CHAPTER 1: The British Film industry|
11. This chapter presents a brief history of
the British film industry, focusing on the key issues that have
continuing relevance to the success of the industry. It then summarises
the current state of the industry, looking in turn at the three
distinct but related sectors of the industry: production, distribution
The history of the British film
12. The cinema as an entertainment industry emerged
from a series of innovations in the late nineteenth century, mostly
in the United States, France and the United Kingdom. In the UK,
filmmakers established small studios to produce short films for
use by travelling showmen and in music-halls. In the first decade
of the twentieth century, more than 30 film studios were established
in and around London. British films rapidly established a substantial
share of the market at home and abroad, including some 15 per
cent of the American market by 1910.
This initial success rapidly faded as American production took
off, with expensive and heavily marketed feature films. The industry's
share of its home market fell from half to less than 10 per
cent by 1914.
13. At the same time as film production was waning,
cinema going flourished as a pastime of the British public. Investment
in cinemas surged, with the founding of many new companies and
investment of £1.5m (£140m at current prices) in cinemas
in 1908 alone. The Government
recognised the potential of the film industry, initially as a
source of revenue, when it included cinema, together with other
entertainments, such as music hall and theatre, in the Entertainment
Tax, introduced in 1916. The rate, which was initially set at
between 25 and 50 per cent of the price of cinema tickets, was
reduced in the 1920s and then raised during the Second World War.
It was finally abolished in 1960.
FIRST GOVERNMENT SUPPORT
14. By 1925, British film production had declined
to a point where fewer than 40 feature films a year were being
made, compared with over 150 in 1920. The vast majority films
shown here were American. In May 1925, Lord Newton raised the
issue in the House of Lords, citing "industrial, commercial,
educational and Imperial interests" involved, and calling
for a Committee of inquiry.
In 1927, the Government recognised the importance of film production
to the British economy and its role in stimulating exports of
other goods and services and acted to protect the home market
from American domination by means of the Cinematograph Films Act
1927. The Act recognised the interdependency of production, distribution
and exhibition, and sought to encourage home production by setting
quotas for British-made films
to be met by both distributors and exhibitors. The Act was a success,
in the sense that production of films in the UK more than doubled
by the end of the decade, and resulted in the establishment of
several new production companies, including British International
Pictures at new studios in Elstree, Warner's studios at Teddington
and Fox's studios at Wembley.
But it was also blamed for creating a market for poor quality,
low cost films, churned out to meet the quota requirements (so
called "quota quickies").
THE CHALLENGE OF AMERICAN FILM EXPORTS
15. While the Government was quick to recognise
the domestic importance of the film industry, and particularly
film production, the American authorities were even quicker to
recognise its importance as an export industry. American missions
abroad were reporting on foreign film market opportunities as
early as the 1910s. In 1926, Congress appropriated $15,000 to
set up the Motion Picture Section within the Bureau of Foreign
and Domestic Commerce of the Department of Commerce, which collected
market information through 44 foreign offices and 300 consular
offices. The Section
also appointed a Trade Commissioner in Europe. At the same time,
Harvard Business School started to offer seminar series in the
business and management of the film industry, and several other
American business schools and universities followed. Domestically,
the film industry was responsible for about 2 per cent of over-all
U.S. GDP-growth and about 3 percent of overall productivity growth
between 1900 and 1938.
The Hollywood studios generally broke even on the American market
and derived their profits from export revenues.
Number of feature films produced in the
Source: 1912-2000: Screen Digest; Screen Finance;
British Film Institute. 2001-2008: UK Film Council Statistical
Yearbook 2009 (including revised figures for 2002-2007).
Note: The films are all feature films, made in
Britain, including co-productions and films made with inward investment.
