Film Policy

International, National and Regional Perspectives

Albert Moran

• Publisher: Routledge
• Year: 2005
• ISBN:
  9781134859986
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Medien- & Kommunikationsbranche

Film Policy is the first comprehensive overview of the workings of the international film industry. The authors examine film cultures and film policy across the world, explaining why Hollywood cinema dominates the global film market, and the effects of the rise of television and video on the international industry.
In a series of case studies drawn from North America, Europe, Latin America, Asia and Australia, the authors explore the relationship between Hollywood cinema product and national film cultures, and trace the development of international and national film policies, looking at issues of financing, regulation, protectionism and censorship.

Part I

POLICY IN A GLOBAL INDUSTRY

1

ADJUSTING TO THE NEW GLOBAL ECONOMY

Hollywood in the 1990s

Tino Balio

The 1980s were good to Hollywood. Without having nurtured the new television distribution technologies, Hollywood became the beneficiary of two lucrative ancillary markets, pay-TV and home video (Balio 1990:262–70). Contrary to predictions, the new technologies did not kill the motion picture theatre; rather, they stimulated demand for more motion pictures, spread the risk of production financing, and enhanced the value of film libraries. Changes in the global political and economic environment, particularly the commercialization of broadcasting systems worldwide, created additional sources of profit. And on the horizon, still newer technologies offered even more intriguing opportunities for growth.

Conditions such as these led to the ‘globalization’ of the film industry. Describing its rationale for merging, Time Warner explained,

In the Eighties we witnessed the most profound political and economic changes since the end of the Second World War. As these changes unfolded globalization was rapidly evolving from a prophecy to a fact of life. No serious competitor could hope for any long-term success unless, building on a secure home base, it achieved a major presence in all of the world’s important markets.

(Time Warner 1989)

Upgrading international operations to a privileged position, the Hollywood majors expanded ‘horizontally’ to tap emerging markets worldwide, formed ‘down-stream’ alliances with independent producers to enlarge their rosters, and ‘partnered’ with foreign investors to acquire new sources of financing. Achieving these goals led to a merger movement that has yet to run its course.

THE DOMESTIC MARKET

Home video and pay-TV invigorated motion picture exhibition during the 1980s by enhancing the status of the theatre in the distribution chain. To consumers, the performance of a feature film at the box office established its value at the video store and on cable television. The vitality of the theatrical market, coupled with the laissez-faire approach to anti-trust by the Reagan administration, convinced the majors ‘to take another fling with vertical integration’ (Gold 1990). The logic seemed to be this. Since only a few movies at any one time succeed at the box office, why not go into exhibition and profit from the hit films on the market? Columbia started the trend in 1986 by purchasing a small chain of theatres in New York City. Within a year, MCA, Paramount Communications and Warner Communications bought or acquired stakes in important theatre chains around the country (Noglows 1992).

Home video and pay-TV also stimulated demand for product. Domestic feature film production jumped from around 350 pictures a year in 1983 to nearly 600 in 1988. Oddly, the majors contributed little to the increase; in fact, the number of in-house productions of the majors held steady during this period, between seventy and eighty films a year (Cohn 1990). The additional films came from the so-called ‘mini-majors’—Orion Pictures, Cannon Films, and Dino de Laurentiis Entertainment—and from independents like Atlantic Release, Carolco, New World, Hemdale, Troma, Island Alive, Vestron and New Line who were eager to fill the void. These companies took the plunge thinking that even a modest picture could earn money from the sale of distribution rights to pay-cable and home video. Although the proceeds from such sales were insignificant by Hollywood standards, the ‘pre-selling’ of rights to these markets could offset the entire production cost for an inexpensive picture and might make the difference between profit and loss for a more ambitious project.

Rather than producing more pictures, the majors exploited a new feature film format, the ‘ultra-high budget’ film (Logsdon 1990:11). The format was popularized by Carolco Pictures, an independent production company headed by Mario F.Kassar and Peter Hoffman that got its start with the Rambo movies starring Sylvester Stallone in the 1980s. Carving a niche for itself in the fast-growing foreign market, Carolco specialized in action-filled blockbusters and paid top stars like Sylvester Stallone and Arnold Schwarzenegger enormous fees to carry them. Following this tack, the majors upped the ante and production costs rose from around $9 million in 1980 to close to $24 million in 1989, on the average. The most expensive pictures in 1989, such as Batman (Warner), The Abyss (20th-Fox), and Tango & Cash (Warner) cost twice the average (Fabrikant 1990a).

