Entertainment Industrialised: The Emergence of the International Film Industry, 1890-1940

Published by EH.NET (April 2009)

Gerben Bakker, Entertainment Industrialised: The Emergence of the International Film Industry, 1890-1940. Cambridge: Cambridge University Press, 2008. xxi + 449 pp. $99 (hardcover) ISBN: 978-0-521-89854-6.

Reviewed for EH.NET by Michael Pokorny, Department of Economics and Quantitative Methods, University of Westminster, London.

This book brings together much of the author?s published and unpublished work (he is a lecturer in economic history and management at the London School of Economics) and sets itself the objective of providing a coherent narrative of the emergence and development of the film industry, from its origins in Europe in the late nineteenth and early twentieth centuries to the overwhelming dominance of Hollywood. This transformation was achieved in a remarkably short period of time, beginning in the immediate post-First World War period and was completed in little more than a decade. Hollywood?s dominance, of course, continues to this day, although the book?s focus is the period up to the beginning of the Second World War (a short epilogue surveys the impact of television on the industry in the post-World War II period).

The tools of analysis are those of mainstream industrial economics. Thus the attempt throughout is to develop a rigorous analytical framework, augmented by the meticulous presentation and analysis of a wide range of rich historical data sets. Indeed, one of the book?s undoubted strengths is the wealth of data that is presented, and at the very least the book will be an invaluable source reference for these data.

The book begins by presenting a comprehensive overview of the markets for live entertainment in the nineteenth century in both Europe and the U.S., as a precursor to a detailed analysis of the emergence of cinema. This was a period of rapid growth in demand for all forms of entertainment, and the various industry sectors responded to this increasingly competitive environment through productivity improvements via a range of technological innovations. In terms of Europe, emphasis is placed on the British and French markets, an emphasis that is maintained throughout the book, although where relevant, discussion of other European markets is also introduced.

An analytical and empirical framework having now been established, the book moves on to its core ? a detailed exposition of the emergence of cinema on both sides of the Atlantic. While this new technology evolved somewhat haphazardly at first, the scope for substantial profit generation quickly became apparent. The tradability of films and the low marginal costs of producing extra film negatives meant that there were almost no limits to the extent to which film outputs could be distributed. While initially film might have been a poor substitute for live performance, this was in part offset by its novelty value, and certainly in terms of the relatively low admission prices that cinemas could charge. But as film outputs became more sophisticated they began to be seen as comparable and then superior substitutes for live performance, while still retaining substantial admission price advantages over live entertainment ? consumers could purchase considerably more hours of film entertainment per dollar than live entertainment, and this cost advantage was something with which (popular) live entertainment simply could not compete.

However, film may have remained an innovation characterized purely by its novelty value, and as such died out as this novelty value wore off. This manifestly didn?t occur, and the book?s central thesis is an explanation of why this innovation went on to become so dominant, and why the U.S. (and Hollywood) emerged to become the dominant film producer. Film producers recognized early on that consumers demanded novelty and innovation ? they demanded ?surprises? ? and hence that the medium had to evolve continually. Initially, this was reflected in the move from short films to full length feature films with increasingly complex narrative structures. Thereafter there were the innovations of sound, color, spectacle, special effects and so on. However, the book?s central contention is that when it comes to explaining the U.S. dominance of the international film market this was achieved very early in the innovation cycle, and to all intents and purposes was achieved by the end of the First World War. The explanation for this is to be found in the application of John Sutton?s theory relating to the impact that increasing endogenous sunk costs can have on market structure, which derived from the ?quality race? that took place among film producers in the early twentieth century. The issue was not just one of producing films that could capture the public imagination, but the manner in which film producers could capture the profits generated by these films. U.S. producers moved quickly to incorporate cinema chains into their organizational structures and developing increasingly efficient distribution networks. In other words, U.S. producers became much more efficient than their European counterparts in capturing film profits thereby providing a greater incentive and resource base for investing in higher quality productions. Such efficiencies were much more difficult to achieve in the fragmented European market, which also suffered from capital rationing during the War.

So why couldn?t European producers catch up in the post-World War I period? In essence, because the gap that had opened up between the U.S. and Europe was effectively unbridgeable. The European market remained fragmented and indeed became even more so in the turmoil of the aftermath of the war. Hollywood had now established a clearly identifiable ?brand,? and as its film budgets increased, and its foreign distribution networks became established, European producers simply could not keep up ? they had left their move too late.

Thus the book presents a compelling and detailed explanation for the dominance of Hollywood, an explanation that is firmly rooted in economic theory. Therefore, a criticism that could, and no doubt will, be made is that surely there is more to the story than pure economics. Other explanations are alluded to but not explored in any detail. Maybe Hollywood simply made better movies. Certainly anyone evaluating the films produced by Hollywood during, say, the 1930s, would be struck by the uninhibited, high octane escapism that these films exuded. And these films were as voraciously consumed in Europe as in the U.S. Indeed the book reproduces an observation to this effect by a British producer of the time, acknowledging Europe?s inability to generate the optimism and enthusiasm that were required to produce films of this kind. The book could have acknowledged more explicitly that economics can only provide partial explanations, and that the contributions of the cultural and critical theorists, and indeed other disciplines, need to be recognized.

A number of other minor quibbles could be made. The book is too long, and would have benefited from more ruthless editing so as to provide more focus to the arguments. The diagrammatic presentations of the data series move between logarithmic and linear scales without justification or explanation and many of the graphs contain too many data series to be illuminating. A range of elasticity and consumer surplus estimates are made, which the author fully acknowledges are highly speculative and approximate, but perhaps too much is made of these, given the health warnings.

But these quibbles should not detract from an admirable attempt at presenting a detailed, coherent and rigorous explanation of the economic forces that shaped the evolution of the film industry, an industry that is perhaps too often prone to wrap itself in myth and hyperbole.

Michael Pokorny (m.j.pokorny@westminster.ac.uk) is a Principal Lecturer in the Department of Economics and Quantitative Methods, University of Westminster, London. His most recent publication is ?Profitability Trends in Hollywood, 1929 to 1999: Somebody Must Know Something? (with John Sedgwick), Economic History Review, forthcoming.