Motion-picture industry

Definition Enterprises that plan, finance, produce, distribute, and exhibit motion pictures

The motion-picture industry, part of the greater entertainment industry, employs vast numbers of people in the creation and distribution of its products. The industry has spawned many other businesses and services, some related to the production of films and others related to their marketing and sales.

Motion pictures and associated business ventures have evolved considerably over their relatively brief existence. Almost as soon as movies were developed in the late 1800s, they were used as entertainment. Nickelodeons (storefront movie theaters) were a popular attraction for the working classes beginning in 1906. With increased urbanization due to the increase in factories in the cities, attendance grew steadily to the point where large movie theaters were built in place of the nickelodeons. Early studios, such as the New York Motion Picture Company, Mack Sennett’s Keystone Studios, and American Mutoscope and Biograph, eventually made way for the five major studios of the first half of the century, Metro-Goldwyn-Mayer (MGM; begun as Loew’s in 1910), Paramount (1916), Warner Bros. (1923), FOX (1915), and RKO (1928).

The American film industry was able to become the leader in releasing and distributing films during the early 1920s thanks in part to World War I and the fact that the United States did not suffer the extensive physical damage and disruption that Europe did. Soon, the major studios were building their own large theaters in which to show their films.

The Studio Era

By the 1920s, there were eight significant studios in the American motion-picture industry. In addition to the five major studios, three smaller studios (Universal, Columbia, and United Artists) were also producing and distributing films. Because of various scandals and fears of increased government regulation, a regulatory group was formed, the Motion Picture Producers and Distributors of America (MPPDA). The group, which later evolved into the Motion Picture Association of America (MPAA), hired former postmaster Will Hays to create a code of conduct for films. The Hays Code was released in 1930 but not really put into effect until 1934. The code remained in effect until 1966 and was replaced by the MPAA ratings system in 1968.

The theaters that the studios owned beginning during the 1920s played a major role in their success. In addition to each studio running only its own films in its own theaters, the studios had a practice of "block booking" with independently owned theaters; this practice required theaters to book all of a studio’s current film titles on offer in order to exhibit any of them. So, if a theater wanted the latest hit film from Paramount, it had to also book the studio’s three B-pictures as well. Block booking ensured that even the smaller pictures would make money for their studios. The practice had an added benefit: If a theater was fully booked with the films of one studio, it was impossible for it to book films from other studios.

In 1928, when Warner Bros. introduced modern sound films with the release of the Jazz Singer, the other studios realized they too would need to convert to sound. However, equipping both their film equipment and movie theaters to accommodate sound films was a major expense, and the film studios took on a lot of debt. Going to the movies had become an important part of most Americans’ lives, and in 1929, over 100 million people bought tickets to see films, making it the industry’s best year to that point.

The Great Depression did not hit the film industry hard during its first couple of years. However, by 1934, ticket sales were down by about 40 million annual sales, and the studios were feeling the pinch from the conversion to sound. Approximately one-third of the movie theaters in the United States closed during the Depression. The ones that remained open lured viewers by slashing ticket prices, having giveaways, and—most popularly—through "bank nights," when a ticket holder would win money through a drawing. Despite the Depression, the 1930s were seen as the golden era of the studio system, with major successes such as Gone with the Wind (1939) making use of new technologies such as Technicolor. It was also seen as the era when the studio system was at its most efficient, with stars and technicians under long contracts and many films being produced cheaply.

In 1938, the three smaller studios sued the five major studios for violating the Sherman Antitrust Act of 1890 through their use of block booking and ownership of theaters. This lawsuit took ten years to make it through the court system, but its final ruling had a major impact on the industry. In the meantime, World War II helped bring movie ticket sales out of their slump, as people were beginning to do better financially.

Post World War II to the 1970s

The end of World War II brought about a series of changes for the film industry, particularly for the major studios. The small studios won their antitrust suit. Studio-owned theaters and block booking were declared illegal. No longer able to count on the revenue from these practices, the studios began cutting costs by releasing actors and technical staff from their contracts. The anticommunist red scare and Hollywood blacklist led to a further loss of talent in Hollywood, as well as smearing the industry’s public image when it could least afford it. The industry was faced with trying to win people back into downtown theaters, despite the growing popularity of television, with its increasingly suburban audience.

During the 1950s, drive-in theaters’ ticket sales increased, but all other movie ticket sales went down. Studios tried to bring moviegoers back with big, all-star film spectacles such as Ben-Hur (1959), but for the most part it did not work. In 1957, RKO, one of the original major studios, went out of business. During this same period, other studios such as Warner Bros., MGM, and Universal diversified into television and music recording. During the 1970s, major corporations began taking over film companies, such as Paramount, Warner Bros., and MGM, and studios sold off the big lots where they had previously shot their films. Still, in other ways the 1970s would later be seen as a new golden age of filmmaking, as a new wave of young directors with strong artistic visions rose to prominence and enjoyed a new degree of independence from the studios. Among these auteurs were Steven Spielberg and George Lucas, whose films would arguably shape the motion-picture industry more than any others of the era.

The Blockbuster Era

With the release and major successes of Spielberg's Jaws in 1975 and Lucas's Star Wars (and its revolutionary toy merchandising) in 1977, film studios began to realize the potential of blockbuster films with sequels, increased marketing, and related merchandising. Merchandising, such as toys for fast-food children’s meals, tie-in books, action figures, and even clothing became a requisite part of every blockbuster film release. Film studios had produced blockbusters and event pictures before, but now, instead of simply emphasizing the star power of the cast, studios began to pour money into marketing budgets and tie-ins. As film historian Joel Finler noted, "What big companies are now selling are not so much blockbuster movies as brands or franchises." The marketing and advertising budgets for films only increased over time, with more money typically being spent on advertising year after year. During the late twentieth century, advertising budgets increased more than film production budgets.