THE 1930S: BOOM AND BUST
16. The arrival of "talkies" in 1928
had a positive effect on British film production. Their films
were protected in the home market and, unlike the French and German
film industries, able to compete with American sound films without
the need for dubbing. The result was that the industry experienced
a boom. The most successful British film production company was
London Film Productions, founded by an immigrant from Hungary,
Alexander Korda. The company's breakthrough success was The
Private Life of Henry VIII (1933). The success of this film
in the US helped Korda to establish an alliance with United Artists
(the first with a large American studio) who had the commercial
muscle to finance his films and ensure American and global distribution.
However, by the late 1930s, the boom in British film production
came to a sudden end. Over-rapid expansion led to bankruptcies.
The number of feature film productions peaked in 1936 at just
under 200 and fell by two thirds in the next four years (see figure
17. The quota provisions in the Cinematograph
Film Act 1927 had been agreed for ten years and the Act contained
a sunset clause. In 1936, the Government set up a Committee chaired
by Lord Moyne to investigate what assistance the industry required.
Moyne warned of the dangers of foreign (meaning American) control
of the industry, particularly the exhibition sector, and recommended
both that financial institutions be encouraged to fund film production
and that quotas be extended for a further 10 years. It also condemned
the "quota quickies" and recommended that the quota
rules included a quality test. The Cinematographic Films Act 1938
confirmed the retention of quotas, at 15 per cent for distributors
and 12.5 per cent for exhibitors. This was intended to encourage
bigger budget films, which could compete internationally. It also
encouraged American film companies to make films in the UK, thus
getting around the quota restrictions. Warner Bros and Twentieth
Century Fox had already established production facilities in the
UK. MGM established a British subsidiary, which immediately produced
successful films, including A Yank at Oxford (1938) and
Goodbye, Mr Chips (1939).
WORLD WAR II AND THE POST-WAR BOOM
18. The British film industry was still in recession
at the beginning of the war but, despite the constraints of the
wartime economy, it began to flourish. The number of studios available
decreased, but cinema attendance rose from 19m a week in 1938
to 30m a week by 1945.
A series of popular films were made which helped to shape the
image of a nation at war, including In Which We Serve
(1942) and Millions Like Us (1943). The immediate post-war
years saw a surge in British film production to more than 120
films in 1950 (see figure 1). The numbers were matched by outstanding
creativity, with films such as David Lean's Great Expectations
(1946) and Powell and Pressburger's The Red Shoes
(1948)the most commercially successful film in the US in
its year of release.
19. The 1940s also saw the rise of the first
British company to attempt to compete with the Hollywood studios
in size and scope. Starting in 1936, J Arthur Rank had built
a vertically-integrated film organisation, buying up distributors,
cinema chains and production companies. Between 1941 and 1947,
The Rank Organisation financed half the films made in the UK,
controlled over 600 cinemas and was the largest film distributor.
Rank ensured American distribution for their productions and a
supply of American films for their cinemas, by securing a 25 per
cent stake in Universal film studios through the General Cinema
Rank provided financial backing to Ealing Studios, which began
its series of comedy films in 1948 with Whisky Galore.
20. In 1947, the Government, needing to conserve
dollars for imports of food and other scarce commodities from
the United States, restricted the Hollywood studios to remitting
only 25 per cent of their substantial profits. The Hollywood studios
responded by refusing to distribute any new films in the UK. The
Rank Organisation tried to take advantage of this boycott by producing
a series of high-value films but, by the time the films were ready
for release, the dispute was resolved and British screens were
flooded with a backlog of American films. Rank's production subsidiary
lost £3m. During the 1950s, Rank's film production incurred
mounting losses and in 1963 the management took the decision to
diversify out of film production and into other areas, such as
the joint venture in photocopying with Xerox.
THE AMERICAN THREAT AND FURTHER GOVERNMENT
21. In the late 1940s, the Government had become
concerned, once again, about Hollywood domination of the film
industry and lack of finance for British film production. In 1948,
the exhibitors' quota for main feature films was raised to 45
per cent and the Cinematograph Film Production (Special Loans)
Act 1949 established the National Film Finance Corporation (NFFC)
to distribute loans for film production. In 1950, the Government
introduced the Eady Levy, which was a voluntary levy on a proportion
of the price of cinema tickets; half retained by the exhibitors
and half going to the makers of films made in the UK, in the expectation
that it would be used to fund new British film productions. This
arrangement was designed so as not to count as a subsidy under
the General Agreement on Tariffs and Trade (GATT), to which competitors
could have objected. The Eady Levy was made compulsory in 1957
and remained in place until 1985.
