Chapter Four:

Tyler Cowen

Department of Economics

George Mason University

Fairfax, VA 22030

tcowen@gmu.edu

 For The Cultural Policy Program Workshop

 April 5, 2001

 Minerva's Owl

Table of Contents

1. Trade Between Cultures

2. Modernity and the Uprooting of Creative Ethos

3. Does Technology Damage the Native Arts?

4. Why Hollywood Rules the World, and Whether We Should Care

5. Dumbing Down and the Least Common Denominator

6. Should National Culture Matter?

Chapter Four: Why Hollywood Rules the World, and Whether We Should Care

Cultural innovations and breakthroughs come frequently in geographic clusters. Periclean Athens, the Florentine Renaissance, Parisian culture of the nineteenth century, and the Mississippi Delta blues are just a few examples of how creativity of a particular kind, at a given time, tends to be spatially concentrated. Cultural innovations in underdeveloped regions have shown especially high clustering. The best Persian carpets or Asmat sculptures were not produced by lone geniuses, but rather arose in established creative environments. Tribal or folk art traditions typically require concentrated geographic centers.

Today it is commonly feared that too much clustering will occur in some cultural sectors. In particular, international trade has made Hollywood the world center for expensive movies with an international audience. The degree of clustering has reached such an extreme, and Hollywood movies have become so publicly visible, as to occasion charges of American cultural imperialism. Many individuals claim that global culture is a threat rather than a promise, when it comes to the world of cinema.

  What lies behind these charges? To what extent is movie production clustered in Hollywood and why has such clustering taken place? Is such clustering inimical to diversity, and if so, could it be reversed? Most generally, has cross-cultural exchange damaged diversity in the realm of cinema?

 The United States has at least one natural advantage in moviemaking -- it has the largest single home market for cinema in dollar terms (although total attendance is higher in India). The countries that specialize in moviemaking will tend to be those countries where movies are most popular, in this case America and India. At times Hong Kong has been an exception to this principle, but a large domestic market does give a natural advantage. Home audiences often (though not always) prefer native products, if only for reasons of language and cultural context, and this shifts production to that market.

Aggregate market size nonetheless remains only a single factor in determining who becomes a market leader. The United States, for instance, has been a large country for a long time, but only recently have European movies held such a low share of their home markets. In the mid 1960s, American films accounted for thirty-five percent of box office revenues in Continental Europe; today the figure ranges between eighty to ninety percent. The greater population of the United States, and the greater American interest in moviegoing, do not themselves account for these changes.[1]

  Furthermore, only certain kinds of cinema cluster in Hollywood. In a typical year the Western European nations make more movies than America does. In numeric terms most of the world's movies come from Asia, not from the United States. It is not unusual for India to release eight or nine hundred commercial films a year, compared to about 250 from the United States. [2]

The Hollywood advantage is concentrated in one very particular kind of moviemaking: films that are entertaining, highly visible, and have broad global appeal. The typical European film has about one percent of the audience of the typical Hollywood film, and this differential has been growing. American movies have become increasingly popular in international markets, while European movies have become less so. [3]

  Not surprisingly, the Europeans invest less money in each film than do Hollywood producers. One estimate from the early 1990s placed the average European film budget at $3 million and the average American budget at $11 million. The average film budget for a major Hollywood studio (as opposed to an independent studio) is $34 million. These numbers do not even include marketing and audience research budgets, the area where American moviemakers outspend their European counterparts most. For an average Hollywood movie, domestic and foreign marketing expenditures might run in the neighborhood of $30 million. European estimates are hard to find, in part because the numbers are so small and not susceptible to easy measurement. [4]

  The question is not why Hollywood makes more movies than Europe, because it does not. The question is why Hollywood movies have more global export success, while European movies are aimed at small but guaranteed local audiences.

  The turning point in this dynamic appears to have come in the 1970s. Before the 1970s, most national European cinemas still experienced a significant amount of export success, whatever problems the industry as a whole had. Since that time, European moviemakers have seen their export markets collapse. In essence, Hollywood is now competing with the native European producers in each individual country, rather than with cross-European exports.

  The popularization of television, and the timing of this popularization, damaged European cinema. As television became widespread throughout Europe, movie audiences dwindled. In Germany, 800 million movie tickets were bought in 1956 but only 180 million were bought in 1962. At the same time, the number of television sets rose from 700,000 to 7.2 million. In the U.K., cinematic attendance fell from 292 million in 1967 to 73 million in 1986. In France, movie attendance dropped from 450 million in 1956 to 122 million in 1988. In Japan, the number of movie tickets sold in 1985 was only a sixth of what it had been 25 years earlier. [5]

  This negative demand shock forced European moviemaking to contract. Hollywood stepped into the void, just as it did during and after the first World War, an earlier crisis period for European cinema. Hollywood became strongest when European competitors were most vulnerable.

  American moviemakers had experienced a similar audience crisis, but much earlier, due to the more rapid spread of television in the United States. Television became common in the United States ten or more years before it did in Europe. The U.S. film audience declined by fifty percent, but this happened over the 1946-1956 period rather than later, as in Europe. By 1955, two-thirds of all American households already had television sets. [6]

  Hollywood responded actively to this challenge. Starting as early as the 1950s, American moviemakers responded to television by making high-stakes, risky investments in marketing, glamour, and special effects. In the 1960s American directors found greater latitude to experiment with sex and violence; this trend was formalized with the abandonment of the Hays Code in 1966. By the 1970s, Hollywood movies had become significantly more excit? ing to mass audiences than they had been a decade before. Jaws and Star Wars were emblematic of this new era. Hollywood was ready to move in with innovative products, expressly designed to compete with television. At exactly the same time, the European moviemakers found themselves unable to compete with television. For Hollywood it turned out to be a blessing in disguise that television hit the American market first.

