film production
The film value chain is the process starting with the selection of an idea that could be transformed into a film and that ends with film consumption in a movie theater or on television. This chain is composed of three major stages: production, distribution, and exhibition. This entry describes the phases of film production and provides an overview of film production in the countries where the film industry is most prominent.
Film production begins with the selection of an idea for a new film and ends when the film is done and is ready for being sold to a distributor, who will make some copies of it for the theatrical release. The film production stage is particularly delicate since during this phase the producer has to make artistic choices about the story, screenwriter, director, and cast that will influence significantly the quality of the outcome. Moreover, the producer must also find money for financing the film, and many of the artistic choices depend on the film’s budget.
During film production, the idea of a film becomes a tangible product with a dual nature. On the one hand, the film becomes an artistic good whose value is tied to its content and style. It is a value that can be estimated in qualitative terms and that is subjected to discretionary judgments. On the other hand, the film becomes an economic good, whose value depends on its ability to reach its break even point and to generate a profit. In this case, the value is given by the ratio between costs and revenues, and it can been quantified in an objective way (although the calculation is very complex).
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Phases of Film Production
The production process of a film changes according to the geographical context in which it takes place and other factors (such as the company or companies involved). But film production is usually composed of four phases: development, preproduction, filming, and postproduction. In the development phase, the producer selects an original idea to be turned into a film or buys the rights to an existing story coming from a novel, a comic book, a theatrical piece, or a game. Already at this early stage, the producer must think about all the markets in which the film, its brand, and its characters can be exploited and not just about the theaters where it will be screened.
Usually, the producer ensures the rights for making a film; for its theatrical release; for selling it in other markets; for exhibiting it in festivals and other venues such as on airplanes or on ships; for the production and sale of soundtracks and merchandize related to the film; and for any adaptation of the story such as live theater, TV series, or books. Once the producer has these rights, the producer charges a writer to develop a screenplay and makes a first estimate of the costs. Subsequently, the producer looks for money. The sources are many and heterogeneous and include other private producers, film distributors, broadcasters, advertisers, and public institutions.
Producers can involve other production companies in order to increase the production budget of the film and to share the economic risk. Many films are financed by distributors, which thus ensure the rights for releasing them domestically and, sometimes, worldwide. In this way, producers have money for making the film, and they can provide guarantees about the theatrical release to other potential sources of funding.
In some cases, especially in Europe, film producers can gain money from (and presell the rights to) television broadcasts. In 1989, the European Union introduced the Television Without Frontiers directive, which requires broadcasters to reserve part of their programming to European works and to invest in film production. This directive was introduced to assist the European film industry, which has had trouble competing with Hollywood films. Usually, European films are not released outside national borders because of their strong roots in the domestic culture. Consequently, it has been difficult for film producers in Europe to raise private funds. In order to cope with this, European institutions have decided to encourage (and impose) collaborations between the film industry and the television industry, requiring broadcasters to finance films and to ensure visibility to European products.
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Another source of financing is represented by advertisers, who sometime sign product placement agreements with film production companies. These agreements consist of including brands and/or products within storytelling for commercial purposes in exchange for money that producers use for financing their films. Product placement is a form of financing that has existed since the beginning of the 20th century, but it has been regulated only in recent decades by virtue of its frequent use as advertisers attempt to find ways to promote their products when viewers increasingly can avoid commercial messages. Thanks to product placement, advertisers can enter their products in various ways within the storytelling, sometimes in a creative way and without the audience being aware of it.
Finally, a further form of financing is direct public funding, which is not as common in the United States as it is in Europe. The loans granted by a government to firms may distort competition within the European market and therefore are prohibited by the European Union. However, the European Commission has granted a waiver (the so-called cultural exception) to support its audiovisual industry since many films with artistic and cultural value would not be produced if left at the mercy of market forces.