22. During the 1950s, despite the support in
place, the British film industry came under increasing competition
from new technologies. Increasingly, the public turned to home
entertainment, as radio listening reached its peak and television
developed. By 1958, eight million households had television licences
and many of the film studios were closed or sold to broadcasters.
The two major British production companies, Rank and the Associated
British Picture Corporation, retreated from the ambitious productions
of the preceding decade, and concentrated on war dramas and comedies.
The turn of the decade saw the appearance of the Carry On
films and Hammer Horror films, which provided low budget
work for the British studios for the next 20 years. The James
Bond films did the same, but at much higher budgets.
AMERICAN MONEY RETURNS
23. During the 1960s, the availability of Eady
funds and American tax legislation encouraged Hollywood studios
to shoot more films in the UK. Some American directors, such as
Joseph Losey, Richard Lester and Stanley Kubrick based themselves
in the UK. The special effects team Kubrick assembled to make
2001, A Space Odyssey (1968) helped to build the UK's reputation
for excellence in this area. The production of American blockbusters,
Star Wars (1977) at Elstree and Superman (1978)
at Pinewood, right up to Moon (2009) made at Shepperton,
demonstrated continuing British expertise in special effects.
US WITHDRAWAL IN THE 1970S AND 1980S
24. In the early 1970s, the introduction of an
American investment tax credit scheme, new American tax rules
on exports and opportunities for Hollywood companies to invest
in television led to a severe reduction in American financing
of British films. Between 1965 and 1971, annual inflows of American
capital for filmmaking averaged £19m. Between 1972 and 1979
they averaged £6m.
British filmmakers increasingly turned to period adaptations,
such as Murder on the Orient Express (1974), and
films based on television programmes, such as Dad's Army
(1971). The continued availability of the Eady Levy kept up the
number of films made, but the drying up of finance was sufficient
for the Government to study once again the requirements of a viable
and prosperous British film industry.
25. The 1980s began with a serious industry slump,
fewer films being made in 1980 and 1981 than in any year since
1914. The incoming Government removed the special support for
the industry: tax rules were tightened, the quota system was suspended
in 1983 and the Eady Levy and the NFFC were abolished in the Film
Act 1985. The Rank Organisation also withdrew from films, which
further reduced the funding opportunities. Despite the rise of
Goldcrest Pictures, Handmade Films, Merchant and Channel 4 with
a surge of high quality and popular films, including Chariots
of Fire (1981), and My Beautiful Launderette
(1985), raising British funds was difficult. David Puttnam
pointed out to us that he only managed to attract £17,000
of funding for Chariots of Fire from UK sources (Q 746).
Through the second half of the 1980s, film production declined,
with only 30 films produced in 1989. Several filmmakers switched
to production of drama for television.
26. Despite the failure of Rank, the Cannon Group
took up the challenge of competing directly with the Hollywood
studios. Cannon was active not only in film finance but also production,
distribution and exhibition. Cannon bought local distributors,
smaller production companies, film catalogues and cinema chains
in the United States (where it had a distribution deal with MGM),
the Netherlands, Italy and Germany as well as the UK, financed
by the state-owned French bank, Credit Lyonnais. For a short time
Cannon was a major player in the British film industry, but it
overextended itself, leading to bankruptcy.
THE 1990S: RETURN OF GOVERNMENT
27. With film production slow to recover from
the low point of 1989, the Government took steps to help the industry.
In June 1990, the Prime Minister chaired a one-day seminar
on the future of the British film industry. The outcome included
commitments to a review of policies to stimulate inward investment
and promote British films overseas, and the establishment of working
parties on the structure of the industry and related fiscal matters.
