Reasons for the demise of European films: television, subsidies or Cannes?

During my childhood cinema-going was still the top form of entertainment and I witnessed its decline, which was superbly described in the film “Cinema Paradiso”. Indeed, Portugal like most European countries had their golden age in the movies industry during the 1940s.

It is well known that when a major industry declines due to the emergence of a new technology that creates a stronger competitor (in this case Television) there is an inevitable consolidation in the declining industry. What is not so well understood is the reason why the major survivors concentrate in specific regions (USA or India) and almost vanish in others (Europe).

The historian Tony Judt examined the fall of the European movie industry in his Postwar book and claims that “domination of post-war European cinema did not come about through the vagaries of popular taste alone… there was a political context”. Hollywood films flooded Italy and other countries encouraged by the State Department to support the anti-Communist vote.

In contrast European governments (left and right wing) tried to protect their declining industries from the so-called “American dumping”. The usual combination of barriers (quotas) to the entry of foreign films and subsidization of European movie producers were used to no avail. By confusing a technological shift with dumping they created the wrong incentives and facilitated the decimation of the few producers that could have survived through consolidation.

Worst, in the 1960s this fed a subsidized cottage industry which was taken over by (mostly) left-inclined and auto-proclaimed intellectuals; dominated by Directors such as Truffaut and Jean-Luc Godard and their followers that today gather around the Cannes Film Festival.

To be fair, the decline in the cinema-going activity meant that the production of movies for a domestic market is no longer a commercially viable activity; despite the widespread ownership of DVDs and a recent rise in the number of smaller theatres in shopping malls. For instance, in Portugal the most popular film can hardly attract 100 thousand viewers. This means that it can earn only 300 thousand Euros and this hardly covers half of the cost of a low-budget film. So only politically-minded “intellectuals” could be attracted for this type of business.

Now that the industry of broadcasted-television is also being challenged by a new technology based on the internet the inevitable consolidation will also to take place. How, the television and film producers will be affected by the emergence of Youtube and similar distribution channels? Before embracing a new round of protectionism European governments would be well advised to learn from the mistakes of the past.

It will be a missed opportunity if once more the Europeans are left behind in a major creative industry as is the film-making industry.