US MOVIE Distribution

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Review of International Political Economy 11:1 February 2004: 3361
Hollywood and the world: the geography of

motion-picture distribution and marketing1
Allen J. Scott
Center for Globalization and Policy Research, University of California
ABSTRACT
Production and distribution activities in Hollywood are secured by two
main types of firms, majors and independents, complemented by a third
type represented by majors subsidiaries. The characteristics of these firms
are detailed, first, in terms of their functions within the Hollywood produc-
tion agglomeration itself, and second, in terms of their roles in external
distribution and marketing. The structure of domestic motion-picture
markets is described, with special reference to the geography of exhibition.
A statistical analysis of film releasing activity is presented. It is argued that
the industry is segmented into three overlapping market tiers, and a hypo-
thetical model of this phenomenon is proposed. Export markets for
Hollywood films are shown to have expanded greatly in recent years, partly
as a result of strategic trade initiatives underwritten by the US government.
The paper ends with a brief commentary on the cultural predicaments raised
by the globalization of Hollywood and on the sources of possible future
competitive threats to its hegemony.
KEYWORDS
Agglomeration; cultural products; globalization; media distribution;
motion-picture industry; regional development.
INTRODUCTION
In one sense, Hollywood is a very specific place in Southern California,
and, more to the point, a particular locale-bound nexus of production
relationships and local labour market activities. In another sense, Holly-
wood is everywhere, and in its realization as a disembodied assortment
of images and narratives, its presence is felt across the entire globe. These
local and global manifestations of Hollywood are linked together by a
complex machinery of distribution and marketing. In this manner, Holly-
woods existence as a productive agglomeration is sustained, while the
Review of International Political Economy
ISSN 0969-2290 print/ISSN 1466-4526 online 2004 Taylor & Francis Ltd
http://www.tandf.co.uk
DOI: 10.1080/0969229042000179758
RRIP100150.fm Page 34 Thursday, April 15, 2004 9:18 AM
REVIEW OF INTERNATIONAL POLITICAL ECONOMY
images and narratives it creates are dispersed to a far-flung and ever-

expanding circle of consumers.
In the present paper, I focus mainly, though not exclusively, on one
principal aspect of this problem, namely, first-run distribution of feature
films to theatre audiences in the US and the rest of the world. There are,
to be sure, other important channels of diffusion for Hollywood films
involving broadcast or cable television, VHS (video home system) or DVD
(digital videodisc), and more prospectively, the internet. At the same time,
the theatrical exhibition of feature films is only one phase in a wider
system of releasing windows and commercial exploitation that eventually
fans out into extensive product franchises, including books, toys, games,
records, clothing, theme park attractions, and so on (Wasko et al., 1993;
Wyatt, 1994). These alternative outlets will be alluded to from time to time
as we proceed, but will remain largely in the background. Instead, priority
will be given to questions of the all-important initial release, marketing,
and distribution of films for theatrical exhibition. This emphasis is par-
ticularly pertinent given that the success or failure of these activities has
significant impacts on the subsequent commercial performance of any film
and its spin-off products.
THE US MOTION-PICTURE INDUSTRY: AN OVERVIEW
Majors and independents

At the outset, the US motion-picture industry can be identified in terms of
a core group of companies constituting the so-called majors, together
with a mass of smaller firms or independents. Later, I shall introduce a
third distinctive type of corporate entity, represented by subsidiaries
owned by the majors.
The majors are Metro-Goldwyn-Mayer Inc, Paramount Pictures, Sony
Pictures Entertainment, Twentieth Century Fox, Universal Studios, Walt
Disney Co., Warner Brothers, and newcomer Dreamworks SKG, all of
them headquartered in Hollywood. With the exception of Dreamworks,
the majors are allied together in the Motion Picture Association of America
(MPAA), a lobbying organization founded in 1922 that represents their
interests worldwide. The majors all function as integrated production and
distribution operations embedded within wider systems of corporate
conglomeration focused on exploiting the multiple synergies running
between the entertainment, media, and associated hardware sectors. Their
hallmark product is the blockbuster film, as exemplified by the four top
box-office champions ever, namely, Titanic (1997, $601 million total gross
box-office), Star Wars (1977, $461 million), E.T. (1982, $431 million), and
Jurassic Park (1993, $357 million). As I shall argue, the ability of the majors
to operate on this particular market register is in large degree a reflection
34
SCOTT: HOLLYWOOD AND THE WORLD
of the internal economies of scale that accrue to their distribution activi-

ties. All of the majors possess streamlined distribution infrastructures
rather like the early railroad and telegraph companies described by
Chandler (1990) through which the variable substantive content flows
over wide territorial expanses. Until the late 1940s, the majors owned
extensive theatre chains in addition to their production and distribution
activities, but they were forced to divest themselves of these chains by the
1948 Paramount antitrust decree. The exhibition sector is thus largely inde-
pendent today, though some significant reintegration of production,
distribution and exhibition has been occurring since the early 1980s.
Although the majors dominate the motion-picture industry, they do not
represent the totality of production and distribution activities. Independ-
ents also constitute an important element of the industry as a whole, and
of the Hollywood complex in particular. Independents tend to be highly
specialized in either production on the one side or distribution on the
other, but cases where the two functions are vertically integrated are not
uncommon. By and large, the independents deal in relatively small-
budget films. Some independent production companies, however, work
alongside the majors in various kinds of financing and distribution deals,
thus enabling them to tap into the lucrative upper tier of the market. This
tier is otherwise largely inaccessible to independents except for the
occasional cases of small-budget films that unexpectedly become box-
office successes.
Sectoral structures
According to the North American Industry Classification System (NAICS)
that came into effect in 1997, the sectors making up the motion-picture
industry can be described under four principal headings. These are:
NAICS 5121101: Motion picture production, except for television.
NAICS 5121201: Motion picture film exchanges (representing the distri-
bution segment of the industry).
NAICS 51213: Motion picture and video exhibition.
NAICS 51219: Post-production and other motion-picture and video
industries (representing the main providers of service inputs to produc-
tion as a whole).
Data on receipts, establishments, and employment for these sectors in
the US and Los Angeles County for the year 1997 are set forth in Table 1.2
The data in Table 1 indicate clearly that Los Angeles is the dominant centre
of the US motion-picture industry at large, except for exhibition, which,
as we would expect, is widely diffused across the country. Los Angeles
scores highly on total receipts and employment as a percentage of US
totals, and all the more so because it is the home base of numerous large
35
Table 1 Receipts and employment in the motion-picture industry, US and Los Angeles County, 1997
Sector Receipts Establishments Employment
US Los LA as US Los LA as US Los LA as