In 1991, the Government established the British Film Commission.
In 1992, it introduced tax relief for production expenditure through
the Finance Act. In 1995, it decided to allocate lottery money
to film production. At the same time, market conditions improved,
with cinema audiences recovering from 98m admissions in 1992 to
164m in 2008, following
the rise of multiplex cinemas (see figure 2). The video market,
and subsequently the DVD market, and the proliferation of television
channels interested in purchasing films to show, gave films a
significant "tail" revenue and added substantially to
films' earning potential (see paragraph 33).
UK cinema admissions and number of screens,
Source: Gerben Bakker, Entertainment industrialised:
The Emergence of the international film industry, 1890-1940 (Cambridge,
Cambridge University Press, 2008), p. 408.
28. The early 1990s also saw another UK-based
attempt to break into the international film distribution business,
when the Dutch-owned music company, PolyGram, diversified into
this area and based the headquarters of its film division in London.
This distribution network was fed by films from a variety of production
companies in the UK, France and the United States. PolyGram's
most important British partner was Working Title, which produced
Four Weddings and a Funeral (1994). After nine years
of moderate success, Philips Electronics, PolyGram's owner, decided
to sell PolyGram to Universal, and the film division, Europe's
only international producer-distributor, was absorbed into Universal
films. It remains the case that there is no UK-based international
THE LAST TEN YEARS
29. The new Government in 1997 took an early
interest in the state of the film industry. In the Finance Act
1997 it permitted a hundred per cent tax write-off in the first
year for films with budgets of less than £15m, which was
intended to help independent filmmakers. In 2000, The UK Film
Council was launched, as a non-departmental public body, absorbing
a number of public and semi-public bodies involved in supporting
the film industry.
30. British film production climbed steadily
through the late 1990s to a peak of nearly 180 films in 2002second
only to 1936. This included many accomplished and financially
successful films. Working Title, having secured financing and
distribution deals with PolyGram and then Universal Pictures,
had major international successes, including Bridget Jones's
Diary (2001), which earned box office receipts of $254m. While
the James Bond franchise continued, a major new series of British-made
but American funded films began with Harry Potter and the Philosopher's
Stone (2001). Aardman Animations, creators of Wallace and
Gromit, made their first feature film, Chicken Run (2000),
which also achieved worldwide success.
31. But in February 2004, the Inland Revenue
announced that it was closing a loophole in the tax relief arrangements
to prevent tax avoidance schemes. These schemes used the provisions
in the Finance Act to encourage the investment of lump sums in
the certainty of reducing tax liabilities, regardless of whether
the film made a profit. The closing of this and other loopholes
in 2004 caused the immediate collapse of a number of film projects
in production or pre-production at the time, and the resulting
uncertainty contributed to a downturn in film production, with
employment dropping by 33 per cent between 2003 and 2008.
32. To end the uncertainty, the Government conducted
an urgent review of film tax relief and, in 2006, announced the
introduction of a new film tax credit, discussed in Chapter 2,
to replace the Finance Act 1997 provisions. In the financial year
2007/08, tax relief granted was worth about £105m, which
was about 40 per cent of public funding for film in that year.
The current state of the British
33. The film industry can be divided into three
distinct but interdependent sectorsproduction, distribution
and exhibition. The aim of this section is to consider how each
of these sectors is currently performing in the UK.
34. The British film industry is production led.
In 2008, the UK was the eleventh largest producer of films in
the world, by number of films, and fifth largest, after the United
States, Japan, France and Germany, by production expenditure.
A total of 111 films were made in whole or part in the UK of which
25 were inward investment feature films, which is to say films
financed, and on which the decision to make the film is taken,
outside the UK. There were 66 domestic productions and 20 were
co-productions. The production expenditure on inward investment
feature films was £338m, which was 58 per cent of total production
expenditure, with an average cost per film of £13.5m.
