Economics for Managerial Decision Making: The Film Industry

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Economics for Managerial Decision Making|
Research Paper Fall 2011, Term2| | 12/7/2011|


Praveen Menon


The film industry consists of the technological and commercial institutions of filmmaking: i.e. film production companies, film studios, cinematography, film production, screenwriting, pre-production, post production, film festivals, distribution; and actors, film directors and other film crew personnel. Though the expense involved in making movies almost immediately led film production to concentrate under the auspices of standing production companies, advances in affordable film making equipment, and expansion of opportunities to acquire investment capital from outside the film industry itself, have allowed independent film production to evolve.


Like other major innovations such as the automobile, electricity, chemicals and the airplane, cinema emerged in most Western countries at the same time. As the first form of industrialized mass-entertainment, it was all-pervasive. From the 1910s onwards, each year billions of cinema-tickets were sold and consumers who did not regularly visit the cinema became a minority. In Italy, today hardly significant in international entertainment, the film industry was the fourth-largest export industry before the First World War. In the depression-struck U.S., film was the tenth most profitable industry, and in 1930s France it was the fastest-growing industry, followed by paper and electricity, while in Britain the number of cinema-tickets sold rose to almost one billion a year.

In the early 1890s, Thomas Edison introduced the kinematograph, which enabled the shooting of films and their play-back in slot-coin machines for individual viewing. In the mid-1890s, the Lumière brothers added projection to the invention and started to play films in theater-like settings. Cinema reconfigured different technologies that all were available from the late 1880s onwards: photography (1830s), taking negative pictures and printing positives (1880s), roll films (1850s), celluloid (1868), high-sensitivity photographic emulsion (late 1880s), projection (1645) and movement dissection/ persistence of vision (1872). For about the first ten years of its existence, cinema in the United States and elsewhere was mainly a trick and a gadget. Before 1896 the coin-operated Kinematograph of Edison was present at fairs and in entertainment venues. Spectators had to throw a coin in the machine and peek through glasses to see the film. The first projections, from 1896 onwards, attracted large audiences. Lumière had a group of operators who traveled around the world with the cinematograph, and showed the pictures in theaters. After a few years films became a part of the program in vaudeville and sometimes in theater as well. At the same time traveling cinema emerged: cinemas which traveled around with a tent or mobile theater and set up shop for a short time in towns and villages.

The first feature film ever made was The Story of the Kelly Gang, an Australian film based on the infamous Ned Kelly. In 1906, Dan Barry and Charles Tait of Melbourne produced and directed The Story of the Kelly Gang, a silent film that ran continuously for a breathtaking 80 minutes. It was not until 1911 that countries other than Australia began to make feature films. By this time Australia had made 16 full-length feature films.

In the early 1910s, the film industry had fully emerged with D.W. Griffith's The Birth of a Nation. Also in the early 1900s, motion picture production companies from New York and New Jersey started moving to California because of the good weather and longer days. Although electric lights existed at that time, none were powerful enough to adequately expose film; the best source of illumination for...
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