In Europe, public funding is granted at three levels: (1) regional, (2) national, and (3) subnational. The main sources of regional funds are the European Union and the Council of Europe. In 1991, the European Union introduced the Mesures pour encourager le développement de l’industrie audiovisuelle program (measures to encourage the development of the audiovisual industry) aimed at supporting the European film industry as a source of cultural and economic activities. These programs finance different stages of the value chain but especially film development and distribution. The second source is the Council of Europe, which in 1989 created a fund to support European coproductions involving at least two member countries. The fund has cultural purposes: It aims to encourage transnational cooperation, the exchange of skills, and the development of a European common culture.
In Europe, national funding is allocated by individual states. These funds mainly support film production, and only a small part of them are devoted to distribution and exhibition. Funds are allocated both through selective and automatic criteria. Selective criteria involve a special committee which evaluates the artistic quality of the projects for which funding has been requested. Automatic criteria, instead, certify the fulfillment of certain requirements in an objective way, such as the nationality of the crew and the nationality of the locations involved. In the past, selective criteria were much more widespread than the automatic ones, but nowadays an opposite trend is ongoing.
Many European countries are introducing tax incentive schemes (indirect film financing) that allow film companies and private investors to enjoy tax discounts when they finance films. The goal of these incentives is to increase both investments and the number of films produced in their respective areas and therefore to generate revenues and economic benefits for the local territory. Nowadays, these schemes are widespread also in the United States, where traditionally film production is a private business not fully supported by public money and film-friendly policies.
The third level of public funding is represented by subnational governments, which finance the production of films for economic rather than for cultural reasons. Over the past decades, subnational governments have realized that accommodating film shoots within their territories brings important benefits to the local territories (e.g., increase of expenditure incurred on site, new employment opportunities, additional tax revenues, development of new local skills related to the audiovisual industry, film-induced tourism). Consequently, they have started to adopt film-friendly policies aimed at attracting more and more shoots within the places they administer. The main initiatives introduced by subnational governments are the establishment of film commissions, the creation of film funds, and the building of film studios. The subnational funds are intended primarily to support film production and in particular the filming stage.
Once the producer has collected the money for making his or her film, the project enters the preproduction stage. Depending on the money available, the producer selects people to work on the film. They can be divided into two groups: above-the-line workers, who provide artistic creative work (directors, actors and actresses, and screenwriters), and below-the-line workers, who provide technical work (e.g., set designers, costume designers, makeup artists). The negotiation of contracts is particularly complex when the above-the-line workers are well-known stars and therefore have a certain bargaining power.
In the past, each production company (especially in Hollywood) had its own team of above- and below-the-line workers. All of them had long-term contracts and would collaborate with the same studio for several films and years. This setup was abandoned after the 1940s and replaced by a project-based approach, which implies that a specific team is grouped for making just one film and ungrouped after the production process is concluded. This change in the work organization had huge consequences; one of them is a higher degree of precarity and uncertainty for below-the-line workers.
During this stage, the producer also selects the technological and the physical material resources, plans shoots, and launches promotional activities. The first press releases start to be issued and articles published in newspapers, magazines, and online during this time.
Then, the film enters the shooting phase. It is a very delicate and expensive process, as it involves the simultaneous work of several people. Often films are shot at a location far from the studio facilities, thus adding to the production costs the expenses of board and lodging of the crew. Beyond the economic aspects, the shooting phase is also characterized by a high rate of unpredictability. During the filming, unexpected events could occur (e.g., bad weather conditions that prevent from shooting outdoors) that can lead to lengthening of the timetable. This risk is particularly related to artistic talents (director and actors) that cannot be replaced. If they fall ill, for instance, the entire production process could stop.
Once the shooting phase is concluded (usually it lasts a few weeks), the film enters the postproduction stage. In this phase, the editing of the film takes place, and the visual effects and soundtrack are inserted. The shoots become a film ready to be marketed (usually it is called a master copy), and it is sold to a distributor that makes copies for the theatrical release.