  Demographics have worsened the European problem. In most countries, individuals older than 35 no longer go to movies in significant numbers, preferring instead to watch television. Moviegoing is the province of the young. Most European countries suffer twice here. First, they have older populations than does the United States. Second, the traditional "art house" styles of European film are better suited to old audiences than to young ones. This makes them especially hard to export. The advent of the cinematic multiplex, which tends to attract the young to movies more than the old, has worsened these problems.

  A self-reinforcing dynamic has since expanded Hollywood's export advantage. American success has led to easier finance and greater marketing expenditures, which in turn has led to greater export potential. Hollywood films have become successively global, while European films target small but guaranteed revenue sources, such as state subsidies, or television rights, sold to government-regulated stations. A vicious circle has been created: the more European producers fail in global markets, the more they rely on television revenue and subsidies. The more they rely on television and subsidies, the more they fail in global markets. Television has cut into the American and European cinematic markets in different fashion. Video rentals are a more important income source in the American market, whereas the sale of television rights plays a bigger role in most of Western Europe.

  U.S. figures (circa 1993), place pay and free television at 19% of cinematic revenues, movie theaters at 27%, and home video at 49%. In contrast, television receipts account for more than half of film revenue in the French market. Not every European country exhibits the same dependence on television, but France is by far the biggest movie producer in Europe and accounts for roughly half of all West European movie output by dollar value. [7] The problems of European cinema are, in large part, the problems of French cinema.

  The revenue reliance on broadcast television makes European movies less suited for the export market. Television provides a largely passive audience. Many TV viewers turn on the set and watch whatever is on, without paying serious attention to the program. They do little to enforce high standards of quality production. Production for the television market tends towards the mundane and the formulaic. Glitzy special effects are rare. We find these same features in made-for-TV films in the United States. A few of these films are excellent (such as Steven Spielberg's early .Duel.), but most are undistinguished and boring, despite the immense talent in Hollywood. Most of all, made-for- TV movies are not well-suited for export to large audiences. In essence, Europe simply has more made-for-TV movies than the United States, regardless of the claimed pretense of theatrical release.

The home video market, more prominent in the United States, is more competitive and demanding than television, and imposes greater discipline on the moviemaker. The customers must be impelled to go out and rent a movie in the first place. Then they must choose a particular film from among hundreds or thousands of competing titles in the video store. The U.S. also has a more competitive television market, due to the larger number of cable channels, which requires that video rentals meet higher quality standards.

In the United States, the television and video markets serve as handmaidens for the theatrical market, augmenting its influence over the quality of the product. While some movies succeed on video alone, video success typically depends on the advance publicity generated by the film at the theatrical box office. The same can be said for success on television, or for the sale of television rights. Theatrical revenue thus drives both video revenue and television revenue in the American market. In Europe, in contrast, television revenue is more likely a substitute for theatrical revenue. European films, which experience major box office successes far less frequently, are more likely placed on television as filler.

The roles of television and subsidies are closely linked. Most West European nations have television stations that are owned, controlled, or strictly regulated by their respective governments, which use them to promote a national cultural agenda. Typically the stations face domestic content restrictions, must spend a certain percentage of revenue on domestic films, must operate a film production subsidiary, or they willfully overpay for films for political reasons. The end result is overpayment for broadcast rights -- the most important subsidy that many European moviemakers receive. Audience levels are typically no more than one or two million at the television level, even in the larger countries such as France -- too small to justify the sums paid to moviemakers for television rights on economic grounds. [8]

European films receive many other forms of subsidy. In France, for instance, direct subsidies are available from the national government, regional governments, European subsidy bodies, such as Eurimages, and co-production subsidies through other national governments. French producers need only put up fifteen percent of the budget of their films to receive subsidies. French producers also receive "Sofica" tax shelters (estimated worth of more than five percent of total budgets), automatic box office aid from the government (estimated at 7.7 percent of total budget), a discretionary subsidy called "avance sur recettes," which takes the form of an interest-free loan (estimated at over five percent of total budget), and subsidies for the promotion of French films abroad. A 1970 study estimated that sixty percent of the "avance" subsidy was in fact never recovered. Money is also advanced for the development of new film ideas, and for script rewriting, if the proposed film is rejected when it applies for subsidies on the first go-round. There is a special subsidy fund for coproductions with East European filmmakers. The French government also subsidizes the upkeep and construction of cinemas -- an indirect subsidy to moviemakers -- and encourages French banks to lend money to moviemaking projects. A number of other French institutions are not formally state-controlled but act in conjunction with the state system, subsidizing scriptwriters, directors, and production companies. [9]

  Martin Dale, a cinema industry analyst, has estimated that the state provides at least seventy percent of the funding for the average Continental film, taking all subsidies into account. This figure is speculative rather than exact, if only because the number and variety of subsidy schemes make their impact difficult to trace. We also do not know what prices the market would yield in the absence of subsidy. Nonetheless subsidy-granting bodies provide more than supplemental assistance for European moviemakers; rather, they have become the primary customer. [10]

  Subsidies encourage producers to serve domestic demand and the wishes of politicians, rather than towards international export. Many films will be made, even when they have little chance of turning a profit in stand-alone terms. The film industries will not develop specialized talents in demand forecasting and marketing, as Hollywood has done.

