Entertainment Industrialized: The Emergence of the International Film Industry, 1890-1940

As the first form of industrialized mass entertainment, film was all-pervasive. Like other major innovations, such as the car, electricity, chemicals, and the airplane, cinema emerged in most Western countries at the same time. From the 1910s onward, each year billions of cinema tickets were sold, and consumers who did not regularly visit the cinema became a minority. In Italy, hardly significant today in international entertainment, the film industry was the fourth largest export industry before the First World War. In the Depression-struck United States, film was the tenth most profitable industry, and in 1930s France it was the fastest-growing industry (followed by paper and electricity), while in Britain the number of cinema tickets sold rose to almost one billion a year. Despite its economic significance, rapid emergence and growth, pronounced effects on the everyday life of consumers, and importance as an early case of the industrialization of services, the film industry has hardly been examined by economic and business historians.

In my dissertation I argue that, in the era of the second industrial revolution at the end of the nineteenth century, falling working hours, rising disposable income, increasing urbanization, rapidly expanding transport networks, and strong population growth resulted in a sharp increase in the demand for entertainment. The effect of this boom was the rapid growth of live entertainment through process innovations. At the turn of the century, the production possibilities of the existing industry configuration were fully realized, and further innovation within the live-entertainment industry could increase productivity only incrementally.

In the middle of the boom, a few smart entrepreneurs developed cinema technology from a mere gadget, a trick, a novelty shown at fairs, into the motor of a new, highly organized, concentrated, and internationally integrated entertainment industry, eventually pushing live entertainment to the margins, at least in economic terms. Entertainment companies rapidly adopted cinema technology as a radical product innovation that could make up for the decreasing returns to further process innovations, switching the industry onto a path of higher productivity growth and merging the freshly integrated national markets into an international one.

A few unique firms that made large investments in film production, distribution, and exhibition pioneered the shift to product innovation. Using industrial organization theory concerning endogenous sunk-costs industries, I analyze the sharp increase in concentration and costs sunk in film production during the 1910s, a rise that coincided with the geographical concentration of the industry in southern California.

I use a comparative approach, hypothesizing universal adoption of the innovation. I selected three countries: the United States (because it was the earliest to deregulate its entertainment industry and became the largest entertainment market, and because the industry ultimately concentrated there); Britain (because it was the second-largest film market, although its film industry was relatively weak, and because it was culturally close to the United States); and France (because its film industry's development was export-led). Initially, France harbored Europe's largest producer-distributors, although its internal film consumption was low. I do not provide a descriptive history of the film industries in these countries, because other works on this subject are available. ¹

Scholars have barely studied live entertainment and film as part of one industrialization process. Historians have generally focused on film style and content, although they often discuss business practices along the way. ² Economic works on live entertainment generally focus on high-class entertainment and subsidies rather than use a pure market perspective. ³ Several recent economic studies focus on isolated, highly theoretical issues, paying little attention to historical development. ⁴

Although the history of the entertainment industry since the late eighteenth century is interwoven with other historical developments—such as revolutions, nationalism, or artistic streams like romanticism, naturalism, and realism—my dissertation exclusively focuses on economic aspects, where the major gap in knowledge exists. I do not endeavor to gain insight into the political, social, or cultural...