Like other major innovations such as the automobile, electricity, chemicals and the airplane, cinema emerged in most Western countries at the same time. As the first form of industrialized mass-entertainment, it was all-pervasive. From the 1910s onwards, each year billions of cinema-tickets were sold and consumers who did not regularly visit the cinema became a minority. In Italy, today hardly significant in international entertainment, the film industry was the fourth-largest export industry before the First World War. In the depression-struck U.S., film was the tenth most profitable industry, and in 1930s France it was the fastest-growing industry, followed by paper and electricity, while in Britain the number of cinema-tickets sold rose to almost one billion a year (Bakker 2001b). Despite this economic significance, despite its rapid emergence and growth, despite its pronounced effect on the everyday life of consumers, and despite its importance as an early case of the industrialization of services, the economic history of the film industry has hardly been examined.
This article will limit itself exclusively to the economic development of the industry. It will discuss just a few countries, mainly the U.S., Britain and France, and then exclusively to investigate the economic issues it addresses, not to give complete histories of the industries in those countries. This entry cannot do justice to developments in each and every country, given the nature of an encyclopedia article. This entry also limits itself to the evolution of the Western film industry, because it has been and still is the largest film industry in the world, in revenue terms, although this may well change in the future.
From the mid-1970s onwards, the Hollywood studios revived. The slide of box office revenue was brought to a standstill. Revenues were stabilized by the joint effect of seven different factors. First, the blockbuster movie increased cinema attendance. This movie was heavily marketed and supported by intensive television advertisement. Jaws was one of the first of these kind of movies and an enormous success. Second, the U.S. film industry received several kinds of tax breaks from the early 1970s onwards, which were kept in force until the mid-1980s, when Hollywood was in good shape again. Third, coinciding with the blockbuster movie and tax-breaks film budgets increased substantially, resulting in a higher perceived quality and higher quality difference with television, drawing more consumers into the cinema. Fourth, a rise in multiplex cinemas, cinemas with several screens, increased consumer choice and increased the appeal of cinema by offering more variety within a specific cinema, thus decreasing the difference with television in this respect. Fifth, one could argue that the process of flexible specialization of the California film industry was completed in the early 1970s, thus making the film industry ready to adapt more flexibly to changes in the market. MGM’s sale of its studio complex in 1970 marked the final ending of an era. Sixth, new income streams from video sales and rentals and cable television increased the revenues a high-quality film could generate. Seventh, European broadcasting deregulation increased the demand for films by television stations substantially.
From the 1990s onwards further growth was driven by newer markets in Eastern Europe and Asia. Film industries from outside the West also grew substantially, such as those of Japan, Hong Kong, India and China. At the same time, the European Union started a large scale subsidy program for its audiovisual film industry, with mixed economic effects. By 1997, ten years after the start of the program, a film made in the European Union cost 500,000 euros on average, was seventy to eighty percent state-financed, and grossed 800,000 euros world-wide, reaching an audience of 150,000 persons. In contrast, the average American film cost fifteen million euros, was nearly hundred percent privately financed, grossed 58 million euros, and reached 10.5 million persons (Dale 1997). This seventy-fold difference in performance is remarkable. Even when measured in gross return on investment or gross margin, the U.S. still had a fivefold and twofold lead over Europe, respectively. In few other industries does such a pronounced difference exist.
During the 1990s, the film industry moved into television broadcasting. In Europe, broadcasters often co-funded small-scale boutique film production. In the U.S., the Hollywood studios started to merge with broadcasters. In the 1950s they had experienced difficulties with obtaining broadcasting licenses, because their reputation had been compromised by the antitrust actions. They had to wait for forty years before they could finally complete what they intended. Disney, for example, bought the ABC network, Paramount’s owner Viacom bought CBS, and General Electric, owner of NBC, bought Universal. At the same time, the feature film industry was also becoming more connected to other entertainment industries, such as videogames, theme parks and musicals. With video game revenues now exceeding films’ box office revenues, it seems likely that feature films will simply be the flagship part of large entertainment supply system that will exploit the intellectual property in feature films in many different formats and markets.
Conclusion
The take-off of the film industry in the early twentieth century had been driven mainly by changes in demand. Cinema industrialized entertainment by standardizing it, automating it and making it tradable. After its early years, the industry experienced a quality race that led to increasing industrial concentration. Only later did geographical concentration take place, in Southern California. Cinema made a substantial contribution to productivity and total welfare, especially before television. After television, the industry experienced vertical disintegration, the flexible specialization of production, and a self-reinforcing process of increasing distribution channels and capacity as well as market growth. Cinema, then, was not only the first in a row of media industries that industrialized entertainment, but also the first in a series of international industries that industrialized services. The evolution of the film industry thus may give insight into technological change and its attendant welfare gains in many service industries to come.
Comments
Post a Comment