  The training of cinematic talent in the United States and Europe reflects these differences. American film schools are like business schools in many regards. European film schools have become more like humanities programs, emphasizing semiotics, critical theory, and contemporary left-wing philosophies. The European directors that survive tend to be established and to have long-standing political connections; one 1995 study estimated that 85 percent of the film directors in France were over fifty years of age at the time. The younger talents set their sights on Hollywood from the beginning, rather than staying at home to develop a domestic cinema. [11]

The two non-Hollywood cinemas that have enjoyed the most export success -- India and Hong Kong -- are run on an explicitly commercial basis. Some segments of the Indian film industry receive government subsidies, but the overwhelming majority of new releases do not. They are commercial productions made for profit and frequently exported abroad, usually to other underdeveloped nations but often to the United Kingdom as well. By numerous measures, such as attendance or number of films released, the Indian movie industry is the largest and the most successful in the world. Indian movies are frequently criticized for their generic nature or sappy plots, but in terms of music, cinematography, and use of color, they are often quite beautiful and even pathbreaking compared to Western productions.

The Hong Kong film industry has experienced export success from the 1970s onward, mostly throughout southeast Asia. At its peak it released more films per year than any Western country, and as an exporter it was second only to the United States. Furthermore, Hong Kong cinema arose in a market that was dominated by Hollywood up through the late 1960s. In the 1970s and 1980s, however, Hollywood sometimes failed to capture even thirty percent of the domestic Hong Kong market. Only since 1997, when Hong Kong returned to China, did Hollywood movies take in more than half of the total local box office. [12]

At first Hong Kong movies focused on the martial arts, but they subsequently branched out to include police movies, romance, comedy, horror, and ghost stories, among other genres. The best of these movies, such as John Woo's The Killer, or Hardboiled, are acclaimed as high art and have had considerable influence on directors around the world. David Bordwell, in his recent Planet Hong Kong, claimed "Since the 1970s it has been arguably the world's most energetic, imaginative popular cinema." Hong Kong movies are made on a commercial basis and have received no government assistance. In recent times, however, the industry has been damaged by the Chinese takeover of Hong Kong and by fears of censorship. [13]

Many of the complaints about American cultural imperialism have an excessively Eurocentric slant. Today's mainstream European cinema does appear less creative and less vital than its 1950-1970 heyday. But cinematic creativity has almost certainly risen in Taiwan, China, Iran, South Korea, the Philippines, and many parts of Africa, among other locales. Even within Europe, the creative decline is restricted to a few of the larger nations, such as France and Italy. Danish cinema is more influential and more successful today than in times past, and arguably the same is true for Spanish cinema as well. While filmmakers in these countries struggle against Hollywood competition, creative world filmmaking is not on a downward trajectory.

The English language, and the move from silents to talkies

The English language, combined with America's role as world leader, has strengthened Hollywood exports. Cinematic clustering, and the current crisis of European cinema, is rooted partially in the transition from silent film to talkies.

  Counter-intuitively, the onset of the sound era increased Hollywood's share of world cinematic revenue. At the time of the transition, equipping the theaters with sound and making movies with sound were costly. To recoup these costs, theaters sought out high-quality, high-expenditure productions for large audiences. The small, cheap, quick film became less profitable, given the suddenly higher fixed costs of production and presentation. This shift in emphasis favored Hollywood moviemakers over their foreign competitors. [14]

  More generally, the higher the fixed costs of production, the greater the importance of drawing a large audience, and the greater the importance of demand forecasting and marketing. Today costly special effects and expensive celebrity stars drive the push for blockbusters in similar fashion, and favor Hollywood production as well.

  The talkies, by introducing issues of translation, boosted the dominant world language of English and thus benefited Hollywood. Given the growing importance of English as a world language, and the focal importance of the United States, European countries would sooner import films from Hollywood than from each other. A multiplicity of different cultures or languages often favors the relative position of the dominant one, which becomes established as a common standard of communication. During the silent era, in contrast, European films enjoyed an even footing in the export market, as language was not an issue.

  Hollywood executives properly regarded the onset of talkies as an opportunity to expand abroad, rather than as a reason for trepidation. At the time of the transition, some movie executives speculated that talking pictures would make English the language of the entire world, which has turned out to be only a partial exaggeration of the truth. [15]

Once America, and the English language, became established as a world standard, this proved self-reinforcing. American audiences, the world's largest moviegoing audience at the time, became accustomed to seeing films in their native language. Dubbed or subtitled movies have a difficult time in the United States to this day, whereas most other audiences accept them with few complaints. In Germany, the individuals who dub the German- language voices of prominent American actors and actresses can become celebrities in their own right, if their manner of speech is sufficiently memorable. Dubbers become known as the German voice of John Wayne, Tom Hanks, or Jack Nicholson.

  This difference in linguistic expectations means that European moviemakers have a much harder time penetrating the American market than vice-versa. The American export advantage is based on a combination of outward-looking producers and inward-looking consumers.

  The move to sound, and the rise of English as an export standard, provided a strong boost to the movie exports of Great Britain. While the U.K. has never seriously rivaled Hollywood as a moviemaking power, many U.K. releases have succeeded on a global scale, essentially by mimicking the Hollywood style. The James Bond movies and David Lean's Lawrence of Arabia or Bridge over the River Kwai are some of the best known British successes. [16]

  Today the United Kingdom is the leading European exporter of movies to other European nations. In 1991, the U.K. put out 36 movies, 56% of which were exported to France. In the same year, France put out 140 movies, only 14% of which were exported to the U.K. Italy, Spain, and Germany have export performances that are far worse than the French record. Not surprisingly, U.K. moviemakers spend more per film than anywhere else in Europe and rely less on subsidies than their Continental counterparts. U.K. producers also have been geared to export for a long time. Given how much of their home market is captured by Hollywood, U.K. features must reap export revenue to turn a profit. [17]