35. The British industry is heavily dependent
on inward investment, almost exclusively from the United States,
and the major productions which this brings (see figure 3). In
2006, spend on inward investment features was £558m or 69
per cent of total British production spend and in 2007 £522m
or 68 per cent. The UK's ability to attract inward film investment
depends on several factors. Stewart Till, then Chairman of the
UK Film Council told us that there were three variables on which
Hollywood studios made decisions on where to make a film. The
first was the availability of tax relief. The second, and most
important was the high quality of the workforce. Mr Till's
third variable was the exchange rate (Q 151). Since American
films are budgeted in dollars, when the pound appreciates, the
UK becomes a less attractive venue for production.
Real film production expenditure in the
Source: UK Film Council Statistical Yearbook;
2009: 138. Values have been corrected for inflation using the
UK GDP deflator.
36. The Pound-Dollar exchange rate has had great
influence on film production costs and decisions in the last few
years (see figure 4). The strength of the UK pound during 2007
was a significant disincentive to American producers. Since lead
times for filmmakers are a year or more, this disincentive is
reflected in the relatively low figure for inward investment spend
in 2008. The subsequent fall in the value of the UK pound has
seen a bounce back in inward investment in 2009, with expenditure
of £686m in the first three quarters of the year, which is
about 20 per cent higher than the entire 2008 expenditure.
37. The UK actively encourages inward film investment
through the work of the UK Film Commissioner. He seeks to ensure
that Britain remains an attractive production base for American
films by making American studios aware of the resources available
to them, including government financial support and professional
talent and expertise. He also works with the screen agencies in
the UK to strengthen the production infrastructure here.
Inward investment in UK film production
and the average annual dollar/pound exchange rate, 1992-2008
Source: see Fig 3, and Lawrence H Officer, 'Dollar-Pound
Exchange Rate From 1791' MeasuringWorth.org.
British film studios
38. The UK has three large film studios, all
in the south east of England: Pinewood, Shepperton (which is part
of the Pinewood Studios group) and Leavesden. All have world class
facilities and are able to accommodate the filming of several
large budget films at any one time. Leavesden is currently used
exclusively by Warner Brothers, but there are plans to expand
the facilities and make them available to other companies. There
are a further seven medium-sized studios (all but one in the south
east) and 40 smaller studios around the country. These carry out
some film work as well as other activities, such as television
39. In 2008, the UK Film Council's statistics
show there were 202 film production companies active in the UK.
Of these, two produced four feature films each, five produced
three each, ten produced two each and the remaining 185 produced
just one feature film each. So the British production sector contains
a few large companies making films with substantial budgets and
a long tail of small companies producing mainly low budget films.
There are currently seven production companies which have long-term
agreements with American studios. For example, Aardman Features,
has a first-look deal
with Sony Pictures Entertainment, and Working Title, is now owned
by Universal Studios. There are two production companies which
are film-making arms of broadcasters: BBC Films and Film4 Productions.
There are production companies which are also independent film
financiers, such as Ingenious Media Investments, and those which
have sales and distribution capability. There are also stand-alone
independents, such as Qwerty Films.
40. The post-production
sector is an integral part of the film production process, though
it also serves other industries, notably television and advertising.
These companies tend to cluster around centres of production,
in this case the south east of England, with 90 per cent of activity
in and around London, particularly Soho. A survey
in 2005 reported that the British film post-production sector
was one of the three largest in world, together with the United
States and New Zealand, which benefited from the work generated
by the Lord of the Rings trilogy. The survey further found that
the British post-production sector was growing rapidly both in
absolute terms and as a percentage of film expenditure, where
in 2005 it represented a quarter of all film production expenditure.
Post-production work is easily tradable: firms in Soho can work
for clients anywhere in the world, regardless of distance. So
firms that produce high quality work are well placed to compete
successfully for export business.
