3. Factors to Explain Hollywood's Supremacy

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1 . Fctors to Explin Hollywood's Supremcy The previous chpter hs illustrted, s generl overview, the current scenrio of the Europen nd the US film industries nd mrkets. Now it is time to point out, in more systemtic wy, the min competitive differences between both contenders. During the lst decdes, number of uthors hve ddressed this issue (De Grzi, 1989; Dle, 1997; Hoskins, McFdyen, & Finn, 1997; Litmn, 1998; Augros, 2000; Kindem, 2000b; Jckel, 200; Wsko, 200; Buquet, 2005; Miller et l., 2005; Scott, 2005; McDonld & Wsko, 2008b). Jnet Wsko, for exmple, in trying to explin why Hollywood domintes the world film mrkets, offers multiple perspective bsed on historicl, culturl, politicl nd economic fctors. Using her pproch s bsis, nd completing the S correspondent fetures with other contributions, I m summrize the - n most significnt issues in the tble 5. This tble presents in concise wy some of the principl differences between both industries nd, by extension, the resons for n ongoing imblnce. Therefore, it cts s n idel frmework for nlyzing them comprtively. Let us comment further on some of these fetures in order to dd more insights. As we hve pid brief ttention to the historicl fctors, I will concentrte on some of the remining spects -with specil emphsis o:,business mngement issues, s the core pproch of this text. % Ci Q s 6 i llfl s w

2 I w $ 9 Historicl Culturl Fctors Tble 5. Hollywood vs. Europe EUROPE. After initil commercil impulse, soon becme more rtisticlly nd poiiticlly oriented (work of rt, propgnd).. Dmged by the World Wrs. HOLLYWOOD ' Commercilly oriented industry from the very beginning (entertinment).. Benefited froin World Wrs.. U.S. s ntion of immigrnts. Universl ppel of film stories. Ideology of optimism nd hope. Escpism nd hppy endings ('drem fctory'). 'Americniztion' of interntionl udiences' tste; driven by stsystem.. Access to udiences through dvertising nd mrketing. Cicuirs: Multipiex, Commercil TY Ntionl culturl boundries. Different udiences. Trgic relism, pessimism, existentilism..'auteurism' (driven by uthors) nd distnce from Europen udiences' tste. Access to udiences through film critics.. Circuits: Art-house, Public TV. - k Serilly produced (studio system) Free trde model economy. Finnced by privte nd nsk cpitl. Economies of scle throueh. Independently produced, on one-off bsis. Mixed-model. Public funds (subsidized). Not economv of scle. Inexistence of 1 I prctices. / distributors. I Politicl Fctors. Politics bsed primrily on economic fctors. Stte intewention: effective industry-government llinces, Movies s strtegic industry (money nd power). Offensive rther thn defensive politics: 'Selling Americ to the world': film s interntionl medium. U.S. mbssdors for trde nd democrcy. I Politics bsed primrily on culturl fctors. Stte intervention: protectionist mesures (both supportive nd restrictive). Movies s culhlrl industry.. Defensive rther thn offensive politics: Mjor effouts trying to void US cultuii dominnce insted of selling ntionl culture to the world. Source: Own elbortion on Wsko (200). Kindem (2000). Tmmpbour (2002), Miller et l. (200, Elsesser (2005). nd other sources.