  We see tendencies towards a common linguistic standard in more segmented cinematic markets as well. Numerous dialects are spoken around the Arabic world. This has helped Cairo, through the use of Egyptian Arabic, to attain a position as the dominant movie exporter to other Arabic nations. Egyptian Arabic is now widely understood around the Arabic world, in large part because non-Egyptians receive so many movies and television programs in the language. This audience is now more likely to patronize the Egyptian product, which makes it harder for other Arab nations to compete. India has fifteen languages and two thousand dialects, but the Hindi cinema of Bombay dominates the market. While more films are made in Madras and other locales, Bombay films command most of the investment, attract the biggest stars, have the greatest national following, and have the greatest success in the export market. The Philippines has many languages as well, but Tagalog has priority in the world of cinema. These more segmented markets illustrate many of the same factors that benefit Hollywood in global markets. [18]

  The move to talkies damaged non-Hollywood .exporters., but not all non-Hollywood producers. In fact, European movies commanded a greater share of their home market in the 1930s than during the silent era. The domestic market offered a certain percentage of "captive" viewers who preferred their native language. So European moviemakers turned their attention inward to a greater degree, given the greater ease of pleasing the home market and the greater difficulty of exporting.

  The French market offers the clearest field for comparison, given the rise of fascism in Germany and Italy, and accompanying restrictions on foreign films. French film production doubled between 1928 to 1938, and French movies commanded over half of their domestic market throughout the 1930s. In 1936 the six most popular French films were all native French products. Of the 75 most popular films, 56 were French, as opposed to 15 from Ameri? ca. In 1935, 70 percent of all film receipts in France went to French-produced movies. In comparison, in 1925, at the height of the silent era, American exports accounted for 70 percent of the French market. [19]

  The sound era offered the greatest relative benefits to the national cinemas that were not exporting much in the first place. The export promise of these products, relative to Hollywood, could not fall, since it was close to zero in the first place. Cinema blossomed in Hungary, Netherlands, Norway, Mexico, and Czechoslovakia, among other places, at least relative to the silent era. The Hong Kong cinema started in the 1930s, and used the Cantonese dialect as its primary selling point in southern China. In contrast, Sweden and Denmark, which were significant movie exporters in the silent era, did not fare nearly as well with the onset of talkies. [20]

  The sound era also transformed movies through the introduction of musical soundtracks. In the 1920s, foreign films, mostly American, captured approximately 85 percent of the Indian market. By the end of the 1930s, this had fallen to twenty percent. In the new sound era, film music was a greater lure for Indian audiences than dialogue, and arguably remains so to this day. Hollywood has no comparative advantage at producing high quality Indian popular music. Indian producers marketed their films domestically on the basis of their music, and quickly developed new centers of cinematic production in Bombay, Calcutta, and Madras. [21]

  Music provided a similar protective role in Argentina, where hundreds of musical comedies were made in the early years of sound. The Argentinean Carlos Gardel, more of a tango singer than an actor, became the hottest Latin cinematic star of this era. Hollywood has never had a strong comparative advantage in producing musicals for foreign audiences, and its international influence has been limited accordingly. The general decline of the musical, however, has weakened an area where national cinemas traditionally held their own against Hollywood imports. [22]

The drive towards clustering

  In part, the production of cinema clusters in a single geographic area simply because there is no reason .not. to have clustering. When the cost of shipping the relevant goods and services are low, clustering is often efficient.

  Consider a more general economic analogy. There is more trade and mobility across the United States of America than across the disparate countries of Western Europe. This trade causes the economic profiles of the American states to diverge.

  In economic terms, the countries of Western Europe are more likely to resemble each other than are the American states. Most of the American states have no steel industry, no automobile industry, and no wheat industry, but rather they buy the products of these industries from other states. But typically a nation of Western Europe has its own steel, automobile, dairy, and agriculture sectors, largely because of subsidies and protectionism. Free trade within the United States allows states and regions to specialize to a high degree and causes their economic profiles to diverge; in a freer economic environment, the economies of Western Europe would take the same path. [23]

  Trade and specialization thus bring clustering when the basic product is mobile. Most American peanuts are grown in Georgia and Virginia and then shipped to the rest of the country. In contrast, each region of the United States performs its own cement manufacture, as does each country. The costs of trading and transporting cement are too high for clustered production, and subsequent transport, to be feasible. Action movies, however, resemble peanuts more than cement in this regard, especially if the film appeals broadly to many cultural groups. Some of cinematic clustering in Hollywood is driven by the short-run, dynamic nature of film projects. Studios may dally over projects for years, but once the go-ahead decision has been made, the moviemakers wish to move as quickly as possible, to meet a perceived market demand. They need to assemble large number of skilled employees on very short notice, and therefore they will "fish" for talent in a common, clustered pool. In similar fashion, the computer industry changes rapidly, many projects are short-term, and once a go-ahead decision has been made, large numbers of talented employees must be assembled rapidly. Common forces therefore shape the clusters of Silicon Valley and Hollywood.

  It is not always the case that movies can be filmed more cheaply in Hollywood than elsewhere. In fact, Hollywood studio hands are worried about how many movies are being outsourced to Canada, Australia, and other non-U.S. locales, to lower production costs. Rather, clustering eases the finding, lining up, and evaluating of the movie's critical assets, such as stars, directors, and screenplays. These tasks are still done in Hollywood rather than in Vancouver or Sydney, regardless of where the movie is filmed.

  The Hollywood cluster has a superior ability to evaluate cinematic projects and in particular, to forecast and meet consumer demand. Hollywood is the geographic center for these kinds of talent. Ironically, it is easier to get a film made in Europe than America. In Hollywood, studios scrutinize projects intensely and refuse to finance projects that do not have a good chance of commercial success. Most European moviemakers do not apply similar filters. Hollywood is a cluster, in part, for the same reasons that New York and London are clustered banking centers. In both cases talents for large-scale project evaluation gravitate towards a single geographic area. [24]

  Moviemaking has become more expensive over the last thirty years, due largely to special effects, rising celebrity salaries, and marketing expenditures. All of these features have increased the natural advantage of talents for demand forecasting and project evaluation. They have increased the natural advantage of Hollywood.

