Shadows Behind the Scenes: Political Exchange and the Film Industry

J. Dunning , Explaining International Production (London: Unwin Hyman, 1988), p. 327.

R. Vernon , Sovereignty at Bay (New York: Basic Books, 1971), p. 92. Networks are discussed on p. 108. As early examples of multinational consortia, Vernon cites Euratom, a European initiative in the field of atomic energy, the 1964 conception of the European Launcher Development Corporation and the France-UK project to develop the Concord airliner (p. 96).

Political exchange refers to the bargaining between governments, which make tax and regulatory policies, and an industry, which can create various politically desired 'outputs' such as employment in lagging regions, employment of minorities, research and development centres and environmental impacts. The concept, as applied here, is developed in Keith Acheson , 'Power Steering the Canadian Automotive Industry: The 1965 Canada-USA Auto Pact and Political Exchange', Journal of Economic Behaviour and Organization (Vol. 11, 1989), pp. 237-51 and Keith Acheson , 'Political Exchange and Government Policy Towards the Canadian Automotive Industry'. in John S. Odell and Thomas D. Willett (eds.), International Trade Policies: Gains from Exchange Between Economics and Political Science ( Ann Arbor, Mich.: University of Michigan Press, 1990) pp. 253-71.

A survey of the international economic aspects of television production and distribution is found in R. Collins , N. Gamham and G. Locksley , The Economics of Television, the U.K. Case, (London: Sage Publications , 1988), pp. 50-97.

See W.V. Strauss , 'Foreign Distribution of American Motion Pictures' , Havard Business Review (Vol. 8, 1929-30), p. 309.

J.S. Nye , Bound to Lead (New York: Basic Books , 1990), p. 194, reports that the United States: ... exported seven times more television showns than the next country (Britain) and had the only global network for film distribution. Although American films account for only 6 or 7 percent of all films made, they occupy about 50 percent of world screen time. According to the Motion Picture Export Association of America (MPEAA) the US motion picture industry generates an annual net surplus of US$3.5 billion. MPEAA letter to Dorothy Balaban, Office of the US Trade Representative, Washington, DC, February 15, 199 p. 2.

The colonies are described in J. Baxter , Hollywood Exiles ( London: Macdonald and Jane's, 1976 }, pp. 128-46. Additional information is provided in Neal Gabler , An Empire of Their Own: How the Jews Invented Hollywood (New York: Crown, 1988).

American interests were mainly in operating booking offices, in the ownership of theatres in different countries, and in reciprocal agreements whereby a number of American films would be shown in Europe in return for European Films, usually a lesser number, shown in the US. Little film production was actually carried out by American firms in Europe, except for a subsidiary that operated in Germany by Warner Brothers and the shooting of individual film projects. This changed somewhat with the introduction of European quotas which led firms to establish production inside the quota countries. Southard, American Industry in Europe (New York: Amo Press, 1976), pp. 94-99.

Sony and Matsushita took over Columbia and MCA, respectively, while French interests own what is left of MGM. Fox was taken over by Rupert Murdoch, an Australian with world media interests. Subsequently. Murdoch became an American citizen. The MPAA now represents major Japanese corporate interests - an ironic result of globalisation.

Vernon, op. cit., in note 2, pp. 65-77.

A famous example is the lending of Clark Gable, who was under contract to MGM, to David Selznick for Gone with the Wind. A description of the general alliance between American and English firms in the late 1930s appears in Margaret Dickinson and Sarah Street, Cinema and the State: The Film Industry and the Government 1927-84 (London: British Film Institute, 1985), pp. 58-59.

An informative account of the evolution of the studio is Thomas Schatz , The Genius of the System: Hollywood Filmmaking in the Studio Era ( New York: Pantheon Books, 1988).

A recent book, R. Brownstein , The Power and the Glitter: the Hollywood-Washington Connection (New York: Pantheon, 1990) describes the linkages between politicians, directors and performers. This book discusses how individuals in the two activities have used the other to promote their careers, a subject not addressed in this paper.

