The American Film Industry - A Model of Oligopoly

The American Film Industry - A Model of Oligopoly

Introduction

The American Film Industry or Hollywood refers to the successful oligopoly economy of the major Hollywood studios in the 1920s to the 1940s. The term implies that it studios, so the production of films constituted the decisive factor in the economic system. But the concept of system refers here to large companies, production, film distribution / sales and film screening at this time controlled.

Vertical Integration

The actual switching was indeed for most firms in New York City, but the company has production facilities in Hollywood grew up to be enormous. Mergers and acquisitions, was formed in 1920 out gradually a powerful oligopoly. The competition in the film industry in Europe has been weakened by the First World War and so much American studios took advantage of the opportunity, the demand for new films to cover most of themselves. The weakness of Edison's monopoly (MPPC) was the insufficient integration of the functional areas of the value chain. This is precisely what the new rendered large companies. Their economic power stemmed from the fact that they took over the production of films, the distribution and the distribution of films and the Exhibition or the operating theater itself, so the functional areas vertically integrated (Balio, 1985).

The Oligopoly

The oligopoly among five large companies, the majors or the "Big Five" and three smaller companies ("Little Three"). The majors were Paramount Pictures, 20th Century Fox, Metro-Goldwyn-Mayer (MGM), Warner Bros. and Radio Keith Orpheum (RKO Pictures).

The Big Five controlled the market, because they had the largest and most beautiful movie palaces. About 15% of all cinemas were in their possession, but they threw from about 70% of total revenue at the box office of the United States. Only in the largest American cities competed for the 'Big Five' with each other directly. Otherwise, the country was divided into areas where only one company was talking cinema. A film that was not given access to these cinemas could have no great popular success (Anderson, 1994).

Also integrated into the oligopoly was the "Little Three" Columbia Pictures , Universal Pictures and United Artists , but with less influence, because they did not have its own movie theater.

An independent production companies, for example appeared Republic Pictures and Monogram Pictures in appearance. Their main business was to "B-movies" to sell, which filled the theater program and it then usually in the "double" (double feature) with an elaborate "A Movie", produced by a major studio.

Together, it ensured the majors in the 1930s and 1940s for 90% of American film production and 60% of world production. The vertical integration of the functional areas (production, distribution and exhibition), the premiere took place in movie theaters, of course the oligopoly.

The Oligopoly of the MPPC

The first attempt to destroy free competition and an oligopoly to form was operated by means of patents. MPPC tried to impede the access of foreign companies by licensing fees through this difficult ...