  Initial clusters often generate snowball effects, attracting yet more talent to the commercial center. When European directors want to make popular movies, they now go to Hollywood, as we have seen with Ridley Scott, Paul Verhoeven, Bernardo Bertolucci, and Jean-Jacques Annaud, among many others. "Snowball effects" of this kind make initial differences self-cumulating rather than self-reversing.

  For this reason, one "turnaround" event can shift a cluster from one locale to another. In the case of cinema, the French lost their dominant market position only with the first World War, which caused the major combatants to virtually cease film production for four years. Hollywood stepped into the vacuum and first penetrated world markets on a large scale in the 1920s. The snowball effect shifted the direction of its momentum, and the United States rapidly surpassed the French as the world's largest movie exporter in only a few year's time after the First World War.

Clustering myths

  A common myth is that America dominates world cinematic markets because of its monopoly power. Yet all the primary distributors in Europe are owned by European media groups and regulated by European governments. When the Cineplex Odeon movie theater chain in the United States was Canadian-owned, and for a while joint Canadian and British-owned, it made little difference on the screen.

  A second myth is that Hollywood dominates because it can sell its movies so cheaply abroad, having recovered their costs in the home market. The claim is that the movie can be dumped abroad, since "it has already been paid for."

  This argument does not provide the fundamental reason for America's market share. At most it explains why Hollywood films are booked by cinemas, not why they are so popular with audiences. When European consumers choose whether to see an American or an indigenous production, typically the ticket prices are the same or roughly the same (if anything the American movie might be more costly, all things considered, given time spent waiting in line). The American dominance arises because at equal admission prices, European consumers prefer to see American movies.

  If the critics were correct that Hollywood's fundamental advantage were on the cost side for film rentals, we should observe relatively empty theaters for American films in Europe. The cheapness of Hollywood films would cause so many films to be imported that the marginal Hollywood film would draw a small audience. (To consider a limiting case, if it cost nothing to show a Hollywood film, so many would be imported that they would play even to virtually empty theaters.) Those films would be carried primarily for their cheapness, not for their popularity. But we do not observe this outcome. When American movies are shown in Europe, the critics complain that the theaters are full. If Hollywood dominated the market on cost grounds, rather than on popularity grounds, Europeans would not fear cultural imperialism as they do.

  The argument that Hollywood movies have "already been paid for" has another logical flaw. Movies from all countries have "already been paid for," once they are made. The fundamental issue is what gets made in the first place, and that depends on product quality. So many Hollywood movies are made because they can draw large audiences. [25]

  Similar points apply to many media industries, such as when Canadians claim that America dump television shows or magazines at very low cost, since the producers are already making a profit in the U.S. market. But again, we typically do not observe American products preferred for their cheapness, we observe them preferred for their superiority in entertaining the audience. The American version of Sports Illustrated does not sell for less than Canadian sports magazines

  The correct version of the argument notes that suppliers with a large home or captive market often can afford to make better products. Given their larger built-in audience, they can invest more money in quality, and earn the investment back on ticket sales more easily. Films from Burkina Faso do not have expensive special effects. This argument, however, leads us back to the conclusion that the more expensive movies are better movies, at least in the eyes of the audience, if not always in more objective aesthetic terms.

  If we examine the television market, the dumping argument implies an irony. To the extent that Hollywood TV programs or movie rights have been sold cheaply in Europe, it is because European TV stations have held a strong bargaining position (a "monopsony," in economic language). Until the recent partial deregulation of European television, the number of program buyers in a single country has sometimes been as small as one or two government-owned or government-controlled channels. The single buyer, through bargaining, could limit the price paid for rights to a Hollywood movie. Ironically, the cheap sale of Hollywood movies to television has, in the past, subsidized the state- controlled, noncommercial products of European television. [26] Without monopsony, the price of movie rights would be bid up to reflect the potential popularity of the movie.

  America has had less success in exporting its television programs than its movies. The popularity of European domestic television programs is fairly robust; even the African nations command a reasonable share of their domestic television market. While some American shows have been exported successfully, they are not hits in every country; Dallas was a failure in Brazil and Japan. American television programs show no sign of taking over the world and in many countries they are losing market share. In 1998, for instance, American television programs were unable to crack the top ten in any of the major Western European markets. [27]

  In part, television programs face a more passive audience and need not meet the exacting technical standards of the cinematic medium. Hollywood has never had a strong comparative advantage at producing relatively low-cost drama. In some genres, such as the soap opera, Brazil and Mexico have proven more effective exporters than the United States, again showing the special and limited nature of the Hollywood advantage in international markets. [28]

  American cannot even dominate the market for Spanish- language Latin television, even though the 30 million or so Latinos in the United States are the single largest Latin audience in terms of purchasing power. The Miami-based stations of Television and Unimundo import most of their dramatic programs from Mexico and South America, rather than making them in the United States. As a result, some U.S. Latinos have objected to the "cultural imperialism" behind this practice, wishing instead for a home-grown Miami product. [29]

American cultural imperialism?

  When Hollywood penetrates global markets, to what extent is .American. culture being exported? Or is a new global culture being created, above and beyond its specifically American origins? There is no simple answer to this question.

  Critics of cultural imperialism make two separate and partially contradictory charges. Some are unhappy with the global spread of the American ethos of commercialism and individualism. Other complaints focus on the strong global market position of a relatively universal cultural product, rather than local products based on national or particularist inspirations. There is some truth to each complaint, although they point in opposite directions.

