Jan 12, 2018 in Research

European Industry Crisis in the Beginning of the Twentieth Century

Early 1900s turned out to be a productive time period for the development of the European film industry as European movies spread all over the world and even overtook half of the market niche in the US. Nevertheless, the decline of the movie industry in Europe was also raising as by mid 1920s, the European film was ‘an endangered species’ in the US and non-influential in Europe as well. The answer to this mystery is given by international economists: the data analysis demonstrates that the intensified industry concentration in the US did not allow any participation on the European part, and after the First World War, catching up sounded impossible. In spite of the high profitability levels, European film companies could not overtake the market share of international movie production once again, and a deep crisis of European film industry followed. (Mezias 306-10)

In the very beginning of the twentieth century, European film companies charged into the lead due to some significant technical innovations such as documentary newsreel and art film. However, it was the American market that took advantage of those inventions to the full. It is interesting how the situation changed after the First World War – now Hollywood Studios was almost the only influential supporter for the European film industry growth. Gradually, European movies became a rarity in American movie theaters. This issue is still burning even today. Since the early 1900s, European movie production never managed to obtain former influence in the American market. This essay will discuss the possible causes of the mass crisis and downfall of the European movie companies that became idle in merely ten years.

As the entire film industry gained more and more scale, the film production costs extended as well. Still, the market demanded more and more expenses, and this resulted in a great economic crisis for the European movie industries. What makes European film development shift so unique is that only few world industries faced such dramatic changes in merely ten years. European films in the American market are going to be the center of attention in this essay as the downfall of the statistics for European movies was the most drastic in the US (from 60% down to 5%). The researchers found out that two most influential movie-producing countries were Great Britain and France – each of them had its peculiarities. Great Britain and the USA had some splitting points in culture and language, and the United Kingdom succeeded in producing high-quality entertainment in the early 1900s. Great Britain itself had a wide internal entertainment market. As for France, it became a leader exporter of the movie products regardless of its small internal market. The cultural difference with the USA was more significant. The period studied starts in 1890 and ends in 1920s when influential market changes took place. The invention and enhancement of the sound systems was a breakthrough that, however, resulted in great increase of expenses. That is why the governmental protection could not save the European movie industry from gradual downfall, and all legal patronage was forbidden. The explanation of the European movie industry decline is the appearance of sunk costs, and the economic theories of Sutton give data-based support to this idea (220-5).  

The early 1900s were marked as successful for European film production since the Europeans were the first to apply projectors, color management tools, cartoons, newsreels, sound and art films, and the serial films. The home markets were definitely under their influence for the most part, and even more than a half of the American market was full of European movies. The French representatives were incredibly fast in launching partnerships, foreign productions, and movie distributors in other European countries and the USA. That was their key to success and domination before the 1910s. Some of the leading French film companies (Méliès, Gaumont, Pathé, and Éclair) launched their affiliated companies in North America. Danish movie makers specialized in producing play imitations on movie screens, and the art film was actually a successor of this approach to film production. Italian movie making branch also had some weight – they worked on long-lasting historical films which can also be called the forerunners of the feature films (Cherchi Usai 123-9).

The crisis started hitting in the beginning of the 1920s when the Europeans could only have insignificant shares in both American and home markets. They had to sell their affiliated branches in the US and quit the home market niche. Meanwhile, Hollywood studios merged the remains of European groundwork and created subsidiaries in Europe. Why did it happen? The crisis start marched in step with the establishment of the Motion Picture Parents Company that was a trust company meant to gain influence on the American market (Bowser 213). Only one member of it was European by origin. The trust forced movie exporters to sell out or threatened to forbid their activity at all. As a result, the European movie makers had no other choice than to join the trust or work with the independent companies that challenged the trust soon. The trust could not fight off, and the Sherman Act proclamation was the last drop. The further fall of the European market was not actually a fall in real figures as the actual values in 1920s remained the same as in the mid-1910s (Mezias 312-22). However, it was the rapid growth of American market share that made the European numbers so marginal. Therefore, the downfall was not absolute but relative which is important to keep in mind.

The home markets of the European companies followed the very same patterns as the US market share governed by the affiliates. It shows that film production market connections were very close and integrated. The assumption is that the entertainment had its fixed standards that made business more profitable and cut the costs. Such mutual dependence and high integration level were influential causing a domino effect for all market shares. One of the reasons for the rapid, unforeseen and permanent crisis of the European film industry is the First World War that cut the home markets and decreased the revenues. Although the gradual fall was already in place in 1910, the war definitely sharpened the situation. It is interesting that during the war years the entertainment demand grew a lot because of the lower costs (few staff members, little materials) and sufficient psychological relief in the form of reality escape. Temporary cinema closures also weakened European film production in the mid-1910s. The fight for the early film was as well burning on the local level – for example, the British parliament announced the immorality demonstrated by the American plays and forbad their performance in London and suburbs. Some of labor unions involved in British cultural life protested against the growth of Americanism in local lifestyles and language (Bowser 214).

In spite of all assumptions, the First World War could not be the only reason for such a rapid decline as the movie industries still have governmental support because it also issued many military materials and propaganda tools, and the war profits even resulted in some prosecutions. Although it may seem at first glance that the neutral states could have benefited during the war, but, in fact, the American movie invasion was more intensive there than in allied countries. The number of art films obtained substantial growth during the war period – the statistics proves that the European representatives were not left out by their American colleagues in terms of production scales. So, the war cannot be the only reason for final industry stagnation in the 1920s as even moderate growth can be found in the war years. The influence of decreased non-European countries cannot count as their involvement in the movie industry was extremely low at the moment.

Another reason behind the downfall of the European movies is the dramatic change in the viewers’ preferences (Bowser 214). The Americans did not have the same passion for the European films anymore, and the sufficient loss of revenue resulted in the industry stagnation. This is especially evident with the French films as French culture was distant from the American lifestyle. The American viewer wanted another movie format: longer dramatic movies with one or two central heroes rather than short and diverse films with multiple characters. Nevertheless, flexibility and cultural awareness were taken into consideration by the European movie makers. They introduced happy endings for the Americans and sad dramatic ends for the easterners.

Therefore, the problem of sunk costs, financial management failures, and market structure peculiarities leaded the European film industry to such fall. The budget melted more and more every year, and the investors switched to Hollywood Studios that has been more successful ever since then. European film producers could not find a way to decrease the costs for creating long and dramatic art films, and they never caught up with the US (Sutton 205-10). They could not establish affiliated and distributary companies in the main markets anymore, and the governmental protection did not help any. The listed reasons for the fall of the European cinema are relevant until today, because this problem has not been resolved till now. Still, there have always been opportunities for further development even in the roughest times, and the researchers hope for the blossom of European cinema throughout the world. 

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