Media Today, 4th Edition
Chapter Recaps and Study Guide
Chapter 12: The Movie Industry
After studying this chapter, you should be able to:
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Explain the history of movies in the United States and how it affects the industry
today.
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Analyze the production, distribution, and exhibition processes for theatrical
motion pictures in the United States and recognize the major players in each
realm.
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Describe how movies are financed, and how they make money through various
exhibition arrangements.
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Analyze the relationship between movie distributors and theaters.
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Explain the impact of new technologies and globalization on the movie industry.
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Consider the impact of the American movie culture on world culture.
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The development of motion pictures.
o In Europe, motions pictures had their origins in the magic lantern
performances of magicians and the understanding of the phenomenon
known as persistence of vision.
o In the U.S., early experiments with photographic images to simulate
motion suggested the possibility of motion pictures.
o Edison used the flexible photographic film invented by Eastman to
develop a motion picture camera in 1889, but Edison conceptualized the
commercial value of the invention as an arcade entertainment called a
kinetoscope.
o In France, the Lumière brothers developed a projection system that
allowed for theatrical presentation of moving pictures.
o Edison bought the rights to a projector and developed the Edison
Vitascope, debuted in New York in 1896.
o Films emerged as a mass medium with the development of theatrical
presentations in nickelodeons and with the development of mass
audiences that included newly arrived immigrants.
o Edison and others established the Motion Picture Patents Company
(MPPC) as a trust intended to control the new industry by means of
patents and licensing the use of equipment.
o Competitors ignored the trust and set up what would become the major
film studios in Hollywood; by 1918, U.S. movie studios controlled 80
percent of the world film market.
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The Hollywood studio system.
o Almost immediately, the Hollywood studios were organized along the
lines of vertical integration, combining production, distribution, and
exhibition.
o The star system was an integral part of the studio system, as was the
division of the studio into A and B movie units; B films were low budget
projects and made quickly.
o Series pictures were movies that featured the same characters and sets
across a number of films, lowering cost.
o The studios forced independent exhibitors to take B movies if they wanted
to get the A movies; this was called block booking.
o The talkies appeared in the late 1920s; the first sound film was The Jazz
Singer (1927).
o The U.S. Supreme Court ruled in 1919 that films were entertainment and
therefore not protected by the First Amendment (this ruling would
eventually be overturned by the Court in 1952).
o The studios set up the Motion Picture and Distributions Association in
1922 to govern content of films; Will Hays headed the organization, and it
was called the Hays Office; it set the model for other media selfregulation.
o The Justice Department’s 1948 case against Paramount resulted in the
break-up of the studio system and Hollywood’s divesture of exhibition
from the vertically integrated industry; the studios gave up their movie
theaters.
o The development of television in the 1950s threatened the movie
industry’s dominance of visual entertainment; the studios moved slowly to
involve themselves with the new medium, offering at first only their B
films to TV.
o Hollywood adapted to TV by developing special effects and by turning
movie attendance into special events; the industry developed a system of
film ratings, based on the ages of audience members, allowing the studios
to develop more adult themed films.
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Changes in ownership.
o From the 1960s to the 1990s, the major studios went though ownership
and management changes that eventually brought them into large media
conglomerates.
o The development of the VCR and DVD players opened up new
opportunities for the film industry to market their films directly to home
consumers; these new technologies also made it possible to counterfeit
films.
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An overview of the motion picture industry.
o All theatrical films (feature films) made in the U.S. are now made
available in a variety of nontheatrical locations.
o Going to the movies is now most common among young people.
o Blockbusters are films that make more than $200 million in theatrical
release.
o Exhibition is characterized by multiplexes (8–15 screens) and megaplexes
(more than 16 screens).
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Production in the motion picture industry.
o The major studios remain very powerful in Hollywood but they produce
only a small number of films each year; most films are produced by
independents, but the names of the major appear on those films, because
the majors are also distributors.
o Production and distribution are separate functions, but the major studios
distribute many of the films produced by independent production
companies; additionally, there are independent distributors that also
perform the function of getting films to exhibitors.
o The example of The Bourne Identity, discussed in the chapter, indicates
how complex—and secretive—the financing and production of
Hollywood films can be!
o To maintain a full roster of available films, a distributor (most often a
studio) relies on independent producers to fill out the number of films
needed each year to keep exhibitors happy.
o The process of making a movie.