For a reproduction of the Robida drawing and a description of his other visions see Erik Barnouw , Tube of Plenty: The Evolution of American Television ( Oxford: Oxford University Press, 1990), p.5.

We use the term international political economy to mean 'a focus of inquiry that seeks to explain international politico-economic relations and how they affect the global systems of production, exchange and distribution.' L. Eden. , 'Bringing the Firm Back In: Multinationals in 1PE', CITIPS Discussion Paper 1991, (Ottawa: Carleton University , 1991), p. 1.

Commercial interests adjust content to cultural differences by adapting a film or programme to individual markets when it is in their economic interests to do so. The print shown in a particular market may have a controversial scene excised or a different version of the scene shot and substituted for the original. The following account from the New York Times (December 2, 1990), p. E5, illustrates a distributor's (not a government censor's) response to characteristics of the Japanese market: When Bernardo Bertolucci's epic, 'The Last Emperor', opened in Japan in 1988 it was missing a key snippet: old newsreel scenes of Japanese soldiers in Nanjing. China, in 1937, gunning down Chinese and dumping their bodies. The movie's distributor, using an expression that often crops up here when debate over anything from politics to high prices seems likely to cause discomfort, explained that 'we had better avoid unnecessary confusion in the movie theatres'. If Japanese are confused, it may be because the 'Rape of Nanjing' is glossed over in the schoolbooks as the 'Nanjing incident'. So is Japan's 45 year occupation of Korea.

For example, policy in a country may use a discretionary funding agency to affect content and require that it be produced by individuals who are nationals. The first limits the world market by affecting demand; the second raises cost by restricting the input choices of producers. Both these factors reduce the level of production activity.

The benefit may be avoiding some negative action from the industry's perspective (i.e. it does not matter for the logic of the argument whether the gain is obtaining a benefit or avoiding a loss).

Milton Viorst , 'A Reporter at Large: Egypt', The New Yorker (July 2,1990), p. 35.

For a discussion of some aspects of such policies see Keith Acheson , Christopher Maule and Elizabeth Filleul , 'The Folly of Quotas in International Trade of Films and Television Programs', World Economy, (Vol.12, No.4, December 1989), pp. 515-24, and Keith Acheson and Christopher Maule , 'Canadian Content Rules: A Time for Reconsideration', Canadian Public Policy, (Vol. XVI, No.3, September 1990), pp.284-97. In discussing cinematic quotas, first introduced in England in the Cinematograph Films Act of 1927, Margaret Dickinson and Sarah Street, op. cit, in note 11, p. 2, assert: Since this policy was one of providing indiscriminate assistance to producers of all films defined as 'British', there was great emphasis in the rhetoric on the cultural significance of nationality. Yet the criteria chosen for determining whether a film was 'British' had relatively little to do with cultural characteristics: the main factor was the proportion of labour costs paid to British nationals. The creative team could in fact be American as long as a sufficiently large British labour force was employed on production.

The topic is covered in N. Pronay and D. Spring , Propaganda, Politics and Film, 1918-45 (Londort: MacMillan, 1982) and L. Furhammer and F. lsaksson , Politics and Film ( New York: Praeger, 1968).

Furhammer and Isaksson , op. cit, in note 21, p.11.

F.A. Southard , op. cir, in note 8, p. 97.

Furhammer and Isaksson , op. cit, in note 21, pp.7-8.

Furhammer and Isaksson , op. cit, in note 21, p.11.

Even today, the average ratio of exposed stock to finished film in Hollywood is reported to be 20 to 1 while in the Soviet Union it is 6 to 1. James Lardner , 'A Reporter at Large (Soviet Film Industry)', The New Yorker (Sept. 26, 1988), p.84.

Tadao Sato , Currents in Japanese Cinema (Kodansha, 1987), p.100.

Furhammer and Isaksson , op. cit, in note 21, p. 41.

Ibid., p. 39.

U.S. Department of State Bulletin (14 (344) 1946, Feb. 3), p.160.

