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» Report 2008
Part one - A WORLD IN CONNECTION
A REFERENCE UNIVERSE
Chapter 1 - An atypical product
The Manufacture of Prototypes
In its complex nature the cinema amalgamates within itself numerous diverse characteristics, each of which being paradigmatic of the single typologies of economic production. Given the structural uncertainty that renders permanent forms of business unsustainable the cinema is a typical example of a temporary system. The various groups employed to make a film are, in effect, organized in such a way that they are formed to carry out a project and deliver an objective (completing the project) and then are dissolved when the project is completed. The very same assets which are instrumental in the production (artistic resources, technical competencies, physical structures such as studios) are used to carry out a single work and not necessarily for others. Such cinema activity is, therefore, also a model of a limited apparatus, a flexible matrix founded on outsourcing and on the diffusion of short term advertising contracts. Against this, however, the research rationalizes and contains the costs and on the other hand maximizes profits determining that which economists define as horizontal integration processes (between companies which operate in the same phase of production) or vertical integration (if companies that operate from start to finish in the implementation process are included) and which usually distinguish the groups and sectors of the large manufacturing process.
Like other forms of entertainment, that of the cinema is additionally a product of repeated use, although its consumption is concentrated in determinate intervals of time which are both restricted and circumscribed. In the opening cinema circuits films have seasonal trends, with an average tenure – between first and second showing – of six weeks and with a high percentage of takings accumulated in the initial days of scheduling. According to economic theory it can, therefore, be assimilated to the so-called products of brief duration such as items of style or fashion. All of those, that is, which, from the point of view of supply impose a very high replacement level and, indeed, every year the cinema sector is forced to produce and distribute a continuous stream of works with a constant turnover of potentially innovative solutions.
With two ulterior implications. 1. Production expenses are represented by fixed costs which are not recoverable due to the fact that they are entirely incurred prior to the circulation of the film in the cinemas and, therefore, the relative investments undergo so-called irreversibility effects: the investment decisions decrease, that is, the variety of choices otherwise available and options eventually exercisable in the future in a particularly significant measure and for long time periods. 2. As to the possibility of success and the final outcome, production is afflicted by a level of uncertainty amongst the highest of all business activity and the distribution revenue (above all that consisting of cinema takings) are not representable by means of the normal curve of proceeds distribution.
The creation of cinema icons that principally characterized Hollywood productions between the 1930s and the 1960s, the subdivision into genres and the employment of ever more sophisticated special effects have been some of the solutions offered by the major American film companies to enable productive elements and standards a greater potential for success and thereby to reduce the elevated risk connected to such activity. A system, at times applied so obstinately as to merit the Hollywood system the title of industry of stereotypes, rather than prototypes.
The precariousness of covering the costs of production – undoubtedly one of the most important problems (if not the most relevant absolutely) for the cinema industry – has, moreover, favoured at a later date in Europe the birth of public support and in the United States the development of ever more evolved marketing techniques. Indeed, the major international companies assign huge amounts of resources for the promotional launch of their titles, in some cases exceeding the very same budget of production, and a large quantity of by-products connected to the same motion picture – from gadgets to theme parks and videogames – which often become the principle business, consistently and predominantly contributing to the projected and allocated investment coverage.

 

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