3 .1. Hollywood's Competitive Advntges I Among the resons for the US film industry's competitive position over the Europen one from the economic point of view the following should be mentioned: Incresing efficiencies nd economies of scle chieved through verticl integrtion (minly production plus distribution, nd in some cses lso exhibition circuits), industril concentrtion, nd diversifiction through mergers, conglomertes, nd multintionl corportions. Other key fetures include trns-ntionliztion of ownership, globl dispersl of production nd the freelnce mrket for cretive nd crft lbor (Kindem, 2000: 67; McDonld & Wsko, 2008: 4). As consequence, s indicted before, Americn conglomertes dominte the world film industry (Chlby, 2006).. The existence of lrge nd welthy home mrket, which llows the industry to recoup significnt prt of its investment in its own territory (Hoskins, McFdyen, & Finn, 1997: 8). The illcresing importnce of interntionl mrkets for Hollywood studios' globl turnover. Currently, between 50% nd 60% of Hollywood's thetricl grosses come from the interntionl mrket (Trumpbour, 2008). Consequently, Hollywood hs reinforced its ppel to foreign udiences through the importtion of foreign tlent nd the so-clled 'runwy productions' (Kindem, 2000: 68; Wsko, 200: 174).. In reltion to the previous point, huge mrketing nd distribution costs -both in domestic nd foreign mrkets- nd relevnce of mrket reserch in order to design effective mrketing cmpigns (Drke, 2008). According to the Motion Pictures Assocition of Americ (MPAA), mrketing costs (prints nd dvertising) of n verge Hollywood movie hve esclted from US$ 19.8 million in 1996 to US$5.9 million in 2007 (MPAA, 2007: 2). Film s rnultipltform commodity, bsed on 'high concept' elements nd with frnchise potentil. A Hollywood movie is no longer just movie, but lso product suitble for ll kind of commercil windows. In this sense, the Hollywood film ir~dustry I oo f Z E# S 8 -

4 'I~E EUROPE-HOLLYWOOD PARDO ALUANDRO 1 COOPETIT~ON 2 '? B E L lpel fundmentlly remins in the business of exploiting intellectul property rights (McDonld & Wsko, 2008: 6-7; Bettig, 2008; Wytt, 1994). The universl ppel of Americn stories nd Americn vlues. The tstes of worldwide udiences hve been 'mericnized', thnks to the clssic nrrtive structure nd filmmking style of Hollywood films, together with their powerful mrketing mchinery (Miller et l., 2005: 5; Trumpbour, 2008). The cretion of 'str system', s key tool to ttrct udiences from ll over the world. In this sense Hollywood strdom remins s sign of commercil vlue in cinem nd populr culture, controlled by smll clusters of firms (gencies) (McDonld, 2008). Sttelindustry prtnership, nd, more in detil, the llince between the MPAA nd the US Deprtment of Commerce. Very erly on, the film industry ws declred 'strtegic industry' by the Americn government. Since then, Hollywood bs received constnt support from the politicl sphere (Pendkur, 2008). S Questionble trde prctices nd policies used by US distributors in Q B interntionl distribution nd exhibition greements. Aprt from - P busive demnds in shring box oftice grosses -mostly in the cses of big blockbusters- s well s blind-bidding nd block-booking prctices in exhibition, they hve restricted the exhibitors' freedom by overlpping in contrcts concerning systems of liquidtion, pricing, collections, control of ticket sles, dvertising of films, selection of thetres, time of exhibition nd the delivery nd return! of copies -in some cses cting s crtel in given country (Prdo, 2002: 61-62; Frter, 2004).!.2. Europe's Weknesses In cler contrst to the Hollywood pproch to film business, Europen cinem suffers from severl endemic illnesses, such s the following: 'Auteurism' or the celebrtion of the director s the min (nd sometimes unique) rtist, mking films tht rrely gmer enough of

5 n udience to recoup their investment. In this sense, films re minly understood s n rtwork with cler culturl implictions. This pproch hs the dnger of converting Europen cinem into 'culturl ghetto' (Dle, 1997: ; Vincendeu, 1998: ; Jckel, 200: 28-29). A lck of business sense, which leds to wrong economic nd commercil pproch: insted of mtching 'budgets to mrkets' (or costs to revenues), the Europen film industry is used to mtching budgets to esily vilble funds, minly subsidies nd television pre-sles. The negtive effects re, on one hnd certin 'subsidy mentlity' believed to crete non-commercil, non-competitive productions; on the other, to focus on stories excessively oriented to television udiences (Illot, 1996: 2-; Dle, 1997: ). Wheres Hollywood studios, thnks to their higher degree of 2 Li verticl integrtion nd economies of scle, hve vrious sources of b finnce nd income nd cn be therefore more flexible with their E i csh-flow projections, invest more in development nd mrketing nd sustin resonble number of filures, Europen producers usully work on single project without hving the resources to 8 develop new projects nor investing in mrketing. Thus, the risk is - i much higher (Jniesch, 199: 2-25, Dle, 1997: ). In reltion with the previous points, there re no regulr nd efficient finncing sources, especilly from privte cpitl funds. Tx-shelter schemes nd risk-cpitl firms only operte in some countries ndlor for specific budget-level project. In this sense, the finncing sitution of the Europen film industry tends to be frgile nd inconsistent for mny producers (Jniesch, 199: 2-25; Coopers & Lybrnd, 1992; IMCA, 2002). High frgmenttion in the production sector, which leds to low output of film productions per compny. According to some estimtes, 80% of EU production compnies do not ccomplish more thn one film per yer. This mens tht verge Europen producers cnnot rely on strong production structures -like the Hollywood system- to mke movies on regulr bsis. In fct, some production firms re creted on project bsis, to csh in on grnts nd subsidies (Henning & Alpr, 2005: 25-26). El k

