Introduction
The US film industry has gained global recognition and dominance, with its films being watched all over the globe. With annual revenue of $5 billion, a 27% decline from the previous year, it shows that the US is a major player in this industry (Escandon, 2020). The US film industry is large, growing, and resourceful from holding spectacular reward events such as the Hollywood film awards and academy presentations that gain global attention. Under Hollywood, the US has gained much competitive edge in the industry. One of the leading competitors in Hollywood is Bollywood, the Indian film industry, which has gained much momentum too (Lee, 2021). The film industry is essential in spreading culture, ideas, and imagination, and the US has successfully thrived. Thus, this study will evaluate the history of the US film industry, the industry’s competitiveness, and the prospects of inward and outward foreign direct investment.
History of the Film Industry
The origin and development of film cannot be accredited to one person. The film industry was started in 1891 by the Edison Company, which produced the first motion pictures using a kinetoscope. During this period, only one person per time could view the image. In 1893, the first public kinetoscope demonstration aimed to form a large commercial industry (Li et al., 2020). In 1895, Lumiere Brothers in France projected the first moving pictures to a paying audience. They used a cinematographer with their own technology, which contained a projector, camera, and printer in one device.
During this period, films included short clips that were one minute or less. In most cases, they were showcased in music halls, fairgrounds, and other regions with darkness to show the film. From 1895 – 1914, the film industry spread through Russia, Europe, and Scavandanian (Cassidy, 2022). However, this influence was less in America as this technology had not yet been adopted. As the industry grew, more people started paying to watch films. Films started to be made longer and involved a narrative or storytelling form. More people were willing and dedicated to invest in the film industry, which led to the building of the first cinemas (Cassidy, 2022). However, this growth was significantly slowed down by the First World War in Europe and accelerated in the American market as the demand for films rose rapidly.
The addition of color to the films started in 1906 as previously films were watched in black and white format. The first natural color films were presented to the public in 1906, and they relied on principles of color separation and the British Kinemacolor Process (Murphy, 2020). This technology was mostly used in documentary films to bring out the essence of truth in the films. However, coloring images slowed down in 1915 because color was costly for filmmakers (Hennig-Thurau et al., 2021). In 1932, a new technology that used a three-color process was introduced in films such as “A Matter of Life and Death” from the UK in 1946.
During the same period, there was a need to add sound to films. The initial sounds synchronized to a film used a disc or phonographic cylinders. In 1927, a movie with a Jazz Singer was synchronized using a different record disk to produce sound (Murphy, 2020). The instrument that was used was the Warner Brother’s Vitaphone system. However, the system was not well received in the market and was abolished and replaced with a variable density soundtrack that photographically was recorded along the film’s edge.
The Cinema industry continued spreading throughout America, Europe, and Russia. In the late 1930s, nearly all cinemas shown had sound and color. The use of sound in films led to a significant boost in the American Film Industry which led to the period of the “Golden Age of Hollywood”. (Cassidy, 2022) By 1940, it became the major form of entertainment with large cinemas that could hold up to 3,000 people per sitting.
In the 1950s, TV was introduced, which significantly boosted the film industry as people could watch films from the comfort of their homes. There was a significant rise in the number of films produced and the length of the films until the late 1990s (Cassidy, 2022). The 21st century has been influenced by quick digitalization, with film producers focusing on finer details such as special effects, editing, and sharpness. In addition, there has been an evolution from 2D films to 3D films, which is a significant improvement.
US Film Industry Competitiveness Based on International Trade Theory
The old international trade based on mercantilism encouraged countries to encourage exports and discourage imports. However, as the world evolved, this theory proved to be non-advantageous for most countries because it created a large margin of growth between countries that encouraged import and those that did not. Thus, many countries have adopted free trade to ensure that they do not restrict their consumers from any goods or influence them, which has brought significant growth in many economies (Hill, 2021). The US film industry employs around 2.2 million people in front and behind the camera (Kim & Brunn-Bevel, 2019). However, the industry competitiveness depends on four factors in the domestic market: endowments, demand conditions, and supporting industries.
US government and other non-governmental organizations have significant endowments on the film industry. Unlike most competitor countries, the government has ensured that the film industry is funded. For instance, the AFI award received an endowment of $350000 to boost their production from The National Endowment for the Humanities in 2020 (Ranger, 2020). George Lucas gave $10 million in endowments to the University of California School Of Arts (Ranger, 2020). These endowments have given the US film industry a significant boost in developing and distributing its films globally. Although other countries in the east, such as China and India, have started valuing their film industry, they still have a long way to go before getting to where the US industry is.