H.T. Schiller , Communication and Culturad Domination (New York: M. E. Sharpe, 1976), p. 26, states that 'The U.S. position was influenced by the example of the ... decisive role played by the. British communications network ... which held the colonial system together, promoted its advantages, and insulated it from external assault .' Likewise, K. Cooper, Barriers Down ( New York: Farrier and Rinehart, 1942), p. 11, asserts that: The cable brought Australia, South Africa, India, China, Canada and all the British world instantaneously to London on the Thames ... Britain, far ahead of any other nation, concentrated on the cable business. First it ties its Empire together. Then it stretched out and tied other nations to it. And in harmony with Victorian practices, the news that went through this vast network of cables gave luster to the British cause!

The MPAA, formed in September 1945, evolved out of the Motion Picture Producers and Distributors Association (MPPDA) which began operations in 1922 and which administered the Production Code, an industry censorship scheme adopted to forestall official censorship. (For a revealing account of the extent of content control exercised see Gerald Gardner, The Censorship Papers: Movie Censorship Letters from the Hays Office 1934 to 1968 (New York: Dodd, Mead & Company, 1987. The president of the MPPDA was former US Postmaster General Will H. Hays who held the position until 1945 when Eric Johnston, an economic advisor to President Eisenhower, was appointed president of the renamed MPAA. On Johnston's retirement in 1963, Jack Valenti, a personal friend and former aide to President Lyndon Johnson, was appointed president and remains so today.

Thomas Guback , The International Film Industry: Western Europe and America ( Bloomington: Indiana University Press, 1969), p.92.

For more detail see Guback , op. cit., in note 33.

Sato , op. cit, in note 27, p.36.

For a discussion of moral hazard, adverse selection and co-ordination, see Eric Rasmussen , Games and Information (Oxford: Blackwell, 1989), Chapters. 6, 7, 8.

For established personnel, reputations may provide adequate safeguards against slacking and misrepresentation of abilities, and payment can be made upfront. Because of the informational problem, conditional contracts are imposed on struggling newcomers, who may have to be paid more, on average, to compensate for the risk that they bear. This perverse transfer of risk is typical of principal-agent contracts. See Daniel Levinthal , 'A survey of Agency Models of Organizations ', Journal of Economic Appearance and Behavior and Organization (Vol. 9, 1988), pp. 153-85.

Recently, withholding tax created a problem for foreigners working in the English industry (particularly stars). The 1988 UK budget created an upper bracket limit of 40 per cent which compares with the combined federal and state tax in the United States of 39 per cent, a change which solved the problem Variety, (March 23, 1988), pp. 1, 130.

For a discussion of Canadian policy and activity concerning co-productions and co-ventures, see Keith Acheson and Christopher Maule , 'The Higgledy-Piggledy Trade Environment for Films and Programs: The Canadian Example', World Competition (Vol. 13, No. 2, December 1989), pp. 47-62.

Public Law 94-553, Oct 19. 1976, Copyrights, Title 17, USC. The compulsory license scheme for cable is contained in section 111.

Canada-United States Free Trade Agreement Implementation Act (S.C. 1988, C.65). The Copyright Board which implemented the compulsory licensing for distant retransmissions was created by an amendment of the Canadian Copyright Act in 1988. The royalties generate just over $50 million Canadian per year, of which 57 per cent goes to the collective representing producers of American motion pictures and syndicated programming. Copyright Board of Canada, News Release (October 2, 1990).

Howard P. Knopf , 'New Forms and Fora of Intellectual Property Law', Canadian Intellectual Property Review ( 1988), pp. 247-74, 263.

Variety, (Aug.30/Sept. 5, 1989), p.7 1.

C.f. Mark Frankel , 'The Little Producer That Couldn't', Spy (August 1989), pp.47-48.

For example, the English financing system, the Eady Levy, apportioned revenue derived from taxing box-office receipts among producers based on the box-office revenues of their films. See Dickinson and Street , op. cit., in note 11, p. 225.