‘Ultra-high’ budgets and saturation booking went hand in hand. To recoup their investments as quickly as possible, film companies regularly booked new releases into 2, 000 and more screens. Print and advertising costs tripled as a result to over $12 million per film on the average by 1989. For ‘event’ films, companies spent $10 million and more on pre-opening weekend advertising alone (Natale 1992a). The strategy resulted in ‘ultrahigh’ grosses; for example in 1989, six pictures grossed over $100 million in the US, among them Batman (Warner, $250 million), Indiana Jones and The Last Crusade (Paramount, $195 million), Lethal Weapon 2 (Warner, $147 million) and Honey, I Shrunk the Kids (Disney, $130 million) (Velvet Light Trap, 1991).

With pictures like these in distribution, it was no surprise that the 1980s concluded with record-breaking box office results. In 1989, admissions reached a five-year high of 1. 13 billion, and the box office a high of over $5 billion (Velvet Light Trap 1991). (Much of this increase at the box office resulted from ticket price inflation, which saw the average price of a ticket increase from $2.69 to $4.44 over the decade.) Capitalizing on the appeal of such pictures, the majors were able to extract better terms, longer play dates, and higher up front guarantees from exhibitors.

The blockbuster had the desired effect from the majors’ perspective of raising the expectations of movie goers for high production values, special effects and big-name stars. But in the process, the ‘ultra-high budget’ picture seriously undermined the ability of smaller firms to play the game. A shake out occurred in the independent market in 1989 as many independent producers went bankrupt. For one thing, the lure of pre-sales had created a product glut. From 1984 to 1987, annual output of the mini-majors and independents nearly doubled, causing a logjam at the exhibition level. Marginal films—those judged unlikely to recoup print and advertising costs—were shelved; others were lucky if they secured any playing time. Without national exposure or a theatrical run, few films found takers in the ancillary markets. To get national exposure, a picture had to open in New York and receive favourable reviews. Because this meant going up against the majors, independents were forced to spend more on advertising for a longer period of time. Few firms had the money to pull this off (Goldman 1989).

THE FOREIGN MARKET

The growth of the overseas market during the 1980s was a result of the upgrading of motion picture theatres, the emancipation of state-controlled broadcasting, the spread of cable and satellite services, and the pent-up demand for entertainment of all types. At one time, theatrical rentals constituted nearly all of the foreign revenues of American film companies, but by 1989 they accounted for little more than a quarter. The largest revenue components for Hollywood product overseas had become video, theatrical and TV, in that order. From 1985 to 1989, video cassette sales increased from $1.5 billion to $3.25 billion; theatrical film rentals rose from $800 million to $1.25 billion; and TV sales grew from $300 million to $800 million (Logsdon 1990:49).

The largest influx came from Western European television. When governments liberated the broadcast spectrum, the number of privately-owned commercial television stations and cable and satellite services grew enormously. In Great Britain, where consumers had long been restricted to two BBC and two quasi-independent stations, British Satellite Broadcasting and Sky Television introduced nine new satellite channels of pay-TV services (Variety 1990). In France, Canal Plus, the country’s first pay-TV service, attracted three million subscribers within five years (Fabrikant 1990d). By 1989, Western European television reached 320 million people and 125 million households (vs 250 million people and 90 million households in the United States) and showed the potential of becoming the largest single market for Hollywood entertainment (Logsdon 1990:50).

Although Hollywood had become the principal supplier of programming to these new services, the value of this trade was considerably less than theatrical distribution. This disparity existed because in most major European markets, governments had erected import quotas on television programmes similar to those imposed on motion pictures after the Second World War. Great Britain, for example, restricted TV imports on the BBC to a maximum of 14 per cent of total broadcast time. France, West Germany, and Italy established similar barriers to entry. The European Economic Community’s plans for a unified Europe in 1992 promised to abolish most trade barriers and make pan-European television a reality. The thinking went that if only a portion of the potentially available television channels were to begin operation, Hollywood imports would increase in volume and in price.