  If we look at the national identities of the major individuals involved, Hollywood is highly cosmopolitan. Many of the leading Hollywood directors are non-Americans by birth. Arnold Schwarzenegger, Charlie Chaplin, and Jim Carrey have been among the leading non-American U.S. stars. Most of the major studios are now foreign-owned. A typical production will have Sony, a Japanese company, hire a European director to shoot a picture in Canada and then sell the product for global export. Of the world's major entertainment corporations, only Time-Warner is predominantly American in ownership.

  For better or worse, Hollywood strives to present the universal to global audiences. As Hollywood markets its films to more non-English speakers, those films become more general. Action films are favored over movies with subtle dialogue. Comedy revolves around slapstick rather than verbal puns. The larger the audience, of course, the more universal the product or celebrity must be. There is relatively little that the world as a whole, or even a select group of fifty million global consumers, can agree on. Greater universality means that the movies are relevant to general features of the human condition, but it also can bring blandness and formulaic treatment. Critics allege that American culture is driving the world, but in reality the two are determined simultaneously, and by the same set of forces.

  Non-American movies, when they pursue foreign markets, must strive for universality as well. The Jackie Chan Hong Kong movie, Rumble in the Bronx, was marketed in the United States with success. The producers, however, cut parts of the movie to appeal to American audiences. All of the action sequences were kept, but the relationship of Chan with the co-star was diminished. In part the woman (Anita Mui) was a star in Asia, not in the United States. In part the relationship was based on the "Chinese" values of obligation and loyalty, rather than on a Western sense of erotic romance. [30]

  The most successful Canadian cultural export is the Harlequin romance novel. In 1990 Harlequin sold more than 200 million books, accounting for forty percent (!) of all mass market paperback sales in the United States. This fact is rarely cited by Canadian critics of American cultural imperialism, not because they are dishonest, but because this export success does not "count" for them. The Harlequin romance does not reflect a specifically Canadian perspective, whatever that designation might mean, but rather targets a broad circle of female readers. [31]

  Despite these powerful universalist forces, the American and national component to Hollywood moviemaking cannot be ignored. Hollywood has always drawn upon the national ethos of the United States for cinematic inspiration. The American values of hero? ism, individualism and romantic self-fulfillment are well-suited for the large screen. It is true that Hollywood will make whatever will sell abroad. Nonetheless .how well. Hollywood can make movies in various styles will depend upon native sources of inspiration. Hollywood has an intrinsic cost advantage in making movies based upon American values, broadly construed, and thus has an intrinsic advantage in exporting such movies. The clustering of filmmaking in Hollywood cannot help but be based on an American ethos.

  For this reason, dominant cultures, such as the United States, have an advantage in exporting their values. Consider food markets. Many third world citizens like to eat at McDonald's, not just because the food tastes good to them, but also because McDonald's is a visible symbol of the West and the United States. When they walk through the doors of a McDonald's, they are entering a different world. The McDonald's corporation, knowing this, designs its third world interiors to reflect the glamour of Western commerce, much as a shopping mall would. McDonald's shapes its product to meet global demands, but builds on the American roots of the core concept. The McDonald's image and product lines have been refined in the American domestic market and draw heavily on American notions of how food and social life are related.

  The promulgated American ethos will, of course, successfully meld both national and cosmopolitan influences, and will not be purely American in any narrow sense. American cinema, like American cuisine, has been a synthetic, polyglot product from the beginning. Hollywood was developed largely by foreigners -- Jewish immigrants from Eastern Europe -- and was geared towards entertaining American urban audiences, which were drawn from around the world.

  Furthermore, Hollywood's universality has, in part, become a central part of American national culture. Commercial forces have led America to adopt "that which can be globally sold" as part of its national culture. Americans have decided to emphasize their international triumphs and their ethnic diversity as part of their national self-image. In doing so Americans have, to some extent, traded away particularist strands of their culture for success in global markets.

  In this regard Hollywood's global market position is a Faustian bargain. Achieving global dominance requires a sacrifice of a culture's initial perspective to the demands of world consumers. American culture is being exported, but for the most part it is not Amish quilts and Herman Melville. Jurassic Park, a movie about dinosaurs, was a huge hit abroad, but Forrest Gump, which makes constant reference to American history and national culture, made most of its money at home.

The virtues of living at the margins

  Hollywood's export success shapes the cinematic market. First and most prominently, it enhances spectacular, blockbuster productions. While many of these productions are aesthetically mediocre, many are excellent (my personal picks would include The Empire Strikes Back, The Truman Show, Dangerous Liaisons, and Seven, to name a few). Clearly, to the extent we use audience preferences as the relevant standard of value, Hollywood succeeds.

In addition to these blockbusters, the financial success of the industry supports diversity. Not all Hollywood products fit the "least common denominator" model. Hollywood puts out a wide range of independent releases, creative comedies, and films that do not fit any easily identifiable category. The late 1990s have in particular been renowned for the wide variety of high quality, non-mainstream fare coming out of Hollywood ("Election," "American Beauty," and "Three Kings" would be three examples from the summer/fall of 1999).

  "Micro-budget" films are far more common in the United States than in Europe. A micro-budget film is one made by a previously amateur director on a minuscule budget, typically less than $100,000. Among the best-known microfilms are Spike Lee's She's Gotta Have It, the Coen brothers' Blood Simple, and the recent Blair Witch Project. All of these innovative projects have been made under director control and liberated from the constraints of studio production.

  It is no accident that Hollywood has both the largest studio apparatus and the greatest number of micro-budget films. Building a film industry of any kind requires a regular supply of popular product. A healthy commercial base is needed to support an infrastructure of theaters, production companies, film schools, and marketing institutions. Independent or innovative filmmakers benefit from this infrastructure just as the major studios do.