41. As the historical section shows, British
companies have struggled to make an impact in international film
distribution. The distribution sector has always been dominated
by the American multi-national film companies. This is a serious
issue for the British industry, in that much of the profit earned
on films goes to American companies which have part-financed and
distributed them. John Woodward, CEO of the UK Film Council, said
that the biggest problem of the British film distribution sector
was that it lacked scale. "By and large
we are talking
about a relatively small number of pretty small companies. What
we do not have in the UK is anything approaching the scale of
the Hollywood studio, which has the ability
to select the
film, finance it, get it made and then distribute it in all markets"
(Q 156). Asked whether a British company could ever compete
with the American distributors, Danny Perkins, Optimum Releasing,
which has two per cent of the UK market, said "There are
some very strong independent companies but they have alliances
with American companies. That is the key to it really" (Q 1056).
He thought the chances of a Warner Bros or a Universal being created
in the UK were "not great" (Q 1057).
42. Films are distributed and consumed in a variety
of wayscinema release, retail sales of DVDs, rental of
DVDs, films on television and video on demand. The total market
for filmed entertainment in the UK was worth more than £3.5bn
in 2008, having peaked at just under £4bn in 2004. In 2008,
the UK was the third largest filmed entertainment market in the
world after the United States and Japan. The first revenue from
a film comes from cinema presentation, but this accounts for only
23 per cent of the total. Cinema revenues grew significantly in
the late 1990s, but have levelled out since then. Distribution
is dominated by the UK-based subsidiaries of the American studios.
In 2008, the six American-owned companies between them had 78
per cent of the market, and the top ten distributors had 95 per
cent. The largest UK-owned distributor is Entertainment, which
in 2008 had eight per cent of the market, with gross box office
receipts of £76m.
43. Few if any films make a profit from cinema
revenues alone. Instead they rely on the remaining sources, or
"tail" revenues, including merchandising, for real returns.
This is one of the reasons why audiovisual piracy, discussed later
in this report, is such a major issue for the industry. The biggest
single revenue source in the British filmed entertainment market
is retail sales of DVDs. Revenue from DVDs peaked in 2004, but
they were still the most important revenue source for the industry,
accounting for 38 per cent of the filmed entertainment market
in 2008. Revenues from showing films on television were the second
largest contributor, showing slight growth in 2008. The Video
on Demand market remains relatively undeveloped in the UK and
makes only a small contribution to total revenues, but this is
likely to grow.
44. The exhibition sector is similarly dominated
by a few large companies, though in this case they are not American-owned.
In 2008, there were 3,610 screens (96 more than in 2007) in 726
cinemas in the UK. In 2008, 61 per cent of screens were controlled
by three companies: Odeon, Cineworld and Vue. The two largest
of these are owned by private equity firms, Terra Firma (Odeon)
and the Blackstone Group (Cineworld). Exhibitor revenues, which
are made up of box office receipts, concessions and advertising,
were just over £1bn in 2008 (three per cent higher than 2007).
Although most film are still shown using the standard film print,
in 2008, the UK had 310 high-end digital screens, the highest
number in Europe, of which 69 were capable of screening digital
THE ECONOMIC CONTRIBUTION OF THE
45. There are various ways of measuring the film
industry's contribution to the economy. The basic measure is the
gross value added
of those companies identified as film companies in the industry
statistics of the Office of National Statistics. In 2007, this
amounted to £2.5bn, with production accounting for 48 per
cent, distribution 36 per cent and exhibition 16 per cent. The
2007 figure was the lowest in real terms since 2003 and a fall
of 30 per cent compared to 2006. There are two other estimates,
both for 2006, which attempt to take a wider view of the impact
of the film industry, and include indirect effects, such as those
on tourism. Oxford Economics estimated the "core UK film
industry" including flow-on effects to non-film companies
(tourism, trade, merchandising), at £4.3bn. By including
the business provided to supplier firms, Cambridge Econometrics
estimated all film activity in the UK, at £5.3bn.
46. The British film industry generates substantial
export earnings from film rights and film production services.
