Cinema as industry. Main actors:

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Camron Craig
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1 Cinema as industry Main actors: Producers / executives Filmmakers / directors & scriptwriters Cast & crew + post-production Distributors Exhibitors Theatre-owners Audiences (viewer / spectator) Reviewers/critics

2 Geopolitics of cinema % of films shown in the world are French % films are American massive exportation total vertical integration (production, distribution & exhibition) becomes an industry of its own Domination of Hollywood cinema with heavy marketing & merchandising strategies Other cinemas Bollywood, European, Asian, South American

3 Hollywood studio system Hollywood = dream factory 1917 vertical integration (Zukor production company + Paramount-distribution + 1,000 theatres by 1926) : 5 majors (Paramount, Fox Film Corp, MGM, Warners Bros, RKO) + 3 little majors (Universal pictures, United Artists, Columbia) : 8 majors controlled 95% USA films - oligopoly Stable of stars, scriptwriters, directors & designers house look Assembly line process 600 films annually (standardisation, genre sophistication) Block-booking & coercion for exhibition Specialisation in types of films = distinctive look criteria for box office success

4 Depression era: economic difficulties & bankruptcy Wall Street interference emergence of B-movies (double feature production) to supplement programme : exhibitors put anti-trust action against majors relinquished theatres (60% of capital investment) emergence of independent films & more foreign imports House of Un-American Activities Committee blacklisting + implicit censorship

5 The Majors Fox: 1930 s popular musicals s Westerns (actors: Temple, Fonda, Brando, Monroe, Peck directors: Kazan, Ford, Mankiewicz) now owned by Murdoch (NewsCorp) Paramount: comedy & light entertainment, epics (actors: Fairbanks, Swanson Dietrich, Marx Bros - directors: B. de Mille, Griffith) now owned by Viacom Warner Bros: gangster films, backstage musicals, social realism & political films no stables but contract directors, actors & crews (Hawks, Bogart, Cagney, Flynn, Dean, Davis, Bergman, Crawford, Bacall) now Time-Warner

6 The Majors MGM: lavish productions (Wizard of Oz, Gone with the Wind) & special FX high investment in pre-production, tight rein on production (galaxy of star actors: Garbo, Garland, Rooney, Tracey) MGM- UA, Turner, Paretti, Crédit Lyonnais RKO: practice of unit production by contracted independent directors variety of genres: big hits (Astaire & Rogers films, King Kong, Citizen Kane) & B- movies (film noir & horror) bought by Hughes then sold to TV company

7 The little Majors Universal: Valentino movies, horror movies (Frankenstein, Dracula) - % of profits offered to actors to attract stars (Stewart,Welles, Dietrich, Leigh) post 1948: thrillers, melodramas, Westerns 70/80 s: Jaws, E.T. sold to Matsushita in 1990 (Jurassic Park) United Artists: founded by Chaplin, Fairbanks, Griffith, Pickford against oligarchy (The Gold Rush, Modern Times) - post 1948: became major (James Bond series, Rocky, One Flew over the Cuckoo s Nest, Annie Hall) - sold to MGM in 1981 Columbia: Produced B-movies sold to big 5 in 1930 s contract directors & actors (Capra, Vidor, Hayworth) created TV subsidiary Screen gems in 1950 & backed foreign productions sold studios in 1972 bought by Coca-Cola in 1982 then Sony in 1989

8 Market evolutions 1960 s : Popularity of television Studios rented space to television companies Involvement in production of TV programmes 1970 s: emergence of blockbusters (Jaws, StarWars) 1980 s: VCR threat became source of additional revenue 1990 s: Studios bought by large conglomerates (= only part of activities) + intro of digital techniques 2000 s: Current practice: independent producers put package together then sell to major studio + lowering costs of filmmaking allows for independent movie making & internet promotion

9 American vs. European cinema Viewed from USA European cinema construed as global concept 2 meanings: Predominance of art cinema + more sexually explicit Only true rival to Hollywood to be infiltrated & dominated French resistance (exception culturelle) quota on US films ( annually) slow erosion nonetheless % films in France from US vs 35% in 1981 UK 80% films shown from US Attempts at national heritage cinemas (Cyrano de Bergerac, Manon des Sources, A Room with a View, Howards End)