(M$) Angeles percent Angeles percent of Angeles percent
(M$) of US US of US
NAICS 5121101 (motion-picture 10,040 7,478 74.5 4,733 1,249 26.4 49,890 31,828 63.8
production, except for television)
NAICS 5121201 (Motion-Picture 9,211 5,366 58.3 477 165 34.6 7,744 3,488 45.0
Film Exchanges)
NAICS 51213 (motion-picture and 7,597 685 9.0 6,358 364 5.7 125,041 9,752 7.8
video exhibition)
NAICS 51219 (post-production and other 4,528 2,088 46.1 3,378 983 29.1 33,205 13,232 39.8
motion-picture and video industries)
Source: US Department of Commerce, Bureau of the Census, Economic Census, 1997.
Table 2 Concentration ratios by largest firms in the US motion-picture industry
Sector Four largest Eight largest

firms (%) firms (%)
NAICS 5121101 (motion-picture 53.6 60.6

production, except for television)
NAICS 5121201 (motion-picture 81.9 91.4

film exchanges)
NAICS 51213 (motion-picture and 30.7 51.0
video exhibition)
NAICS 51219 (post-production and other 16.4 21.4
motion-picture and video industries)
Source: US Department of Commerce, Bureau of the Census, Economic Census, 1997.
firms. However, it scores somewhat less impressively on its percentage of

establishments, a circumstance that is due to the existence of many small
firms serving miscellaneous audiovisual markets in other parts of the
country. All sectors of the motion-picture industry in the US have grown
significantly over the last decade or so, not only as a function of expanding
domestic demand, but also of continued insistent penetration of foreign
markets (Scott, 2002). Today, approximately 50 percent of all revenues
earned in the industry come from exports, and since the early 1990s the
domestic box-office has on average not even covered the majors basic
production costs.
In addition to its marked geographic agglomeration in Hollywood, the
motion-picture industry shows signs of strong corporate concentration, as
revealed by Table 2. The main production and distribution sectors (NAICS
5121101 and NAICS 5121201) are particularly given to this syndrome, with
four-firm concentration ratios of 53.6 percent and 81.9 percent, respec-
tively.3 The notably high level of concentration in distribution points to
this sector as the key organizational bottleneck in the industry as a whole.
FROM PRODUCTION TO DISTRIBUTION

AND EXHIBITION
The Hollywood complex

In the aftermath of the Paramount decree of 1948 the motion-picture
industry of Hollywood entered a long period of crisis and restructuring
that was rendered even more intense because it was accompanied by a
great expansion of television broadcasting and a consequent massive
drain of audiences from motion-picture theatres. This period, which
37
extended over much of the 1960s and 1970s, was marked by a transforma-
tion of the so-called old Hollywood, centred on the vertically integrated
studio system, to a new Hollywood characterized by much more vertically
disintegrated production processes and significant externalization of
many of the detailed tasks of film-making (Blackstone and Bowman, 1999;
Hozic, 2001; Storper and Christopherson, 1987). The basic motion-picture
production complex of Hollywood today can be characterized as a dense
constellation of many interdependent firms and workers, functioning
together in a project-oriented work environment, along with a variety of
institutional arrangements providing different sorts of coordinating
services. The whole structure of agglomerated activity generates massive
external economies of scale and scope providing a constant flow of
competitive advantages to each individual firm (Scott, 2002; Storper and
Christopherson, 1987).
More specifically, the kernel of the complex is constituted by shifting
networks of specialized but complementary firms engaged in many
different phases of film-making, with both the majors (dominantly) and
independent production companies (vastly more numerous but with
much less commercial leverage) as the central organizing agents. The
production process itself is project-oriented in the sense that networks of
firms and individuals come together around particular joint tasks, only to
fall apart as the tasks are completed, and to re-appear in some other shape
as new projects are identified (DeFillippi and Arthur, 1998; Grabher, 2001).
This kernel is complemented by an elaborate system of local labour
markets in which an enormous diversity of skills and aptitudes is
mobilized in the daily round of work. In keeping with the project-oriented
structure of production, many of the workers caught up in the industry
even highly skilled and highly remunerated individuals hold only
temporary jobs or freelance engagements, and circulate with some
frequency through the entire system. The whole agglomeration is under-
pinned by a tightly knit institutional fabric, comprising on the one side
powerful trade organizations such as the MPAA, the Academy of Motion
Picture Arts and Sciences (which organizes the annual Academy Awards),
the Alliance of Motion Picture and Television Producers, the American
Film Marketing Association (AFMA), and on the other side representa-
tives of both professional and craft labour such as the Directors Guild, the
Producers Guild, the Screen Actors Guild, the Writers Guild, and the
numerous specialized locals of IATSE (the International Alliance of Theat-
rical Stage Employees). Within the vortex of activity represented by the
agglomeration as a whole, many-sided human interactions and exchanges
of information occur at frequent intervals, and these forms of contact
typically represent important sites of creativity and innovation (Scott,
2000).
These diverse elements of the Hollywood complex all contribute to its
38
strong centripetal or agglomerative locational pull. They hold it together

in geographic space as a dense and growing production machine based
on endogenously created competitive advantages. Even if there is a
growing trend to the actual shooting of Hollywood films at other locations
(Monitor, 1999), the status of Hollywood as a pre-eminent focus of pre-
and post-production work in the motion-picture industry remains for the
present undiminished.
The organization and geography of motion-picture distribution

Just as the production system is organized around majors and independ-
ents, so distribution is similarly bifurcated. The majors focus on world-
wide distribution of large-budget films, either through their own facilities,
or in various kinds of agreements with distributors in other countries.
Independent companies more typically take on responsibility for distribu-
tion over comparatively limited market territories, so that any one film
may be distributed by a large number of different firms, both inside and
outside the US. This type of arrangement means that production com-
panies regularly face high transactions costs in working out distribution
deals, but it also enables them to tap into multiple sources of finance.
Independent distributors often take equity positions in the films they
handle (Rosen and Hamilton, 1987).
The majors stock in trade is the high-budget blockbuster film that calls
not only for an elaborate production capacity, but equally for an extensive
distributional infrastructure. In the case of the majors, these two sides of
the business are always vertically integrated with one another. Nowadays,
the majors domestic distributional infrastructure is focussed on satura-
tion theatrical openings across the country, and maximization of the box-
office returns from the first weekend of exhibition. This strategy differs
sharply from earlier distribution procedures geared to a staggered system
of openings moving progressively from flagship theatres down the hier-
archy of exhibition venues, and depending on word of mouth for publicity.
The current strategy is especially well suited to the peculiarities of contem-
porary film markets where initial exhibition is the first stage in a chain of
market windows for any given film, with strong effects on the films
subsequent performance throughout the chain (Litman and Ahn, 1998).
There is some probability, too, that saturation openings will become more
common in international markets in the not-too-distant future, not only as
a commercial goal in its own right, but also as a way of pre-empting film
piracy. With the shift-over in film formats from analog to digital, world-
wide saturation openings will be increasingly feasible.
As we observed earlier in the discussion of Table 2, there is a marked
degree of business concentration in the motion-picture distribution sector.
However, this concentration is not so much an outcome of the physical
39
effort needed to distribute films, for actually moving reels of film from
point a to point b is a comparatively easy task. Concentration in the
distribution side of the business is rather a function of the need to maintain
continuous and extensive contact with large numbers of different theatre
chains, and to coordinate placement of any one film in theatres across the
country and the world according to a tight schedule of release dates.
Levels of concentration are further boosted by the need to back up distri-
bution, as such, with massive marketing campaigns, and, above all, to
generate sufficient publicity nationally and locally for each film so that the
opening weekend brings in significant threshold box-office returns. In
order to secure these objectives, the majors all maintain branch offices in
critical regional markets, thereby facilitating close and steady contact with
theatre operators. Figure 1 displays the location of these branch offices in
the US and Canada. All of them coincide with metropolitan areas in states
or provinces where large numbers of theatre screens are to be found.
On the basis of information gathered in face-to-face interviews with
representatives of distribution companies, we can characterize the inter-
actions between these branch offices and the theatre chains with which
they deal as a form of relational contracting. This signifies that both parties
to any given transaction have long-term relations built on strong personal
familiarity, in contradistinction to purely arms-length dealings.4
Figure 1 Offices of major Hollywood distribution companies in relation to the