It also imports in both categories, but the film trade has been
in surplus every year since figures were collected (the mid-1960s)
and thus the industry has been a significant contributor to the
overseas account. In 2007, the latest year for which figures are
available, film exports were worth £1,050m, of which £646m
was royalties and £403m production services. In the same
year, film imports were worth £818m, giving a surplus of
47. The export of production services occurs
when overseas film productions use British studios, locations
and services, such as visual effects and post-production. Given
the flexibility of the labour market in the film industry, due
to the prevalence of freelance and part-time working, export of
production services make use of spare capacity. Royalty streams
do not use up any current British production capacity and so their
full value goes into companies' profits.
48. According to the Labour Force Survey
2009, there were over 35,000 jobs, full-time or part-time, in
the film and video industry. Of these, 60 per cent were in film
and video production, eight per cent in distribution and 32 per
cent in exhibition. This represents a 13 per cent increase in
the workforce since 1996, slightly below the average for the overall
British workforce, but a decline of 33 per cent from a peak of
nearly 54,000 jobs in 2003. The 2005 study of the film post-production
and visual effects sector estimated that it provided 4,400 jobs.
Employment in the production and distribution sectors is heavily
concentrated in London and the south east. Almost half of those
working in the production sector are self-employed: in 2008 it
was 46 per cent, compared to 13 per cent for the whole British
Size of companies
49. The number of companies operating in the
film and video industries has grown rapidly in recent years, but
this growth is almost exclusively in the production sector. In
2008, there were 7,970 companies working in film and video production,
as against 1,745 in 1996: more than a fourfold increase. This
reflects a sharp increase in the number of small companies in
the production business. The proportion of companies with a turnover
of between £1,000 and £99,000 is 57 per cent, which
is significantly higher than the average for other industries.
While in 1996, the film industry had relatively fewer small companies
than the UK as a whole, by 2008 the opposite was the case. In
comparison, the distribution and exhibition sectors have seen
growth in companies and size of companies more in line with the
UK as a whole.
50. There are a number of conclusions that may
be drawn from the history and structure of the British film industry,
which are discussed in the next chapter.
51. The government intervened in the film industry,
initially to tax the exhibition of films and then subsequently
to protect and support the film production industry. It has been
a given for almost all of the last hundred years that it is in
the interests of the UKfor economic and cultural reasonsto
have a healthy and competitive film production industry and that
this requires some government support.
52. The film industry has suffered a cycle of
boom and bust throughout its existence despite almost constant
government intervention. This has contributed to the emergence
of a pattern of informal labour practices, including widespread
free-lance and part-time work, which is also found in the television
53. The British industry has been profoundly
influenced by the American film industry. The shared language
and cultural background has helped those working in film to obtain
employment in the American industry or American productions in
the UK but the output of the American industry has threatened
to overwhelm the UK market at various stages. This is particularly
true of the distribution sector, where most profits are to be
54. In part to counter the American threat, the
government has followed alargely successfulpolicy
of encouraging American companies to make their films in the UK.
This has been assisted by the presence of an English-speaking,
skilled labour force that can adapt easily to American working
55. The film industry has been a net contributor
to UK exports at least since the early 1960s, largely due to the
flow of inward investment, which accounts for about two thirds
of average British film production expenditure. This is a reversal
of the situation in the 1940s, when the industry's large trade
deficit was a concern to the Government.
56. The policy of seeking to attract inward investment
has had a positive effect on employment and national income. It
has had the disadvantage of provoking a slump in production (and
employment) when American companies reduce their production budgets
or find more attractive opportunities elsewhere.
57. Despite several attempts, no British company
has been able to emulate the American model of a vertically-integrated
film company, which has interests in production, distribution
and exhibition and can finance its own films. Rank, Cannon and
PolyGram have tried and had some success, but they were not able
to sustain their position in the market.
58. A model which has proved successful for production
companies since the 1930s has been to establish a close association
with one of the American majors with the finance and distribution
muscle. Under this model, financial independence is traded for
financial security but with considerable creative freedom.
59. For fully British independent production
companies, finance has always been a problem. The government has
assisted, either directly or through encouragement and inducements
to potential investors, but the problem remains.