The other factor is demand conditions whereby US distribution channel or their films has beaten that of their competitors. The US is a technological hub that has developed ways of ensuring that its films reach their global audience. The six biggest US producers have each distribution channel suitable for their consumers. The main distributor companies are Universal Studios, Paramount Pictures, Lions Gate Films, and Sony Pictures (Kim & Brunn-Bevel, 2019). Film producer’s use licensing, selling of film rights, and negotiations with film brokers to distribute films. Other companies such as Netflix have adopted monthly subscriptions, making the US beat their competitors in film distribution. This has enabled US film companies to beat the biggest threat, piracy.
The US film industry has so many supporting industries which depend on it. It benefits from other industries, including technology, creative and which are part of its value chain. Software engineers and film manufacturers are some of the essential supporting industries. In addition, with film, there is a need for other technologies, such as sound and light industries which are critical to enhancing movie experiences (Kim & Brunn-Bevel, 2019). These industries give the US a major boost over their competitors because the US dominates most of the supporting companies’ products.
The US film industry is more successful than its competitors in India and China. This is because it dominates in endowment and demand conditions and has dominant supporting industries. It enables the country to produce quality films and distribute them at lower rates. A film like Black Panther generated $1.3 billion globally, which shows that most of their films are successful (Escandon, 2020). It depends on economies of scale to make its profit because most of its films are watched globally.
The Prospects for Inward and Outward Direct Foreign Investment in the US Film Industry
The Chinese market has accounted for a significant market in the film industry. Thus, the US film industry has to compete with Chinese, Japanese, and Indian filmmakers who have a significant presence in the Chinese market. To its advantage, the US film industry has a special position in the market due to the profit and influx, which enables it to create major blockbuster films (Kim & Parc, 2020). The first top ten positions in the box office titles came from US movies (Kim & Parc, 2020). In addition, various socio-cultural factors make exporting Asian films to the western market difficult. A study by Marandu & Ditshweu (2018) states that Indian films are almost non-exportable due to Western dominance. Soft power contributes to western consumers’ preference for western movies. The US government has used soft powers such as awards and nominations to increase its institutional recognition. When actors are recognized in the US media, they get global recognition as the best, and people are likely to watch their films because they believe they are the best. This reduces the US importation of foreign films and saturates their market with local films.
The US film industry has successfully been able to dominate foreign markets too. The increase in demand for films in Asia has been due to their disposable income, which has seen their population change their living habits. In 2005, China could sell 152 million cinema tickets annually, which rose to 1.62 billion in 2017, showing an uptrend (Paksiutov, 2021). Although the US market does not largely consume films from other markets, or the Asian market, it’s the opposite. The US has exported its films to global markets due to customer preferences, global distribution, and marketing of its films. This has made many international markets, such as the Chinese, prefer co-production with US producers over competing. This shows that the US market is reaping big from exporting its films to other parts of the world.
Emerging Trends in the Film Industry
One of the emerging trends is related to a technology whereby there is an increased internet revolution. The internet has provided new methods of distributing films using streaming services such as Amazon and Netflix. Another trend is crowdfunding, whereby people are allowed to provide funding for films. This method allows the public to invest in films, giving the industry financial backup. Finally, the other trend is the conversational shift regarding diversity, social commentary, and real-life events. Most of the films produced nowadays are focused on diversity and giving actors from diverse backgrounds to showcase their talents. There is significant integration of western and Asian culture in the current films.
Future Forecast
Some future threats to the film industry are inclusivity challenges, pandemics, politics, and piracy. It has been a challenge for the US film industry to ensure equal representation of all races, social classes, and other factors that divide society (Kim & Parc, 2020). The industry has seen significant criticism from minority ethnic groups for not being well represented in their films. The COVID-19 pandemic affected the film industry positively by increasing viewership of films when people were indoors and negatively by hindering the process of production of films. Politics has been a great player in the film industry because most current films highlight societal issues (Kim & Parc, 2020). Thus, political leaders have been hindering filmmakers from showing the people some of the societal issues affecting the country. Finally, piracy has been a challenge for a long time, whereby people obtain movies illegally and sell them to the market. This has cost the US film industry billions of dollars and is significantly affecting the film industry.
Conclusion
The film industry started in Greece and has since evolved to where it is currently. However, in the wake of the film industry globally, the US had already dominated the market by endowments, demand conditions, and supporting industries. The US film industry has received much support from government and non-governmental bodies, enabling it to produce major blockbusters in the industry. Although there are other competitors in the Bollywood and Chinese Market, the US film industry domination is still big. The US managed to hold its domestic market and venture into other foreign markets. The government has used sot powers to capture the domestic market. It has used customer preferences, distribution channels, and marketing for the foreign market.
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