But European unification did not proceed as planned, so that the largest single source of revenue for Hollywood in Western Europe remained home video. The spread of VCRs in Western Europe demonstrated that, given a choice, consumers preferred entertainment with greater appeal and more variety than their state broadcasting monopolies provided. In 1978, VCR sales totalled around 500,000; by 1987, sales topped 40 million, or nearly one-third of all households. Like their counterparts in the United States, European VCR owners not only wanted to time shift programming to suit their own schedules, but also to enjoy different kinds of programming, particularly Hollywood movies. The message was clear; the demand for more entertainment on television had been left unsatisfied. By 1990, video sales in the European Economic Community totalled nearly $4.5 billion, with the lion’s share generated by Hollywood movies (Watson 1992).

Western Europe’s video business was likewise fuelled by theatrical exhibition. By 1990, the major American film companies collected around $830 million in film rentals from Western Europe, which came to about half of the film rentals they earned in the United States (Illist 1991). Overall, all overseas markets accounted for 43 per cent of their total theatrical revenues by 1990, an increase of 10 per cent over the decade (Fabrikant 1990b).

Two factors helped sales: more and better theatres and more effective advertising outlets. Going into the 1980s, nearly every market outside the US was under screened. Western Europe, for example, had about one-third the number of screens per capita as the United States, despite having about the same population (Illist 1991). And most of its theatres were old and tired. To rejuvenate exhibition and to encourage movie going, American film companies and European exhibitors launched a campaign during the 1980s to rebuild and renovate theatres on the continent. In Great Britain alone, new construction and refurbishment were responsible for 500 new multiplex screens, which had the effect of nearly doubling theatre attendance by the end of the decade (Fabrikant 1990c; Iliot 1993). Similar results were found in Germany, Italy, Spain, and France, as well as in Japan.

Taking advantage of the advertising opportunities created by commercial television, Hollywood pitched its wares as never before. Whole markets, such as West Germany, were opened up to television advertising. And new channels, such as MTV Europe which reached between 15 to 20 million homes, offered opportunities for niche marketing (Groves, 1990). Spending lavishly on advertising, the majors were able to bolster their ultra-high budget pictures in theatrical and in ancillary markets and overwhelm smaller, indigenous films that could not compete in such a high-stakes environment.

GLOBALIZATION

Urges to merge

Hollywood’s first response to globalization was to shift operations from vertical integration (e.g. studios acquiring theatre chains) to horizontal integration (e.g. studios partnering with other producers and distributors) (Logsdon 1990:4). The shift departed significantly from the merger movement of the 1960s, which ushered the American film industry into the age of conglomerates. During the 1960s, motion picture companies were either taken over by huge multifaceted corporations, absorbed into burgeoning entertainment conglomerates, or became conglomerates through diversification. The impetus behind this merger movement was to stabilize operations by creating numerous ‘profit centres’ to protect against business downturns in a specific area (Balio 1985:443). Acquiring theatre chains in the 1980s was an extension of this philosophy. Horizontal integration was designed to strengthen distribution and represented a new way of controlling the world entertainment market. As film industry analyst Harold Vogel put it,

Ownership of entertainment distribution capability is like ownership of a toll road or bridge. No matter how good or bad the software product (i.e., movie, record, book, magazine, tv show, or whatever) is, it must pass over or cross through a distribution pipeline in order to reach the consumer. And like at any toll road or bridge that cannot be circumvented, the distributor is a local monopolist who can extract a relatively high fee for use of his facility.

(Vogel 1989)

A survey of the strongest companies in the industry illustrates how they protected their entrenched positions while assuring themselves access to all the turnpikes and bridges. Rupert Murdoch’s acquisition of 20th-Century-Fox in 1985 triggered the recent merger movement. Murdoch’s goal was nothing less than to create ‘the world’s first global television, publishing and entertainment operation’ (Cohen 1990:31). The head of News Corp., an Australian-based publishing conglomerate, Murdoch owned newspapers and magazines in Sydney, London, New York and Chicago valued at over $1 billion. Acquiring a controlling interest in 20th-Century-Fox for $600 million, Murdoch announced his intention to create a full-blow...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Dedication
• Contents
• List of Tables
• Notes on contributors
• Series editors’ preface
• Acknowledgements
• Terms for a Reader: Film, Hollywood, National Cinema, Cultural Identity and Film Policy
• Part I Policy in a global industry
• Part II National film policies
• Part III Intranational perspectives
• Index