Essay About Cost Leadership Strategy And Blumhouse’S Average Movie Production Budget

Blumhouse Is a Movie Production Studio in Los Angles
BlumhouseBlumhouse is a movie production studio in Los Angles and the company is famous for its cost leadership strategy. When comparing Blumhous’s budget to box office gross ratio to the industry, one can tell that Blumhouse continuously produces more profitable films than its peers. While Blumhouse’s average movie production budget is $5 million, an average film in Hollywood cost $60 to $70 million to produce. Blumhouse’s ability to produce films at significantly lower cost is a huge competitive advantage because the company can avoid taking a huge hit if a movie fails. The primary objective of Blumhouse’s cost leadership strategy is to archive competitive advantage by keeping the cost of operation significantly lower than competing studios. One way Blumhouse control the production costs is not giving directors extra fund while filming is underway. Blumhouse’s directors are required to plan ahead and manage the budget seriously because there is no exceptions to this rule. On the other hand, Blumhouse seek previously failed directors with solid skills and likes to hire undervalued talents. Those undervalued directors often willing to take lower pay because they crave for a chance to prove themselves. To enhance creativities and compensate for the strict budgeting, Blumhouse Directors have full control over the final cuts.To further implement its cost saving strategies, Blumhouse pays casts and crew members on the Hollywood “scale”, and they will get a bonus only if the box office reached expediential goals. Blumhouse is able to archive this because actors are clustered in Los Angles and there are many undervalued talents who are willing to work for little monetary compensation in exchange for exposure to the general audience. Blumhouse’s other saving measures include: no special effects in all movies, directors have to choose cheap locations and set designs, all shoots are to be kept as short as possible. Even speaking roles are limited because they cost more. Blumhouse’s low budget films also tend to the horror genre. Because a horror movie can often be filmed in with smaller budget as it doesn’t demand so much location changes, sometimes one single house could suffice. Another way Blumhouse cut cost is to focus on product extensions (sequels) because they cost less, and sequels of hit movies are more likely to succeed because they already have a customer base. Besides cost saving, Blumhouse’s second strategy is to differentiate itself from other studios is through its unique sales and marketing partnership with Universal. Blumhouse has a 10 year contract with Universal, the latter provides the entire production budget, marketing and delivery costs. This allow Blumhouse to not put in any capital in their film from cradle to grave. In addition to providing monetary supports like the production budget, Universal is also responsible for the promotion and distribution for the films strategically. After Blumhouse show a movie to Universal, Universal has the right to make a decision on the release strategy. Universal can take a film “wide” when they believe the film will be a hit, meaning to release the film in large number of theaters and support it with a big promotional budget.