  The major studios typically seek to buy out and "corrupt" the independent filmmakers, and in this sense the two cinematic worlds are always at war with each other. But in a larger sense they are complements. The mainstream desire to commercialize the independents helps finance their existence. Directors invest their money in micro-budget films, in part, because they have a chance of receiving a subsequent contract with a major studio. This is not just a matter of money, but also of receiving the resources to film their larger visions. In addition to the Coen brothers and Spike Lee, Francis Coppola, Peter Bogdanovich, Martin Scorsese, Jonathan Demme, David Lynch, Sam Raimi, John Sayles, and Jim Jarmusch all first made their names with micro- budget films. The directors of Blair Witch Project were courted for a Hollywood sequel, which earned them millions in advance, despite its low quality. Hollywood studios, whatever their conservatism and their flaws, are always looking for the "next hot thing." If they can find a micro-budget production that is marketable, they will seek to co-opt it but in the meantime they are providing the "prizes" that drive the independent market.

  European studios, in contrast, never expect high returns from projects and thus they adopt a more conservative attitude. Notable European directors such as Godard, Bertolucci, Truffaut, Besson, and Pasolini found their start with micro-budget films, but the overall commercial weakness of European cinema is making those kinds of opportunities harder to find and exploit. [32]

  It is not altogether bad that European cinema does not have the same export promise as Hollywood. While commercial improvement would undoubtedly benefit European cinema, diversity would not be served by a fully "level playing field" in the industry. The dirty little secret of today's cinematic world is the following: the very features of the film industry which have led to American export dominance also have supported diversity of style around the globe.

  The global prowess of Hollywood means that European moviemakers pursue different markets and produce different kinds of creativity. Many of the interesting qualities of European movies come precisely from their inability to reach world markets on a large scale. Shut out of world markets, European movies have been able to focus on nuances of language and culture. They typically do not have happy endings, but rather they opt for something more interesting. Non-Hollywood productions that have success abroad, such as Four Weddings and a Funeral, or Like Water for Chocolate, often have many of the flaws that plague mainstream Hollywood releases, such as saccharine, cliched characters or an unrealistically happy ending.

  European pictures from the silent era, which had a greater chance of export success, were more like American movies of their time than are current European productions, or European films of the 1950s or 1960s. European talkies, because they are aimed at different audience segments, have not followed the same artistic path as Hollywood. Hollywood's asymmetric economic strength, while it comes under heavy criticism, in fact supports aesthetic diversity.

  Similarly, the creativity of Hong Kong moviemaking in the 1980s would not have been possible, had those pictures been geared to export to American and Europe, rather than the smaller and more specialized southeast Asian market. The Hong Kong movie .Dr. Lamb. was a success in the Hong Kong market of the 1990s. The movie was explicitly patterned after Silence of the Lambs, a U.S. and global hit in 1992, but the two movies could not be more different in tone. Silence of the Lambs plays up its two celebrities, Jodie Foster and Anthony Hopkins, and gives them a strong, caricatured presence in the movie. They engage in witty repartee and are made into glamorous figures. The last segment of the movie plays the viewer for mechanical suspense, as Jodie Foster chases down another serial killer. Dr. Lamb is a far scarier entry. It never plays the viewer for suspense, but rather reveals its denouement at the beginning. The killer is a sullen and nasty figure, rather than the charismatic and articulate Anthony Hopkins playing Hannibal Lecter. We see the killer dismembering his victims, indulging his perverse fetishes, and having brutal arguments with his family. There is no feeling of resolution offered at the end, rather the viewer is left feeling uneasy. Not surprisingly, Dr. Lamb has never been released in the U.S. market.

The future of global cinema

  It remains an open question whether the current extent of movie clustering will reverse itself in the long run, but the immediate trends appear to favor Hollywood. The current European malaise is driven by a concatenation of unfavorable forces, as described above, involving television, subsidies, demographics, language, the size of the American market, and Hollywood's more entrepreneurial environment. More protectionism and more subsidies abroad are unlikely to reverse these trends and would more likely than not worsen them.

  To revisit the initial question about the creative efficacy of markets in cinema, we probably do see too much clustering of movie production in Hollywood, relative to the best possible state of affairs. Nonetheless cross-cultural exchange is not entirely to blame for this excess clustering. Part of the problem has been cultural protectionism and subsidies, combined with bad demographic luck, rather than the growth of the global market per se.

  European governments are understandably reluctant to remove the subsidies. Once the dynamic of Hollywood export superiority is in place, most European productions, as we currently know them, cannot survive without governmental assistance. In the short run, laissez-faire would likely lead to a greater Hollywood presence in European cinema. Ideally European governments would like to return to something like the 1930-1970 period. These years show that the strong presence of Hollywood in world markets does not eliminate the creativity of foreign moviemakers. In 1973, Hollywood held only 23 percent of the Italian market, and large numbers of high-quality Italian movies were commercially viable. Hollywood had dominated the Italian market after the Second World War, but Italian moviemakers fought back, in part using the techniques they learned from studying Hollywood releases. [33]

  Even as recently as 1985, French movies outgrossed the Hollywood product in their home market. Since that time, Hollywood's ability to capture 80 percent of French film revenue has come largely because French revenues have declined, not because Hollywood revenues have risen so much. [34]

  Going back further, the 1930s were a "Golden Age" for French cinema; the best-known French films of this era include L'Atalante (Jean Vigo), Le Jour de Seve (Marcel Carne), La Chienne, The Grand Illusion, and The Rules of the Game (by Jean Renoir). Over thirteen hundred French feature films were issued, covering a wide range of genres. During this period, French cinema received no government subsidies. The legal restrictions on American films were insignificant and did not keep Hollywood productions out of the French market. [35]

