from increased diversity and representation is immense. By acknowledging and addressing the current disparities, the industry not only stands to gain economically, but also make a significant social impact and secure a more sustainable and innovative future.
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