10 American vs. European cinema In 2000: 595 films produced in Europe vs. 460 in US Average cost of US film: $54.8m vs. $7.2m in UK, $5m in France, $2m in Italy US budgets include marketing budgets (promotion, copies, etc.) Distribution larger across member states for European films but more US films achieve box office success (1 to 10 ratio) & dominations of US in market share (73% US, 15% national, 8% non-national European, 4% others)

11 International Film Industry Cinema advertising = only 1% of total advertising expenditure in UK & Europe Revenue = direct & indirect charges for access to consumers For some = royalties from merchandising 3 categories of release window: Cinema box office (theatrical) = main source Video (rentals, retail)= grew strongly in 1980s Television = also rapid growth since 1990 s (moviebased subscription channels)

12 Exhibition window Cinema-going: General upward trend in cinema admissions despite some slumps USA: 1.48b admissions in b in 2004 (+4%) UK: 139m in m in 2004 (+23%) France: 130m in m in 2004 (+50%) Heavy investment in cinema screens / multiplex phenomena USA: 31,865 screens in ,594 in 2004 (+15%) UK: 2,564 screens in ,474 in 2004 (+35%) France: 4,762 in ,295 in 2004 (+11%)

13 Secondary and tertiary windows =Even more lucrative sources of income over last decade But box office performance determining (popularity) Important knock-on effects in later stages of distribution And on price that can be negotiated for rights in subsequent release windows = impact on per-viewer profit Till early 1990s video accounted for majority of film expenditure Now subscription TV movie channels, VOD, DVD

14 Typical sequence of windows for distribution of feature films US Box- Office Overseas Box- Office Pay-Per-View Video At least 12 months after 1 st release 2-3 months after 1 st release 4-6 months after 1 st release 6-9 months after 1 st release Pay Television At least 2 years after 1 st release Free Television

15 Merchandising Main earners in ancillary markets = children s films producers E.g. : Disney Character brands exploitation Theme parks Licensing of production of clothing, toys, etc. Time Warner / New Line Cinema: $2.9 billion worldwide box office receipts for all 3 Lord of the Rings films $3 billion+ consumer spending on Lord of the Rings home entertainment & merchandise

16 International business US domination Bulk of domestic consumer expenditure on films generated by and ploughed back into dominant US industry India only competitor most prolific film-producing nation (1,000 films annually) Main factors favouring Hollywood majors: Size of demand (large domestic market to support output) Size of supply (large scale of productive activity) High budget well-promoted films & risk spreading Structure well integrated production & distribution

17 Major studios 7 majors today: Paramount Pictures, Universal, 20th Century Fox, Warner Bros, Disney, MGM, Sony/Columbia Pictures Total majors films production: around 140 per yr 90% of domestic box-office Gain top positions in international markets (above 50% of total revenues)

18 Independent sector Companies within and outside US that develop, finance & distribute films independently from majors In some cases, independence is not absolute some successful firms backed by larger parent corporations with cross-ownership with Hollywood majors (e.g. New Line Cinema owned by Time Warner, Miramax owned by Disney) US independent cinema 3 times more films than majors but less than half gain theatrical release

19 Film = hit-or-miss business Risky & highly expensive business Constant upward pressure on production budgets (brand-name star fees) Highly speculative Majority lose money Only 2 out of every ten films make profits For majors, virtuous cash-flow circles (revenues from 2 hits support other films)

20 Funding to be raised in advance for devt, production & marketing Returns only after film is shown (on average 3 yrs or more later) House nut cinema-owner takes cut directly from receipts to cover costs of running the venue Then, rest divided betw exhibitor & distributor (usually 10:90 split) Distributor deducts commission and costs, including advertising & promotion Remainder goes to equity investors or financiers then to producer

21 New Technologies = Reduction of entry barriers Production - use of digital cameras & editing reduces capital and labour costs Low promotion costs possible (e.g. The Blair Witch Project = use of chat-sites & word-of-mouth across Internet to create hype & draw attention long before critics had access to the film) Distribution subscription TV (extra channel capacity due to digital compression & additional film services enabling consumer selection) + PPV + near VOD Possibility of direct gateway thru Internet (bypass distributors & exhibitors)

It is a pleasure to have been invited here today to speak to you. [Introductory words]

Audiovisual Industry Seminar WTO, Geneva, Wednesday 4 July 2001 Speech on "The economics of the sector - the UK example" Michael Flint, Deputy Chairman, BSAC [Slide 1] It is a pleasure to have been invited