geographic incidence of theatre screens in the US and Canada
Source: Based on information provided by the National Association of Theatre Owners and
Motion Picture Theatre Associations of Canada.
40
Relational contracting between distributors and exhibitors is no doubt

partially a substitute for vertical integration, for it permits collaborative
programming of their interdependent activities over some fairly extended
time horizon, without overt contravention of antitrust regulations. Even
so, since the early 1980s, when the Justice Department under the Reagan
administration adopted a more tolerant interpretation of the Paramount
decision, some vertical re-integration between distribution and exhibition
has been occurring (Blackstone and Bowman, 1999). The most visible case
of this phenomenon involves the Sony Corporation which owns Loews
Cineplex, one of the largest theatre chains in the US, with 264 sites and
2,323 screens. The same search for vertical synergy is apparent in the
majors continuing quest for ownership (both directly and through their
corporate umbrellas) of broadcast and cable television networks, as exem-
plified by Warners direct interest in the Home Box Office Cable Network.
Also, as home-video markets have soared upward over the 1990s, the
majors have established specialized divisions to distribute films in both
VHS and DVD formats.
Independent film distributors are mostly small in size and subject to
especially erratic market swings. The largest independent distributor in
the country currently is USA Films, which released 15 films in the year
2000 and earned just 1 percent of gross box-office receipts nationwide.
Artisan Entertainment, Lions Gate Films, Shooting Gallery, and Winstar
Cinema, are a few of the many other independent distributors operating
in the country today. According to data on motion-picture credits
published by AMPAS (2001), some of the larger independent distributors
in the US may deal with a dozen to a score of films a year, but the vast
majority of independents handle no more than two or three. Independent
distribution companies focus on films made by their own production
arms or other independent producers, both American and foreign; they
rarely or never deal with films produced by the majors. In a questionnaire
survey of independent film production companies, carried out in Los
Angeles over the summer of 2001, it was found that 27.7 percent of those
respondents who had made a feature film in the previous year relied on
the majors to get their films to market, while fully 72.3 percent relied on
independent distributors.5 It was evident, moreover, from the completed
questionnaires that many respondents were making an unduly broad
interpretation of the meaning of the term major in this context. Film
festivals are nowadays important venues in which independent
producers and distributors come together to make deals with one another.
On occasions, independent production companies will seek to distribute
their own films, especially where these are directed to highly specialized
audiences and the production company has an informed sense of the
nature of the market, as in the case, say, of films that appeal to gays or
certain ethnic groups. An increasing practice among independent
41
producers is to make direct-to-video films and to dispense with theatrical

exhibition altogether (Vogel, 1998).
Domestic motion-picture markets

As Table 3 indicates, gross domestic box office returns in the US motion-
picture industry as a whole grew from $5,745 million in 1980 to $7,661
million in 2000 (in constant dollar terms). By far the greater share of these
returns is accounted for by films released by the majors. In Table 4, aggre-
gate box-office returns are broken down to show the portion earned by
each of the major distributors at five-year intervals from 1980 to 2000.
Buena Vista (the distribution arm of Disney) has tended to dominate the
market over the last decade, but never by more than one or two percentage
points. In fact, the data presented in Table 4 conform to a pattern of
revolving leadership in which no one major remains at the head of the
league for very long. MGM has clearly been a laggard over the last two
decades, and this circumstance reflects its turbulent recent history of
reorganizations and corporate takeovers. As it happens, the theatrical box-
office is no longer the main source of the majors revenues, although
exhibition remains the key initial market window for any film as it moves
through subsequent windows in video, television, in-flight entertainment,
and so on. According to data published by Veronis Suhler (2001), home-
video sales and rentals in the US (both VHS and DVD) amounted to
$22,453 million in 2000, some three times larger than the total gross
domestic box-office for that same year.
The historical pattern of annual releases of films in the US is presented
in Figure 2. The figure shows the number of films released by the majors
since 1945, and by independents since 1980. Over the crisis years,
stretching from the 1950s to the 1970s, releases by the majors declined
continually if erratically. These were years in which the majors were
struggling to cope with rapidly shifting organizational and market trends,
and to work out a viable new aesthetics and economics of popular cinema,
Table 3 Gross domestic box office, 19802000a
Year Current M$ Constant M$ Majors share
1980 2,749 5,745 91%

1985 3,749 6,000 77%
1990 5,022 6,617 80%
1995 5,494 6,208 86%
2000 7,661 7,661 83%
aDomestic box office includes receipts for both the USA and Canada.
Sources: Motion-Picture Association of America (http://www.mpaa.org/) and National
Association of Theatre Owners, Encyclopedia of Exhibition, 20012002.
42
Table 4 Domestic theatrical film distribution, market shares of Hollywood majors, 19802000
Year Market share (%)
Buena Vista/ Columbia/ Dreamworks MGM Paramount 20th C Fox Universal Warner
Disney Sony
1980 4 14 7 16 16 20 14
1985 3 10 9 10 11 16 18
1990 16 5 3 15 14 14 13
1995 19 13 6 10 8 13 17
2000 15 9 10 1 11 10 15 12
Source: National Association of Theatre Owners, Encyclopedia of Exhibition, 20012002.
Figure 2 Number of new feature films released annually in the US since 1945.
Published data on releases by independent distribution companies are available
only since 1980. Note that releases by majors include films released by their
subsidiaries; also, releases by majors include films produced by majors, their
subsidiaries, and independent production companies
Source: Motion-Picture Association of America (http://www.mpaa.org/).
leading eventually to the successful development of the high-concept