6 m Little ttention to the development phse of filmmking. Too mny Europen projects enter into production without hving undergone thorough development process (script rewriting) nd finncil strtegy (business pln). This in turn hmpers mrketbility nd economic vibility. On verge, the Europen udiovisul industry invests less thn 5% of production investment totls in given project, compred with 10% invested in the United Sttes (Finney, 1996: 1-8; Prdo, 2002: 52-5). A frgmented mrket tht is very difficult to tret s whole. Linguistic nd culturl brriers impede the smooth nd regulr trvel of Europen films (Jniesch, 199: 25-26; Henning & Alpr, 2005: 28). Only 20% of the films nnully produced in Europe chieve distribution outside the min country of production, which & represents only u 7% shre of the mrket (Fttorossi, 2000). Ln the cse of EU produced films, they chieve n verge 5% of grosses 0 E in other EU countries outside ntionl mrket (EAO, 2006: 71). t Distribution is the wekest sector of the Europen film industry, nd the low level of verticl integrtion mkes the development of k - q integrted strtegies for commercil exploittion difficult. Europe : $7- is still very frchlred, despite its politicl unifiction, nd udiences hve little tste for other Europen cinem, especilly from smll countries. Europen producers do not hve much negotition leverge when fced with the US distributors' considerble power in selecting the type of movies to distribute nd mrket. This cretes the necessity for strong Europen distribution. Nevertheless, pn-europen distributors hve never mnged to survive. Hollywood lso seeks to buy off especilly successful locl distributors, nd it usully succeeds (Buquet, 2005: ; Henning & Alpr, 2005: 26; Lnge, Newmn-Budis, & Hugot, 2007: 9-12). A significnt percentge of Europen films do not hve thetricl relese in their own territory within one yer of production -between 50% nd 60% of British films, 0% of Germn nd Itlin films, round 25% in the cse of Spnish nd French films (Jckel, 200: ; 17-18). In ddition to this, there is lso lck of investment in distribution nd mrketing costs -prints nd dvertising- s consequence of

7 film compnies' lck of cpitliztion. Across Europe, it is common for promotionl costs to outweigh print costs in the distributor's outgoings for film cmpign. Generlly speking, the verge relese promotion costs for blockbuster in Europe runs from 400,000 to 2 million, wheres n independent movie cn be in the region of 15, ,000, figure very fr wy from the US$ 25-9 million in the cse of n verge Hollywooh movie (Screen Digest, 2006, 2006c; Finney, 199). Misdirected ndlor indequte protectionist mesures t the Europen level, especilly those regrding direct subsidies insted of incentives. Generlly speking, most of the public ids re production-oriented insted of distribution-oriented. The reltionship between culturl vlues nd mrket competition remins highly contentious in the context of Europen film policies (Jckel, 200: 88-89; Herold, 2004; Henning & Alpr, 2005). % W : Lstly, the lck of Europen 'str system' mkes difficult the E z interntionl ppel of movies led by Europen ctors nd ctresses, lthough it is true t the sme time tht some Europen film directors work s 'brnd nmes' interntionlly (Europ- Cinems, 2006: 21, 2). In this regrd, s will he ddressed lter, some Europen tlents hve emigrted to Hollywood nd they hve built up their interntionl strdom there. EM k Q w -

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