  In the early silent era, France dominated world cinema markets. Before the first World War, French movies accounted for up to seventy percent of the American market, and even more in Latin America. In a reversal of contemporary trends, American filmmakers charged the French with cultural imperialism and asked Washington for trade protection. It was commonly charged that European movies encouraged lax morals and corrupted American culture. The French responded by noting the openness of their cinematic markets and asking America to compete on equal terms. Like Hollywood today, the French market dominance was achieved without significant subsidies from the French government. [36]

  After the Second World War, European movies did typically receive subsidies, but of a much smaller magnitude than today. Martin Dale estimates that in 1960 subsidies accounted for only twenty percent of the average European film, compared to his current estimate of seventy percent. The notable movies of Truffaut, Fellini, Visconti, Bergman and others were fundamentally money-making endeavors, aimed at the competitive marketplace, despite the involvement of government at various levels. [37]

  The best hope for European cinema today is to rediscover the economic and cultural dynamic that generated movies of these kinds, or to generate a new dynamic in its place. Such a dynamic will require heavy reliance on international markets and global capital. The marketplace never guarantees a favorable result, but excessive insulation from competitive pressures can virtually guarantee an unfavorable result, whether economically or aesthetically.

NOTES

1. On the increase of American revenue in Europe, see Puttnam (1998, p. 266).

2. Ilott (1996, p.13).

3. On the growing differential, see Dale (1997, p. 119).

4. See Ilott (1996, p. 27) and Dale (1997, p.31).

5. See Kaes (1997, p. 614), Dunnett (1990, p. 43), Noam (1991, p. 59), and Dissanayake (1988, p. 16).

6. See Rifkin (2000, p.25) on the timing of the decline in America. On the 1955 statistic, see Caves (2000, p. 94).

7. Ilott (1996, pp. 10, 27, passim).

8. For details on European television regulations, see Grantham (2000, chapter four), Dale (1997, p. 119) and Noam (1991, pp. 107, 112).

9. On the 1970 study, see Some Aspects of French Cultural Policy (1970, p. 45). For a more general list and outlining of these subsidies, see Wangermee (1991) "International Film Finance," at http://forth.stir.ac.uk/~fmzpl1/France.html. On some details about German subsidies, see Kolmel (1985).

10. See Dale (1997, p. 123).

11. On film school, see Dale (1997, pp. 206-7). On the age of directors, see Micklethwait and Wooldridge (2000, p. 199) and Dale (1997, p. 161).

12. On Hong Kong cinema, see Bordwell (2000, passim, pp. 1, 34).

13. See Bordwell (2000, p.1).

14. Seagrave (1997, p. 74: Usabel 1982 pp. 80-2).

15. Crafton (1997, p. 422). In particular sectors or times when the American market share fell, other events appear to have operated, such as trade quotas, patent problems, or the Great Depression (Crafton 1997, chapter seventeen, Thompson 1985, pp. 164-5).

16. See, for instance, Puttnam (1998, p. 113) on how sound boosted the English export sectors in its early years.

17. Ilott (1966, pp.14, 28).

18. Bombay dominance, see Chakravarty (1993, p.44), Gokulsing and Dissanayake (1998, p. 123), and Lent (1990, p. 231).

19. See Crisp (1993, p. 12), Andrew (1983, p. 57), Hayes (1930, pp. 194-5), Sklar (1975, p.222). Quotas limited American films to seven-eighths of the market, which was more than the American share had ever been. On 1925, see Magder (1993, p. 21) and Costigliola (1984, p. 176).

20. See Armes (1987, p. 63), Dibbets (1997, p. 219), Schnitman (1984, p. 15), and Teo (1997, pp. 6-7).

21. On these points, see Barnouw and Krishnaswamy (1963, p. 39), (Sklar 1975, p. 226), Baskaran (1982, p. 99), and Armes (1987, p. 62). On musicals in Egypt, see Khan (1969, pp. 23-30).

22. On Gardel, see King (1990, p. 37) and Schnitman (1984, p. 54).

23. Note that clustering will tend to maintain distinct regional ethoses as well, by giving each area a different economic and thus social flavor.

24. The above analysis draws on Ilott (1996).

25. We do find some times when American films are plentiful in a country, but do not draw so many viewers. Germany in the 1950s provides one example (Garncarz 1994, p. 101), but this case is an exception to the general state of affairs. For other criticisms of this explanation for Hollywood domination, see Noam (1991, pp. 12-20).

26. Noam (1991, p. 20).

27. Micklethwait and Woolridge (2000, p. 194).

28. On the lesser American success in exporting television, see Negrine and Papathanassopoulos (1990, p. 160), Dunnett (1990, pp. 41, 194-5), Allen (1996, p. 123), and Berwanger (1995, pp. 316-7).

29. On the Latin market, see Navarro (2000).

30. See Fore (1997, p. 250).

31. On Cineplex Odeon, see Gomery (1992, p. 105). On the history of Harlequin, see Twitchell, pp. 92-3. On the Canadian nature of Harlequin, see Audley (1983, pp. 101, 107).

32. See Dale (1997, p. 243).

33. See Muscio (2000, p. 127).

34. Segrave (1997, p. 270) and Pells (1997, p. 275).

35. See Crisp (1993, p.12), Andrew (1983, p.57), Hayes (1930, pp. 194-5), and Sklar (1975, p. 222). Quotas limited American films to seven-eighths of the market, which was more than the American hare had ever been. Gomery (1985, p. 31) argues that French quotas, which were enforced in a changing and complex manner, had some effects on American exports, but even in his account the effect is a small one, limiting Hollywood exports by no more than fifteen percent.

36. On early French dominance, see Abel (1999), Pearson (1997, p. 23), Roud (1993, p.7), Armes (1985, pp. 19-23), and Abel (1984, p.6, 1994). On the plea for government assistance, see Puttnam (1997, p. 41).

37. See Dale (1997, p. 123).

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