blockbuster film as the industrys staple product. The data presented in
Table 5 reveal a dramatic surge in the costs of producing and marketing
films released by the majors between 1980 and 2000. In constant dollar
terms these costs rose approximately threefold over this two-decade
period. Marketing costs have on average run at just below half of produc-
tion costs (negative costs), though in the case of specific highly promoted
films the former can sometimes exceed the latter by a wide margin.
Figure 2 also demonstrates that the 1980s witnessed dramatic growth in
the number of films released by independent distributors, a growth that
occurred in response to the rise of diverse niche markets and the great
expansion of ancillary markets in video and deregulated television broad-
casting (Prince, 2000). This was a period in which the so-called mini-
majors (such as Cannon, Carolco, Miramax, Orion, or New Line) rose to
prominence by capitalizing on these developments, though a number of
the same firms have since vanished. At this time, too, the majors began
significantly to acquire or to create smaller affiliated production and distri-
bution companies in order to exploit and shape some of the same market
44
Table 5 Average negative and marketing costs, Hollywood majors, 19802000
Year Millions of current dollars Millions of constant dollars Marketing

costs as % of
Negative Marketing Negative Marketing negative costs
cost a costs b cost a costs b
1980 9.4 4.3 19.6 9.0 45.7

1985 16.8 6.5 26.9 10.4 38.7
1990 26.8 12.0 35.3 15.8 44.8
1995 36.4 17.7 41.1 20.0 48.6
2000 54.8 27.3 54.8 27.3 49.8
aProduction costs, studio overhead and capitalized interest.
bPrints and advertising.
Source: Motion-Picture Association of America (http://www.mpaa.org/).
niches. The rising quantity and diversity of films on offer is reflected in

the fact that whereas the number of theatre sites in the US has declined
significantly over the last two decades, multiplex theatres (distinguished
by their flexible arrangements for accommodating films with widely
variable audience appeal) have increased greatly in number, with a
concomitant expansion of the total number of screens available for exhib-
iting films. In 1980, according to NATO (2002), there were 17,675 screens
in the country as a whole; in 1990 there were 23,814; and in 2000, there
were 36,264 (at 6,979 sites, thus giving an average of 5.2 screens per
theatre).
MARKET STRUCTURES AND THE DYNAMICS OF

FILM RELEASING
Economic systems are shaped by both the production strategies of firms
and the demand patterns of consumers. Out of this tense force-field of
relations there emerges an architecture of the market, which, in the
motion-picture industry, is expressed in a particularly revealing manner
by shifting structures of releasing activity over time, space, and delivery
format.
Some determinants of releasing behaviour

The majors release films produced in-house as well as films produced with
varying degrees of participation by independents (where for present
purposes, independents include the majors own subsidiaries). A first
question, then, revolves around the changing origins of the films that flow
through the majors distribution systems. A data series pertinent to this
question was constructed for the period 19802000 from listings of
individual film credits given in the Annual Index to Motion Picture Credits
45
published by the Academy of Motion Picture Arts and Sciences. The

Annual Index provides information on the production and distribution
companies involved in all films released in Los Angeles every year. From
this information we can identify which films released by any major are
produced with independent participation and which are not. Unfortu-
nately, our source of information does not provide us with any clues about
the precise nature of this participation in any given instance. In some
cases, the major distributing the film exerts dominant control over the
decisions of the independent producer(s). In other cases, the control is
nominal. In yet other cases, as represented by so-called negative pickups,
the distributor does not even know about the film until after it is
completed. Despite the ambiguities involved, the outcome of this exercise
appears to be fairly robust, and a strong (inverse) statistical association is
observable in the two different types of films distributed by majors. The
details are as follows.
Let yt be the number of films made with independent participation and
distributed in year t by any given major; let xt be the corresponding
number of films made in-house and distributed by the same major. These
variables are de-trended by taking first differences (yt = yt yt1, xt =
xt xt1), and simple linear regressions of the relationship between them
are computed, for all majors individually and collectively, as laid out in
Table 6. There is a marked negative relationship between the two variables
across all regression equations. This suggests that the majors consistently
substitute between films of type y and x in their distribution systems, so
that when they distribute more of the latter, they distribute less of the
former, and vice versa. The same finding implies that the majors are
concerned to even out the flow of films through their distribution systems
and to ensure that these systems operate as close to optimal capacity as
possible over time.6 The regressions presented in Table 6 also point to
Table 6 Regression equations showing the relations between yt and xt,

19802000 (see text for definitions of variables)
Distributor Constant Regression Adjusted R2

value coefficient
Columbia/Sony 0.24 0.8741** 0.52

Disney/Buena Vista 0.56 0.2448 0.02
MGM 0.12 0.5250 0.09
Paramount 0.18 1.4172** 0.52
Twentieth-Century Fox 0.09 0.7292** 0.51
Universal 0.07 0.9216** 0.36
Warner 0.07 0.7481** 0.33
All majors 0.58 0.8813** 0.50
**The double asterisk indicates significance level of 0.01 or better.
46
important differences in production-cum-releasing strategies between the

majors. Paramount is characterized by a much greater tendency to substi-
tute between the two types of films than any other major, suggesting that
it has developed a relatively flexible production-distribution strategy. In
the case of Disney and its distribution arm, Buena Vista, the relation
between the two sets of changes is unusually small and statistically
insignificant, a circumstance that reveals Disneys much greater reliance
on its own internal resources than the other majors.
A second and related question concerns temporal patterns of releasing
in relation to general market conditions. Here, in addition to majors and
independents, a third group of distribution companies is explicitly intro-
duced, namely, subsidiaries of majors. The variables of interest in the
present phase of the analysis are defined below:
It: Number of films released by independent distributors in year t.
St: Number of films released by majors subsidiaries in year t.
Mt: Number of films released by major distributors in year t.
At: money spent on admissions to films in year t (in constant
dollars).
it: the interest rate (federal funds, effective rate) in year t.
A series of regression equations was then computed linking the number
of films distributed by these groups of companies to money spent on
admissions and interest rates for each year from 1980 to 2000 (see Table 7).
Notice that At enters these regressions with a time lag of one year. The
signs on the coefficients of the independent variables in the regressions are
all as expected. Thus, the number of films released by each of the three
groups of distributors, and by all three in aggregate, is positively related
to money spent at the box-office in the previous year, and negatively
Table 7 Regression equations showing the effects of box-office returns and interest
rates on temporal variations in films released by independents, majors
subsidiaries, and majors, 19802000 (see text for definitions of variables)
Dependent variable Regression coefficients
Constant value At1 it Adjusted R2