The Main Players in Film Production: An International Overview
Making a film is a risky business. The value of a film, that is what makes it appealing and differentiates it from other products, depends on the work provided by the artistic and creative members of the crew. It is a job that cannot be made automatic (i.e., it cannot be replaced by machines) and which is subject to a hardly governable timing. In addition, there are few individuals able to offer a quality job and/or a performance appreciated and recognized by the audience. Consequently, productivity in the film industry grows less than in other fields and is subject to a regime of rising costs. In fact, while the cost of no-creative labor grows in line with other industries, the cost of creative work grows at higher rate than average. In addition, the economic performance of films is unpredictable.
Today, the United States has the world’s most important film industry. In the Los Angeles area, the offices of major film studios are found, including Warner Bros., Disney, Universal, and Paramount. The strength of these companies relies partly on the fact that they are vertically integrated along the three stages of the value chain: (1) production, (2) distribution, and (3) exhibition. They not only produce films but they also distribute them in the domestic market and abroad. These companies produce relatively few films yearly (10–15 per year), but they also release and sometimes finance films produced by other firms (independent and foreign producers) considered potentially profitable.
A second factor that makes the studios particularly powerful in the market is that they belong to large multimedia groups (or conglomerates) that have businesses in the whole media market (e.g., broadcasting, publishing, music), as well as in other areas that have nothing to do with media. Belonging to these groups allows studios to produce high-budget films (the so-called blockbuster movies) and to exploit stories and brands of these high-cost productions in several ancillary markets in which their mother group operates. Thanks to these synergies and to the financial viability of their groups, the projects developed by the studios are usually successful, and even in the case of a flop, they have the resources to overcome it.
In the past few years, changes have begun to erode some of the power of the Hollywood film studios. New players have started to successfully work in the digital streaming market, and they produce their own content: TV series and films. Companies such as Amazon and Netflix have a different business model (and sometimes a different core business) from the studios, but they are able to challenge the power of the large Hollywood studios.
According to the European Audiovisual Observatory, U.S. films have a majority market share in the United States and in the European Union. However, the United States is not the main film producer in the world in terms of output. India, in fact, holds this primacy, with many hundreds of new films released every year. Indian films have had huge success in the domestic market and in some neighboring countries but have not conquered the international market.
The other main film produces in the world are China, Japan, South Korea, and some European countries such as France, Germany, Spain, Italy, and the United Kingdom. In Europe, however, films are usually considered a cultural good, a means of artistic expression, and a tool useful for calling into question, developing, and forging the identity of a country. As a result, European films are deeply rooted in their national culture and therefore often fail to catch the interest of foreign audiences. Foreign spectators also can be unable to understand meanings, jokes, or sociocultural references of these films. Consequently, European cinema is fragmented into many (often small) national cinemas, which are not able to compete with the transnational appeal of Hollywood films.
Film production has its fulcrum in Southern California, where the most successful films are planned and strategic decisions are taken. However, film shoots, including those of Hollywood productions, involve many countries around the world. Film shoots, in fact, are increasingly less tied to the places where the projects were designed and developed. Many traditional production centers in Europe, such as Rome, Paris, and London, are experiencing a migration of film shoots toward other parts of their respective countries or abroad.
Thanks largely to funds and tax incentives, which are spreading throughout the world, many producers choose the locations of their films based on the opportunity to raise or save money. But nowadays, the mobility of film production is also due to two other factors. The first is the search for places where the cost of labor is cheap, which is a factor that drives more and more productions to shoot in Eastern Europe, North Africa, and South America. The second is the advent of new centers able to host specific phases of the production process. Nowadays, for instance, postproduction of many Hollywood blockbusters is outsourced to India, in order to save money and to access specific local skills developed in the past few years. Thanks also to the advent of digital technologies, film production is more and more a polycentric and dynamic activity that involves countries that in the past played a marginal role in this business.
The original version of this article was published by SAGE Publications in The SAGE International Encyclopedia of Mass Media and Society.