 Concepts, coming from any number of places, are turned into
treatments and scripts, sometimes offered by a little-known writer
on spec to a producer who may turn it into a film; books are a
major source of film concepts that may get the “green light.”
 Foreign distribution has become a major source of revenue for
Hollywood, explaining why action films are potentially so
profitable.
 Signing a star to appear in a film sometimes involves the producer
entering into back-end deals or offering percentages of the gross
in negotiation with the star’s talent agent.
 Producers must also meet the standards set by various unions and
guilds.
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A film is often chosen based on the available financing for its
budget; so-called genre films are typically low budget; different
types of films are distributed in different ways.
The term green light is used in the film industry to indicate the
moment that industry executives approve the making of a film,
usually after a long process of development.
A film studio’s distribution division typically tries to develop deals
with exhibitors (for the most part, theater chains) that win a
percentage of box office receipts for the studio.
Independent production companies (those not owned by a studio)
often have very close ties to a studio’s distribution division.
Track records are very important in Hollywood, because previous
success indicates future success, so the industry seeks out firms
and individuals with successful track records in order to lower risk.
A good way to develop an understanding of the complexities of
film production is to simply watch the credits at the end of a film.
A film line producer has the important function of making sure
that the necessary equipment and personnel are where they need to
be during the production phase.
One crucial element in the production process (as well as in the
early stages of development when a producer may be looking for
investors) is a contractual deal with a completion bond company,
a specialized insurance firm that guarantees the film will actually
be made, even if it runs over budget.
Distribution in the motion picture industry.
o Ten major distribution companies control over 90 percent of U.S.
theatrical activity.
o The major distribution firms are very powerful in the industry and are
able to place films in theaters throughout the world.
o The major distributors are linked to the major studios and are constantly
seeking films.
o A film’s release date is an important part of the distribution strategy and
include a variety of patterns: wide release (including saturation
releases), platform release, and exclusive release.
o The marketing of films involves title testing and audience previewing of
preliminary versions called rough cuts, sometimes resulting in significant
changes in a film before it goes into distribution.
o The expenses incurred by distributors are summarized in the term P&A,
or prints and advertising, meaning the cost of reproducing the original
negative of a film, as well as the cost of advertising it.
o The high P&A costs are one reason that distributors seek free publicity
for a newly released film.
o Most movies make their greatest profit in the first few weeks of
distribution, and tracking studies are used to understand how well (or
poorly) the film is doing at any given time.
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Theatrical exhibition.
o The largest 3 percent of the movie chains control 60 percent of the
screens on which films are shown.
o Because of the overbuilding of theaters, most of the chains have declared
bankruptcy or come close to it.
o Tension exists between distributors and exhibitors over the selection of
films and the kind of deal that will make it possible for both parts of the
industry to make a profit, the details of which are worked out in complex
exhibition license agreements.
o The financial arrangement typically involves a percentage of the ticket
sales for the distributor or a percentage-above-the-nut (the cost of doing
business) for the exhibitor.
o Digital projection, involving the distribution of films to theaters via
satellite, is now technologically possible, but the installation of digital
projectors in theaters remains very expensive.
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Non-theatrical distribution and exhibition.
o Different distribution opportunities for a film are called windows in the
industry.
o The current non-theatrical windows include sales to rental outlets and
the multiple opportunities in television, including DVD release, pay-perview in hotels, home cable and satellite pay-per-view, airline exhibition,
subscription cable, broadcast network or cable, and local television
stations.
o The industry has a curious and somewhat mysterious way of calculating
profit, and the producers claim that six out of ten films fail to make profits
even after distribution across multiple platforms.
o Film piracy, the unauthorized duplication of films for profit, is a major
industry problem.
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Media literacy and the movie industry.
o The movie industry remains a central element within American and
global culture and is dominated by a handful of major distributors.
o All of the major studios and distributors are tied to the major media
conglomerates that use their Hollywood assets in concert with other parts
of their operations.
o Critics of the Hollywood system sometimes argue that its industrial
practices narrow the range of cultural diversity in films and that the
enormous influence of U.S. distributors results in cultural colonialism in
countries with smaller economies.