It 168.05 0.0577** 2.1198 0.49
St 52.16 0.0188 3.7797 0.23
Mt 125.58 0.0010 3.0057** 0.40
It + St + Mt 94.66 0.0775** 8.9052** 0.74
**The double asterisk indicates significance level of 0.01 or better.
Regressions based on data derived from the Academy of Motion Picture Arts and Sciences,
Annual Index to Motion Picture Credits, and from the US Department of Commerce, Bureau of
the Census, Statistical Abstract of the United States.
47
related to interest rates in the current year. Independent distributors are

particularly sensitive to the former variable, possibly in part because they
ride on the coattails of majors successes. Releases by the subsidiaries of
majors do not appear to be significantly related to either of the inde-
pendent variables. The majors themselves (excluding their subsidiaries)
are highly sensitive to interest rates in their releasing behaviour, a reflec-
tion, presumably, of their tendency also to cut back on production when
rates are high. When we re-run the regression analysis using It + St + Mt as
the dependent variable, both At1 and it emerge as having extremely sig-
nificant effects, with an adjusted R2 of 0.74. The regression coefficients in
the latter model suggest, as we might anticipate, that the composite
pattern of releasing is rather more volatile than it is in the case of
independents, subsidiaries, or majors taken in isolation from one another.
A tripartite model?
Reference has frequently been made in all of the above to an essentially
bipartite pattern of production-consumption relations in the motion-
picture industry, revolving around the split between majors and inde-
pendents. Only an occasional acknowledgment of a possibly distinctive
role for the majors subsidiaries has thus far been offered. In fact, since the
early 1980s, and especially since the early 1990s, there has been a marked
tendency for this group of companies to emerge as a peculiar domain of
activity in its own right.
Today, every major has a larger or smaller stable of these subsidiaries,
most of which act as quasi-independent production and distribution
entities and possess a high degree of autonomy in their corporate decision-
making. In this regard, the majors are coming increasingly to resemble the
music majors that pioneered this form of corporate strategy (Negus, 1998;
Scott, 1999). These subsidiaries function within a range of intermediate
markets lying between those in which the majors proper operate and those
in which the independents are typically ensconced. They also represent a
sort of advance guard for the majors by reason of their more experimental
approaches to the motion-picture business and their consequent ability to
capture and shape emerging talent and trends. Among the more important
subsidiaries with a substantial stake in distribution activity at the present
time are Disneys Miramax, Sony Classics, Warners New Line, MGMs
Orion Pictures, Twentieth-Centurys Fox Searchlight, Universal Focus and
Paramount Classics.
Figure 3 provides some empirical details as to how the conjectured
tripartite structure of US motion-picture production and markets is
arranged. The figure shows frequency distributions of percentage box-
office returns for films distributed by (a) independents, (b) majors sub-
sidiaries, and (c) majors (less subsidiaries). These percentage figures sum
48
Figure 3 Distribution of box-office returns for domestic exhibition, 2000; releasing

companies categorized by independents, subsidiaries of majors, and majors
Source: Calculated from data given by National Association of Theatre Owners, Encyclopedia
of Exhibition, 20012002.
to 100 within each of the three types of distribution system. The x-axis of
Figure 3 is drawn on a logarithmic scale in order to facilitate visual
comparison of all the information available. What is immediately striking
about the figure is the clear separation of each frequency distribution into
lower, middle, and upper market segments. These three segments are
sharply divided from one another in terms of the average box-office
returns attributable to each. As Table 8 reveals, the average box office for
independents was $3.8 million in the year 2000, for subsidiaries it was
$14.3 million, and for majors $55.6 million.7 A t-test indicates that these
values are all different from one another at extremely high levels of statis-
tical confidence. In the same year, the average number of films distributed
by each type of firm was 2.0, 8.6, and 14.3, respectively, though there is
much variance around these values. From these data it is apparent that
the majors subsidiaries (together with a few selected independents) are
carving out a very definite middle-range market niche for themselves.
Concomitantly, whenever any independent begins consistently to contest
49
Table 8 Breakdown of average box-office returns by types of releasing companies,

2000
Types of releasing companies Number of films Average box-office Percent of total

released ($000) box-office
Independents 221 3,752 10.2

Subsidiaries of majors 80 14,264 14.0
Majors 111 55,639 75.8
Source: Calculated from data in National Association of Theatre Owners, Encyclopedia of
Exhibition, 20012002.
this same niche, it becomes a prime target for takeover by a major, as

illustrated by Disneys purchase of Miramax in 1993 or Warners acquisi-
tion of New Line by merger with Turner Broadcasting in 1995. Scrutiny of
Figure 3 suggests that there is a fair degree of competition within each of
the three niches, and more limited competition between them, but that the
majors have a tight oligopolistic hold over the upper reaches of the
market, strengthened by the strategic positioning of their subsidiaries in
a sort of intermediate buffer zone. Data limitations mean that we cannot
push this same analysis very far back in time. However, since 1991, the
data show a strongly bifurcated market gradually giving way before
trifurcation as the majors subsidiaries expand in number and enlarge
their lists of releases.
These remarks may be extended with the aid of a speculative model of
hierarchical market relations in the motion-picture industry. The model is
based on two key assumptions. The first is that we can identify different
types of films in terms of the different market segments to which they
appeal (e.g. low-budget films for limited audiences, middle-range films
for wider but still selective audiences, blockbusters with sweeping
popular appeal, and so on). Wyatt (1991) argues, for example, that high-
concept blockbusters are a distinctive product deeply differentiated from
other motion-picture products by their particular substance and pack-
aging. The second assumption is that the expected gross box-office returns
for a film of any given type bear a statistical relationship to the amount of
money invested in the production and marketing of that film. Of course,
other factors play a role in generating expected returns, such as the cast,
the director, press reviews, and so on, but production and marketing
budgets represent a primary element on which many other of these other
factors themselves depend (cf. Daly, 1980; de Vany and Walls, 1997; Litman
and Ahn, 1998; Robins, 1993). In this context, we need to note that the
commercial performance of any single film is extremely unpredictable. An
industry rule of thumb is that 7 or 8 out of every 10 films show a net loss,
so that overall profitability in the industry is dependent on the other two
or three films out of the 10 that actually earn money above and beyond
50
their costs. It should be emphasized therefore that expected returns are

