finance2

Major USA Production/Distribution Companies

As Hanseen (2007) summarised, 'The Hollywood studio system era' of vertical integration that impacted production, distribution and exhibition (because the major companies owned the cinemas) came to an end in 1948; "when the USA Supreme Court issued its famous Paramount decision. The Paramount consent decree required the divestiture of affiliated cinema chains and the abandonment of a number of vertical practices" (Hanseen, 2007)

What this meant, in theory, was that the five major conglomerates (Fox, MGM, Paramount, RKO and Warner Brothers) and the partly integrated companies (Columbia, Universal and United Artists - N.B MGM have now bought out United Artists) who had made up the Hollywood studio system had to compete on a more level playing field with other companies. However, these companies did still have an advantage over independent studios because vertical integration could still take place at production and distribution levels - the court only ruled against cinema ownership (exhibition).

Distribution Companies

As McDougall (2008) summarised, five major distribution companies dominate the UK film industry:

- United International Pictures

- Warner Brothers

- Buena Vista

- 20th Century Fox

- Sony

None of these distribution companies are British, approximately 9/10 films seen in UK cinemas have been distributed by these Hollywood companies. In the majority of cases, these companies are either the same company who produced the film or are directly linked to the Hollywood production companies who made the film (vertical integration). Although the Paramount 1948 Supreme Court ruling now prevents these companies from owning the cinemas used for exhibition, films distributed by these Hollywood companies are still prioritized (for reasons of long term and short term profit) over films produced/distributed by independent companies e.g. Hollywood films generally gross more than a independent film and also because they make more films than independent companies cinemas can make more each year through supporting Hollywood films than they would if they started prioritizing independent films over Hollywood releases (doing this might prompt Hollywood to stop using this chain which would obviously impact profit for the cinema).

The fact that multiplex cinemas are often owned by American companies also has an impact here because they obviously have deals with the Hollywood distributors in the USA and UK that makes it easier/more cost effective for them to secure Hollywood blockbusters than it is for independent cinemas (it is basic business that works in the same way to Tesco's v independent stores).

Distribution is also expensive, Hollywood distributors can afford to spend millions on marketing and distribution while smaller independent companies struggle to compete. Aside from advertising, one of the biggest costs in prints (every film shown in a cinema is a separate 'print'). Each reel cost approximately £1000-£2000. When you multiply this by the number of cinemas in the UK, for example, it is easy to see why Hollywood companies can afford to 'blanket release' their products in the majority of cinemas while smaller companies struggle to do this.

In theory, this problem should be a thing of the past because we live in the 'digital age' and it would be straight forward for companies to simple digitally release their films to cinemas on the release date. This has a number of potential advantages:

1) Image quality could be improved. Have you every noticed 'scratches' on the screen at the cinema? The reason why you sometimes notice this is because the reels we get in the UK are the ones that have already been used in the USA cinema. Changing to digital distribution would solve this.

2) Piracy could be adverted if the film was released at the same time throughout the world.

3) It would cut costs dramatically and make it possible for British distributors to compete. Cutting cost could also mean more profits for production/distribution companies that they could then put back into films. 

The British Film Council even took steps to via the 'Digital Screen Network' to help equip independent cinemas with digital facilities. This has lead to more British films being shown in independent cinemas but the multiplex cinemas are not following this example because Hollywood films are still made on reels.

Why? Again, this links to economics and business - Hollywood distribution and production companies known they have a massive advantage over independent companies because they have more money. Through making films on reels they are ensuring they keep this advantage because it makes it harder for smaller companies to gain any market share without teaming up with Hollywood companies (to make D/E Category films) because they simply cannot afford to shoot 35mm pictures and print hundreds/thousands of reels without the financial backing from bigger companies.