In North America, Stephen Wilson of the research firm, The Fairfield Group, estimated that $1.95 billion was spent directly by consumers on tapes in 1987. The rental market was estimated to be $9.55 billion. Wilson also estimated that thirty per cent of VCR owners are buying tapes rather than renting. Variety, (March 23, 1988), p.41.

Variety (December 21-27, 1988), p.3.

The Wall Street Journal (July 27, 1990), p.B3.

Ironically, interest in other countries may support these policies, if their subsidiaries were grandfathered into the protected set of companies when the legislation was introduced, as is the case with film distribution in Switzerland.

For example, that Canadian rights be separated from American and not be sold as bundled North American rights.

Warners, the producers of Batman, signed twenty-four contracts covering key chains, automobile sunshades, $150 motorised ride-on Batmobile for kids, Nintendo games, walkie-talkies, shirts, robes, pyjamas, boxer shorts, costumes, capes and plastic replicas of the Batplane, Batcar and Batcave. Los Angeles Times/Calendar (May 14, 1989), p.29.

'Ten years after its first show, it was seen in 50 countries in English and in seven foreign-language editions, including Arabic. It is now telecast in English in 80 countries as well as in 14 other languages.' The Christian Science Monitor World Edition, Friday, Nov, 10, 1989, p.11. For an earlier discussion on Sesame Street see A. Maltelart , Multinational Corporations and the Control of Culture (Sussex: Harvester Press, 1979), p. 161.

The Christian Science Monitor, Friday, Nov.10, 1989, p.10. Disney has always cultivated and protected the characters created in its animated films. When an actress dressed as Snow White danced provocatively with Rob Lowe at the 1989 Academy awards, Disney registered a complaint with the Academy. The Wall Street Journal, (April 3, 1989), p. A1.

Los Angeles Times (Aug.29, 1989), IV, p. 1.

In commenting on proposals for corporate sponsorship of British feature films, Dickinson and Street note that in the 1940s, 'The fact that manufacturers sometimes gave 'props' free or paid to have their brand name shown in a feature was hardly considered a source of ambiguity since their contributions were relatively small', op. cit., in note 11, p. 115.

Robert Anderson , 'The Motion Picture Patents Company: A Reevaluation', Ch. 5 of Tino Balio, The American Film Industry (Madison WI: University of Wisconsin Press, 1985), pp.133-52.

The integration between sound manufacturers and film producers and distributors, either through ownership or through relationships in the United States, helped in international dissemination of American sound systems. In England, for example, American firms would not distribute their films to cinemas which had not installed the Western Electric system until June 1929 when United Artists, MGM and Paramount broke ranks and dropped the requirement. See Dickinson and Street, op. cit., in note 11, pp. 44-45.'

Western joined the fledgling Warner Brothers to create the Vitaphone Corporation- Later, Western's subsidiary, Electrical Research Products Inc. (ERPI), bought out Warner's exclusive right to the new technology, and in the deal Warner Brothers obtained control of Vitaphone, received over a million dollars in cash and accepted becoming a licensee of ERPI with a royalty fee of 8 per cent of gross revenues from sound pictures. For a fuller treatment of the impact of sound, see Douglas Gomery, 'The Coming of Sound: Technological Change in the American Film Industry', in Balio, op. cit., in note 56, pp. 229-51

There were 8 reels to a 90 minute film.

See James Lardner , 'Annals of Law (Betamax Case - Part 1) ', The New Yorker (April 6, 1987) and 'Annals of Law (The Betamax Case - Part II)', The New Yorker (April 13, 1987).

The Globe and Mail (Nov. 27, 1990), p. B1.

Keith Acheson and Christopher Maule , 'Trade Policy Responses to New Technology in the Film and Television Industry', Journal of World Trade (Vol. 23, No. 2, April, 1989), pp. 35-48.

'No medium has a more multinational history than the motion picture', Ithiel de Sola Pool, Technologies without Boundaries: On Telecommunications in a Global Age (Cambridge: Harvard University Press, 1990), p. 76.