2 Analysis of the annual number of British films in
American Film Institute, Catalogue of motion pictures released
in the United States. 1893-1910 (New York and London, R. R.
Bowker, 1995) Back
Gerben Bakker, 'The Decline and Fall of the European Film Industry:
Sunk Costs, Market Size and Market Structure, 1895-1926', in:
Economic History Review 58, 310-351; 313 Back
Rachael Low, The history of the British film 1906-1914
(London, George Allen & Unwin, 1949). Back
Political and Economic Planning, The British film industry.
A report on its history and present organisation with special
reference to the economic problems of British feature film production
(London, Political and Economic Planning, 1952), p 42 Back
To qualify as British, both the maker (i.e. producer) of the film
and the scriptwriter had to be British. The production company
had to be legally established in some part of the British Empire,
with the majority voting power in the hands of British subjects.
Studio scenes had to be shot in a studio in the British Empire
and at least 75 per cent of labour costs (excluding copyright
payments and the salary of one actor or the producer) had to be
paid to Britons or persons living in the British Empire. The quotas
started at 5 per cent for exhibitors and 7.5 per cent for distributors
in 1928, rising to 20 per cent for both in 1935. Back
Warner and Fox: Margaret Dickinson and Sarah Street, Cinema
and state. The film industry and the British government, 1927-1984
(London, British Film Institute, 1985), p 56 Back
Kristin Thompson, Exporting entertainment. America in the world
film market 1907-1934 (London, British Film Institute, 1985),
Gerben Bakker, "Time and Productivity Growth in Services:
How Motion Pictures Industrialized Entertainment," Working
Papers in Economic History, No. 119 (2009), Department of
Economic History, London School of Economics, http://www.lse.ac.uk/collections/economicHistory/pdf/WP119.pdf Back
The remit of the Moyne Committee was "to consider the position
of British films, having in mind the approaching expiry of the
Cinematographic Films Act 1927, and to advise whether, and if
so what, measures are still required in the public interest to
promote the production, renting and exhibition of such films". Back
Office of National Statistics. Back
Geoffrey MacNab, J Arthur Rank and the British film
industry (London, Routledge, 1992), p. 19-20 Back
Sue Harper and Vincent Porter, British Cinema of the 1950s:
the decline of deference (Oxford, Oxford University Press,
2003), 35-56, 55 Back
B.R.Mitchell, International Historical Statistics, Europe 1750-2000 Back
Margaret Dickinson and Sarah Street, Cinema and state The film
industry and the British government, 1927-1984 (London, British
Film Institute, 1985), p 240 Back
John Hill, "Government policy and the British film industry
1979-90," European Journal of Communication, Vol.
8 (1993), No. 2, p. 203-224; 219-220. Back
UK Film Council Statistical Year Book, (2002: p 13, 2009: p 7) Back
Most of the statistics in this section are taken from the 2009
UK Film Council Statistical Yearbook and "Film in the UK:
A Briefing Paper", UK Film Council Research and Statistics
Unit, August 2009. Back
Figures from Screen Digest, quoted in "Film in the UK: A
Briefing Paper" by the UK Film Council Research and Statistics
Unit, August 2009. Back
Other factors, such as the end of the Hollywood writers strike,
may also have contributed to the sharp rise in expenditure. Back
UK Film Council Statistical Yearbook, 2009 p 145. Back
A first look deal gives a distributor the right of first refusal
on new film project that a producer might wish to undertake. Back
Post-production refers to activities or processes that enhance
the visual image or soundtrack of a film. These activities include
visual and audio special effects, physical effects, animation,
picture and sound editing services and computer generated images. Back
Oxford Economic Forecasting: The Economic Contribution of the
UK Film Post-production Industry, October 2005 Back
Gross value added is a measure of an industry's ability to generate
income for its employees, owners and investors. Hence it mainly
consists of wages and salaries, interest and profits. Back
Conducted by the Office of National Statistics. Back