represented here by expected average returns.
For the sake of simplicity, let us consider the case where just two market
segments exist, one dominated by films with dense production values (and
appealing to mass audiences), the other characterized by a proliferation of
films with more meagre production values (and catering to relatively
limited demands per film). For each type of market segment, i {i = 1, 2},
the expected box office for any given film will be an increasing function
of the total amount of money invested in producing and marketing the
same film. More specifically, the function can be identified as a logistic
curve. This proposition follows from the strong likelihood that we will
almost always observe low returns per dollar invested at low and high
levels of investment (due to under- and over-investment, respectively, in
production values), and relatively high returns at some intermediate point.
The curve for any given segment is expected to be distinct from the curve
for any other segment. Define Ci as the total production cost of a film
serving market-segment i, and let its distribution and marketing cost be a
simple proportion, i, of the same amount. Total investment in the film is
thus Ii = (1+ i)Ci and its expected box-office earnings are EBOi = fi(i, Ci).
The problem that the producer-distributor must now face is to identify
what particular market segment any planned film should be assigned to
and then to find values of i and Ci that maximize EBOi Ii. A typical
solution for this problem is shown in Figure 4, where for a film of type 1,
a production cost of C*1 yields a profit-maximizing value of EBO*1, and
for a film of type 2, a production cost of C*2 yields an optimal value of
EBO*2. The lower panel of Figure 4 displays hypothetical frequency distri-
butions of the occurrence of type 1 and type 2 films.
Depending on the dynamics of market supply and demand, various
empirical expressions of this kind of logic are possible, ranging from a
single, continuous frequency distribution of films relative to production
costs, to a completely segmented pattern of frequencies. A tendency to the
one extreme would be apt to occur if films could not be significantly
differentiated from one another in terms of appropriate investment levels,
i.e. where audience response is statistically unpredictable on the basis of
production costs. A tendency to the other extreme would be more likely
to occur where at least the top end of the market can be cornered by a select
group of firms with strong internal economies of scale and the ability to
mobilize significant resources. In this case, barriers to the entry of new
competitors will be established, and these barriers will be accentuated as
firms then hone their long-term competitive advantages in relation to that
market segment. The market-cornering process, moreover, is reinforced in
the motion-picture industry by the proclivity of the majors continually to
raise the stakes as they gamble on ever more ambitious blockbuster films,
thus making the entry of new competitors increasingly difficult. The
51
Figure 4 A model of investment, expected box-office returns, and frequency of

occurrence for films of types 1 and 2. Optimal values of variables are indicated by
an asterisk. Note that values of EBOi are a function of both i and Ci. See text for
explanation of symbols
remainder of the market may then converge around a single competitive

norm at a lower average cost or price, or yet further cornering or quasi-
cornering of selected segments may occur until the possibility of further
partitioning is exhausted. Obviously, the number of different market
segments that appear may vary from time, though it is likely to be small
given finite markets, and equally, frequent overlap between the segments
will tend to occur, as exemplified by cross-over films that start off in one
segment and end up in another.
52
This analysis proposes a mechanism whereby stable, differentiated

market segments in the motion-picture industry might emerge, at least for
a certain period of time. The model mirrors the earlier descriptive
discussion of the layered structure of markets in the motion-picture
industry. However, it represents only a first attempt at an explanatory
schema, and plainly, considerable further refinement combined with
rigorous empirical testing are essential before it can be taken to be
anything much more than a speculative gesture.
TRADE AND GLOBALIZATION
Export markets
Right from the beginnings of Hollywood a century ago, American motion
pictures have found ready markets in other countries. Since World War II,
this export flow has expanded dramatically, and today the presence of
Hollywood is felt virtually around the world (Hoskins et al., 1997; Miller
et al., 2001; Wildman and Siwek, 1988).
Data on US film and tape rental exports to other countries between the
years 1986 and 2001 are laid out in Table 9. The data refer to videotape
rentals as well as motion-picture distribution overseas and they cover all
US exports in these services. These rentals have grown with notable vigour
over the last 15 years or so, and they now exceed the domestic box-office
by a considerable margin. Whereas the gross domestic box office for
motion pictures increased (in constant dollar terms) by 40.9 percent from
$5,970 in 1986 to $8,413 million in 2001, exports of film and tape rentals
over the same period increased by 452.8.0 percent from $1,683 million to
$9,304 million. Table 9 informs us that by far the main importers of the
products of Hollywood are the European countries. The UK, Germany,
and the Netherlands alone account for 36.7 percent of all rental exports
from the US. Japan and Canada, too, are major importers, as are Australia,
Brazil and the Republic of Korea.
The majors maintain extensive distribution and marketing networks not
only in North America, but also in other countries. Through their multi-
national operations the majors directly control distribution systems in all
their principal foreign markets, as well as in many more secondary
markets. United International Pictures, for example, is a joint venture of
Universal and Paramount, which owns distribution facilities in as many
as 37 different countries including the UK, France, Germany, the Nether-
lands, Australia and Japan, as well as in less lucrative territories like
Hungary, Chile, Peru, the Philippines, and Thailand. Twentieth-Century
Fox owns 21 foreign distribution facilities in an equally diverse set of
countries. In countries where the majors do not actually own a distribution
network outright they often enter into joint ventures or long-term
53
Table 9 US exports in the form of film and tape rentals; percentage values by
destination
Destination 1986 1991 1996 2001
France 10.2 8.6 8.6 6.7

Germany 7.5 9.6 10.5 12.4
Italy 10.0 7.3 4.7 4.9
Netherlands 15.2 17.5 17.4 9.0
Spain 5.1 5.9 6.2
Sweden 1.8 1.4 1.2
UK 10.6 11.0 9.8 15.3
Europe 60.3 66.5 64.9 62.8
Australia 10.3 3.4 4.8 3.6
Japan 8.3 11.5 8.7 8.9
Republic of Korea 0.8 1.8 1.2
Taiwan 0.5 0.7 1.0
Asia and Pacific 22.1 18.3 19.3 17.1
Brazil 0.8 2.2 2.5
Canada 10.4 8.7 6.8 8.0
Mexico 1.3 0.9 1.3 2.6
Americas 17.9 12.5 13.0 16.9
South Africa 1.1 1.0
Africa 1.0 1.2 1.0
Middle East 0.5 0.8 1.1
World ($ millions, current) 1,071 1,962 4,982 9,304
World ($ millions, constant) 1,628 2,400 5,290 9,304
Source: US Bureau of Economic Analysis, Survey of Current Business.
agreements with local companies in order to ensure distribution of their

films. As indicated by Table 10, American films garner never less than half,
and sometimes more than two-thirds of total box-office receipts in all their
major markets. This phenomenon can be ascribed both to the unequalled
ability of American multinational media corporations to disseminate the
products of Hollywood across the globe, and their ability to make big-
budget films that appeal powerfully to popular taste in many different
cultures. In testimony to the latter remark, films that do well at the box
office in the US invariably also do well abroad. Thus, the simple correla-
tion between gross domestic box-office earnings and foreign box-office of
121 Hollywood films released in the year 2000 is 0.81, which is significant
well beyond the 0.01 level.8
54
Table 10 Structure of selected national film markets, 2000
Country Number Total theatre Total receipts Domestic US film

of films entries ($ millions) film industry industry share
produced (millions) share (percent) (percent)
Australia 31 82.2 401.0 8.0 87.5
France 204 165.5 821.3 28.9 58.3
Germany 75 152.5 463.5 9.4 81.9
Italy 103 103.4 258.1 17.5 69.5
Japan 282 135.4 1585.3 31.8 64.8
Spain 98 135.3 297.1 10.1 82.7
UK 90 142.5 941.2 19.6 75.3
US 460 1420.1 7661.0 96.1
Source: CNC Info, No. 283, 2002, Paris: Centre National de la Cinmatographie.
Strategic trade in Hollywood films

