The changing role of Hollywood in the global movie market

 
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Hollywood films are one of America’s most powerful “exports,” and the globalization of U.S. films, and their values, is a phenomenon both celebrated and lamented. Academic researchers have been doing increasing work in the business of film (for an overview, see “The Economics of Movies: A Literature Survey,” in the Journal of Economic Surveys.) As Hollywood has become more dependent on international revenue streams, more research has focused on the dynamics of how U.S. films are being marketed globally and how a new “global Hollywood” is changing as an industry. In addition, the business news media have explored the phenomenon in articles such as “Hollywood Goes Global: Bigger Abroad,” in The Economist, and “Plot Change: Foreign Forces Transform Hollywood Films,” in the Wall Street Journal. Meanwhile, the rise of domestic film markets in places such as “Bollywood” in India, China and Brazil have made the global film market more varied and complex.

In a 2012 study published in the Journal of Media Economics, “The Changing Role of Hollywood in the Global Movie Market,” researchers from the University of Calgary and the University of Sydney examined the dynamics of about 2,000 films over the period 1997 to 2007, exhibited in the following countries: the United States, Canada, Australia, France, Germany, Mexico, Spain and the United Kingdom. The researchers note that, for Hollywood, “international revenues have grown from roughly equal to domestic in year 2000 to double the level of domestic revenue in 2009.” The average budget for films in the sample was $41 million; worldwide average revenue for a film was $76 million, with a median of $38 million and a standard deviation of $110 million — meaning that certain blockbusters do significantly better financially than many other films combined. The study categorizes films by genre and type — including whether they are sequels or have name-brand stars — in order to gauge each country’s taste for certain kinds of movies. Ultimately, the researchers examine if Hollywood appears increasingly to be catering to foreign audiences, and they provide detailed economic analysis to explore the “global Hollywood” phenomenon.

The study’s findings include:

  • The data lend “support for the hypothesis that the supply of Hollywood films has accommodated global demand as the relative size of the U.S. domestic market has decreased.” It suggests that Hollywood is “sacrificing some U.S. box office appeal” in order to appeal to foreign markets.
  • Patterns in taste are discernible across countries. In general, action films do better at the box office across all countries, compared to other genres. Romantic comedies perform better in Australia, Germany and France. Films with stars do 35% better in the United States compared with other genres, while only 16% better in Mexico, for example.
  • Spanish audiences value sequels more highly than American audiences do; stars are also “most highly valued in the Spanish market,” while “dramas are most highly valued in the French market.” Comedies are “most highly valued in the domestic U.S. market.”
  • Hollywood appears to be doing less of what scholars have called a “cultural discount, where films would be produced primarily for the domestic market and then distributed to foreign markets to earn incremental revenues.”
  • There is little “international contagion effect” — the idea that a film first released in the United States, which does well in the domestic box office, will necessarily be a global success. The data show that “high U.S. revenues reduce the risk of a film earning low foreign revenues, while not greatly increasing the probability that a film earns extremely high revenues.”

The researchers conclude that “growing relative size of the foreign market may be providing an incentive for the production of films that maximize worldwide profitability, which necessarily leads to a trade-off between what appeals to the domestic market and what appeals to foreign markets.”

A related study in the journal Communication Research, “Explaining Global Box-Office Tastes in Hollywood Films: Homogenization of National Audiences’ Movie Selections,” finds that global and American tastes are increasingly converging. In an article exploring that study, the research-oriented magazine Pacific Standard notes, “As far as box-office grosses are concerned, U.S. blockbusters have become the unifying force for theatergoers worldwide. Surprisingly, this win hasn’t necessarily come at the expense of native or alternative media offerings.”

Tags: entertainment

    Writer: | Last updated: January 10, 2013

    Citation: Walls, W. D.; McKenzie, Jordi. "The Changing Role of Hollywood in the Global Movie Market," Journal of Media Economics, 20012, Vol. 25, Issue 4.
     

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