The new crop of blockbuster films—notably the original Star Wars trilogy—also used groundbreaking special effects, made possible by advances in technology including animatronics, model making, and eventually computer graphics and other forms of digital manipulation. The huge profits earned by major films financed further increases in special effects budgets and ability, and franchises and standalone films alike grew bigger, more complex, and more expensive. Technology involving film, cameras, and sound design also improved steadily as films turned bigger and bigger profits.

During the 1980s, Disney, formerly known mainly for innovative animated films under founder Walt Disney, began to become a bigger player in the motion-picture industry, just as MGM and United Artists were declining. Foreign investment in film studios was also becoming a trend, with media mogul Rupert Murdoch buying Twentieth Century-Fox and Japanese companies Sony and Matsushita buying Columbia and Tri-Star, and MCA and Universal, respectively. During the late 1980s and early 1990s, many film companies either changed hands or merged with larger companies (Warner Bros. merged with Time, for example). At the same time, many smaller film companies that had made a dent in the film industry, such as Orion, were going out of business. During the period from 1985 to 1995, Disney was the only major studio to avoid a takeover or merger.

New Revenue Streams and Outsourcing

Merchandising and ticket sales came to account for only a portion of film companies’ revenues with the rise of home viewing options and other developments. During the 1980s, the advent of the videocassette recorder (VCR), cable television, IMAX theaters, and pay-per-view channels gave film companies new ways to extend the revenue life of their films. A sector of the industry developed as video rental outlets gained popularity, with more and more consumers gaining access to such technology as prices dropped. With the arrival of the digital versatile disc (DVD) during the 1990s, with its ability to contain extra features and commentary, the studios were able to realize new profits from their extensive film libraries by rereleasing classic films on DVD. The importance of film libraries can be highlighted by media mogul Ted Turner’s purchase of MGM’s movie library in 1986 for over $1 billion. Sales of films to foreign markets also became a major revenue stream.

In 1994, the latest major studio arrived with the creation of DreamWorks SKG. However, during the 1990s fewer films were made by major studios than in previous decades. Many films, while financed in part by major studios, were produced primarily by subsidiaries, such as Miramax, a subsidiary of Disney. This sharing of the work in making a film became a new way for the major studios to hedge their bets when creating a film. By partnering with a smaller company (which usually handles the film production while the major studio handles the marketing and distribution), the studio is able to share any risks as well as profit with its partner.

In a move reminiscent of block booking, in the 1980s and 1990s film companies—with the cooperation of the cinema multiplexes that first began cropping up during the 1970s—experimented with saturation booking, in which a film opens on three thousand screens or more. These saturation bookings tend to occur during times of peak movie ticket sales, such as summer or the Thanksgiving holiday. By filling multiple screens at each location, blockbusters reinforce their status as a destination or event film, while preventing smaller films from sharing the same theater.

In the late 1990s and early twenty-first century the viewing of films over the Internet drew much interest as another source of revenue, though it also opened the doors to a major expansion of media piracy. Some feared that streaming media online would reduce the popularity of going to the cinema and otherwise profoundly change the motion-picture industry. The Internet film industry indeed proved popular, and it grew rapidly as technology improved in the 2000s and 2010s. Companies like Netflix offered both mail-order DVDs and online streaming of extensive libraries of classic and recent films, and the rise of smartphones and tablet computers provided new viewing possibilities.

These developments did bring about major shifts in the film industry; most notably, the traditional video rental industry was all but destroyed. However, the appeal of seeing films on large screens at movie theaters was undiminished, and ticket purchases even increased. Blockbuster films and franchises continued to be major draws, but the independent film movement also thrived as filmmakers found cheaper and easier ways to create, promote, and sell films online, regardless of support from larger studios. The globalization trend continued as well, with the market for major Hollywood productions boosted by foreign distribution and financing. China, especially, became not only a major viewing market but an important source of money for increasingly expensive productions reliant on computer-generated special effects. Under this model, even a big-budget film that flopped at the domestic box office could be considered a success—and even spawn multiple sequels—if it made enough money in foreign markets and through various merchandising.

Despite the ongoing success of the motion-picture industry, it has earned substantial criticism. Among the most important issues in the early twenty-first century were concerns over discrimination and underrepresentation in mainstream films. Many observers have noted that women and minorities make up relatively small proportions of those in the film industry, especially in relation to their proportions of the US population and film-going audiences. Studies have found that women are paid less compared to men both as actors and in behind-the-camera roles. Major films continue to predominantly feature white males in lead roles, while women and minorities in supporting roles are often depicted as stereotypes. This issue was reflected in the widespread backlash to the eighty-eighth Academy Awards (for films of 2015), in which many protested the ongoing lack of diversity among the Oscar nominees.

In 2020, the global coronavirus (COVID-19) pandemic caused the motion-picture industry to come to a halt, as film production ceased and cinemas were closed. To combat this, several large-budget films that were originally planned to premiere in theaters were instead released straight to OnDemand services. Other films premiered at drive-in theaters. By September 2020, many cinemas had begun to reopen and film production had resumed with added guidelines to adhere to various state and country health guidelines.

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