Strategic trade involves governmental support for export activities in
circumstances where national interests are in some sense at stake (cf.
Tyson, 1992). It comprises institutionalized market-opening practices
whether for reasons of political influence or economic leverage (as in
circumstances where extension of the market generates rents based on
increasing returns effects within domestic production complexes).
Exports of motion-pictures from the US have long been a classic instance
of this phenomenon, with federal bureaucracies continually pressing in
various forums of trade negotiation for foreign governments to open their
doors more widely to Hollywood films. Indeed, Hollywood has always
received abundant help from the US State Department, the Commerce
Department, and other agencies of federal government. At least since
World War II, the interests of Hollywood and the aims of Washington have
consistently coincided on the economic front even when there has been
less accordance on the ideological front (Segrave, 1997). One particularly
notable case of this convergence of interests occurred at the time of the
Marshall Plan for Europe (194851) whose provisions linked levels of aid
directly to recipients willingness to accept imports of US motion pictures
(Guback, 1969). These provisions were at once a boon to Hollywood, and,
in theory at least, a means of ensuring that European minds would be
appropriately fortified against pernicious left-wing political influences.
More recently, as globalization has started to intensify, the US government
has been aggressively promoting free-trade in goods and services (and
cultural-products in particular) across the world, leading predictably to
significant direct and indirect gains for Hollywood.
In the never-ending effort to ensure that the interests of Hollywood are
promoted by the federal government in various forums of national and
55
international deliberation, the MPAA plays a critical role as both industry

mouthpiece and lobbying organization. Symptomatically, the Association
has offices in Washington, DC, as well as in Southern California. The
MPAA preaches an aggressive doctrine of free-trade, and it played a
notably active role behind the scenes at the GATT negotiations in 1993 in
the confrontation between the US and Europe (led by France) over trade
in audiovisual products. Although the European position prevailed at that
time by asserting a cultural exception permitting each country to set up
trade restriction according to its own cultural preferences, there is every
likelihood, in the newly constituted WTO that succeeded GATT, that the
US/MPAA position will eventually prevail. The MPAA is also the parent
organization of the MPA (Motion Picture Association), formerly known as
the MPEA (Motion Picture Export Association), established in 1946 as a
legal cartel under the provisions of the Webb-Pomerane Export Trade Act.9
Outside the US, the MPA has offices in Brussels, Rome, New Delhi, Rio de
Janeiro, Singapore, Mexico City, Toronto, and Jakarta, and from these
bases it carries out its basic mission of promoting exports of Hollywood
motion pictures, protecting intellectual property rights, and advancing the
goals of the industry generally in foreign markets.
Independent motion-picture distributors are represented by AFMA (the
American Film Marketing Association), an active and influential organiz-
ation founded 1981. AFMAs membership roster of over 170 firms is
composed primarily of independent distributors and allied businesses
based in Hollywood, but a large proportion is made up too of firms from
other parts of the country and from abroad. Like the MPAA, AFMA is
concerned to promote the interests of its members in regard to trade and
public relations, with a special emphasis on issues of arbitration, piracy,
marketing and tracking members earnings from foreign sources. AFMA
also promotes the American Film market, an annual event in Santa Monica
representing the largest motion-picture trade event in the world, attracting
over 7,000 people from over 70 different countries.
Globalization and the cultural economy

The steady globalization of Hollywood as an expression of both market
forces and US government action on the international trade front, has, of
course, engendered numerous clashes and disputes. Some of these reflect
purely commercial differences of interest; some are focussed on cultural
collisions of one sort or another; and some, perhaps the majority, are a
complex mixture of the two. The official line of the MPAA and the US
Department of Commerce is that international trade in cultural products
should proceed in as open and as free a manner as possible, and should
not be subject to any special restrictions. This line, however, overlooks the
circumstance that unlike wheat or coal, cultural products are also
56
intimately bound up with matters of selfhood, identity and consciousness.

More generally, each individuals consumption of cultural products is
replete with externalities for all other individuals in the same society.
Politicized responses to the flow of cultural products from one society to
another are therefore to be expected and need to be dealt with on their
own terms. A rhetoric of market ideology inevitably misses the crucial
point here. It might be plausibly argued that even within the US itself
direct governmental engagement with the content of motion pictures has
been averted only because of the formal and informal self-regulation of
the industry, dating from the time of the promulgation of the Hays Code
in 1930. In fact, governmental scrutiny of the motion-picture industry in
the US has been frequent and usually intense, in episodes ranging from
the House UnAmerican Activities Committee hearings in the late 1940s
and early 1950s to recent congressional inquiries into the role of violence
in films and television programs.
Given the appeal of Hollywoods entertainment products to mass
audiences all over the world, the US will probably continue to maintain a
strong lead as an exporter of motion pictures for the foreseeable future.
There is evidence, however, that some important shifts may be in the
offing. For one thing there has been a very significant rise in runaway
production activities from Hollywood to cheaper locations in Canada,
Mexico, and further afield. Hitherto, this phenomenon has not posed very
much of a threat to the basic role of Hollywood as a centre of creativity
and deal-making in the motion-picture industry, though there are signs
that the outflow of capital and work may be helping to stimulate the rise
of competitor film industries (for example in Toronto and Vancouver). At
the same time, and independently of runaway activities from Hollywood,
dynamic centres of audiovisual production in many different countries are
now also beginning to contest and recontest global markets. Producers in
places like London, Paris, Rome, Beijing, Hong Kong, Tokyo, Mexico City,
Mumbai/Bollywood, Sydney, and so on, are all in various ways making
efforts to improve their market performance and to compete internation-
ally. Similarly, American media conglomerates are no longer the
unchallenged champions of cultural globalization that they once were.
With the rise of large multinational media corporations based in Europe
and Japan, the global cultural landscape is becoming considerably more
complex, and competitive pressures are mounting steadily. Some of these
corporations are also acquiring significant stakes in American film, tele-
vision, music, publishing and other cultural-products industries. For the
moment, the Hollywood motion-picture industry remains unmatched in
its commercial vigour and market reach. If the history of other formerly
triumphant industrial agglomerations from Manchester to Detroit is
any guide, however, the continued leadership of Hollywood is by no
means automatically assured. In spite of Hollywoods acquired
57
competitive advantages, it cannot be ultimately free from economic

threats emanating from elsewhere, especially in view of the often
unpredictable shifts in the structure of consumer preferences for motion-
picture entertainment.
A FORWARD GLANCE
For almost a century, and especially since the World War II, Hollywood
has dominated national and international motion-picture markets. It has
accomplished this record of success partly on the basis of the well-
lubricated, large-scale production machine of Hollywood itself (with its
unparalleled ability to cater to popular audiences), and partly on the basis
of the industrys early perfection of its capacity to distribute films to mass
markets across the nation and across the world.
With the advent of new electronic distribution technologies, Hollywood
is again facing a major paradigm shift that may well have important
impacts on the way it and its competitors do business in the future. These
technologies will in all likelihood make it eventually possible to dispatch
films directly and cheaply to the individual consumer. In this respect, we
may perhaps derive some clues about the future of film markets from
events in the television industry where deregulation and technological
change have allowed programmes and distribution channels to proliferate
over the last couple of decades (Brown, 1996; Staiger, 2000). On the one
hand, then, consumers choices will almost certainly continue to be shaped
in significant ways by a limited number of firms with the resources to
mount extravagant marketing campaigns, so that even if the audiences for
blockbuster films stabilize or shrink (just as ratings for top television
shows have tended to decline over the 1980s and 1990s) the phenomenon
of high-revenue films at the top end of the market is likely to continue. On
the other hand, the development of new delivery systems will in principle
open up the market to more effective contestation by smaller independent
film production and distribution companies (cf. Leyshon, 2001). Thus, the
eventual attainment of film distribution by means of the internet will no
doubt give rise to a great increase in the amount of cinematic material
available to consumers, thereby widening the market and almost certainly
making inroads on blockbuster audiences. Additionally, there are credible
arguments for suggesting that foreign film industries might be re-entering
the competitive foray, not only on the basis of revivified local production
clusters, but also of enhanced distributional and marketing capacities
aided by the rise of home-grown media conglomerates. Hollywood can
never rest on its laurels.
58
NOTES
1 This research was supported by the National Science Foundation under grant
number BCS-0091921, with supplementary funding from the Haynes
Foundation.
2 These data are taken from the 1997 Economic Census. Unfortunately, data for
the 2002 Economic Census are not yet available.
3 The n-firm concentration ratio in any given sector is the percentage of total
receipts earned by the top n firms in that sector.
4 The complicated accounting relations that typically exist between motion-
picture distributors and exhibitors are described in Cones (1997).
5 A total of 122 firms responded to the questionnaire. Of these, 55 had made a
feature film in the previous year.
6 These remarks offer a somewhat more nuanced view of the relations between
large and small firms than the one identified by Berger and Piore (1980) in
terms of industrial duality. In Berger and Piores concept, large and small
firms are functionally distinctive entities occupying distinctive market niches,
the former serving a residuum of stable demands, the latter being relegated to
a more unstable market spectrum. In the present instance, there is a zone of
overlap in which large firms appear to use smaller firms as a means of ensuring
synchronic stability of product flow.
7 Observe that the ratio of 14.3 to 3.8 is almost identical to the ratio of 55.6 to 14.3.
8 Data for this exercise were obtained from <http://www.worldwideboxoffice.
com/>.
9 The same piece of legislation permits block-booking by American motion-
picture distributors on foreign markets. This practice is expressly forbidden on
domestic markets by antitrust legislation.
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61

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fm Page 33 Thursday, April 15, 2004 9:18 AM

Review of International Political Economy 11:1 February 2004: 3361

Hollywood and the world: the geography of

REVIEW OF INTERNATIONAL POLITICAL ECONOMY

images and narratives it creates are dispersed to a far-flung and ever-

THE US MOTION-PICTURE INDUSTRY: AN OVERVIEW

Majors and independents

SCOTT: HOLLYWOOD AND THE WORLD

of the internal economies of scale that accrue to their distribution activi-

Sector Receipts Establishments Employment

US Los LA as US Los LA as US Los LA as

SCOTT: HOLLYWOOD AND THE WORLD

Table 2 Concentration ratios by largest firms in the US motion-picture industry

Sector Four largest Eight largest

NAICS 5121101 (motion-picture 53.6 60.6

NAICS 5121201 (motion-picture 81.9 91.4

firms. However, it scores somewhat less impressively on its percentage of

FROM PRODUCTION TO DISTRIBUTION

The Hollywood complex

REVIEW OF INTERNATIONAL POLITICAL ECONOMY

SCOTT: HOLLYWOOD AND THE WORLD

strong centripetal or agglomerative locational pull. They hold it together

The organization and geography of motion-picture distribution

REVIEW OF INTERNATIONAL POLITICAL ECONOMY

Figure 1 Offices of major Hollywood distribution companies in relation to the

SCOTT: HOLLYWOOD AND THE WORLD

Relational contracting between distributors and exhibitors is no doubt

REVIEW OF INTERNATIONAL POLITICAL ECONOMY

producers is to make direct-to-video films and to dispense with theatrical

Domestic motion-picture markets

Table 3 Gross domestic box office, 19802000a

Year Current M$ Constant M$ Majors share

1980 2,749 5,745 91%

Year Market share (%)

REVIEW OF INTERNATIONAL POLITICAL ECONOMY

leading eventually to the successful development of the high-concept

SCOTT: HOLLYWOOD AND THE WORLD

Table 5 Average negative and marketing costs, Hollywood majors, 19802000

Year Millions of current dollars Millions of constant dollars Marketing

1980 9.4 4.3 19.6 9.0 45.7

niches. The rising quantity and diversity of films on offer is reflected in

MARKET STRUCTURES AND THE DYNAMICS OF

Some determinants of releasing behaviour

REVIEW OF INTERNATIONAL POLITICAL ECONOMY

published by the Academy of Motion Picture Arts and Sciences. The

Table 6 Regression equations showing the relations between yt and xt,

Distributor Constant Regression Adjusted R2

Columbia/Sony 0.24 0.8741** 0.52

SCOTT: HOLLYWOOD AND THE WORLD

important differences in production-cum-releasing strategies between the

Dependent variable Regression coefficients

Constant value At1 it Adjusted R2

REVIEW OF INTERNATIONAL POLITICAL ECONOMY

related to interest rates in the current year. Independent distributors are

SCOTT: HOLLYWOOD AND THE WORLD

Figure 3 Distribution of box-office returns for domestic exhibition, 2000; releasing

REVIEW OF INTERNATIONAL POLITICAL ECONOMY

Table 8 Breakdown of average box-office returns by types of releasing companies,

Types of releasing companies Number of films Average box-office Percent of total

Independents 221 3,752 10.2

this same niche, it becomes a prime target for takeover by a major, as

SCOTT: HOLLYWOOD AND THE WORLD

their costs. It should be emphasized therefore that expected returns are