4: European Films in the American Market

The United States, with 200,000,000 people speaking the same language and spending billions on entertainment, is the world’s wealthiest film market. To the European producer, it is a market without a screen quota or an import quota. Officially, the United States is a free market, and a film from Sweden or Italy has as much opportunity of being released as a Hollywood production. This large, rich, easily accessible market, when viewed superficially, gives the impression that a foreign producer merely has to export to the United States and watch the money flow back to him. For the British producer, it would seem easiest of all because he has no language problem with which to contend and does not have to face dubbing or subtitling costs.

Admittedly, this view of the market has not been supported by reality. The United States has been one of the most difficult markets for European films to enter. Until the early 1950’s, the American film industry was producing pictures in such quantity that there was generally a sufficient supply to fill the demands of exhibitors in the United States. When demand exceeded output, old films were available for reissue. This condition had its foundation in the vertically integrated film industry in which large companies owned production, distribution, and exhibition facilities. The monopolistic structure of the industry and the coordination between exhibition and production assured a continuous flow of product. Studios were geared to quantities of production based upon what the company-owned houses could absorb. Horizontal coordination helped to provide stability for major distribution companies which did not own such chains. Due to the ownership pattern of theatres, there was little desire to import films and little if any screen time available in which to show them. American producers had their own film investments to amortize and this could not be done if their theatres were playing foreign pictures. When American companies were attracted by a foreign actor, director, or technical expert, they usually brought him to Hollywood to make films rather than import the films he had made in Europe. The structure of the industry was based upon the mass production of films exploited profitably in company-owned theatres and block booked into independent houses. To introduce foreign films would have meant disrupting the production-distribution-exhibition chain and voluntarily giving away a portion of the box office to foreign producers. In monopolizing the home market, American companies were following the dictates of economic self-interest.

This policy had other implications for foreign films. As long as they were not being exhibited widely, they remained in the category of the “untried and unproven.” Who would be willing to gamble on importing a film, dubbing or subtitling it, then advertising it, without any precedents? Few people in the industry could even guess how a given foreign film would do at the box office—if it could get wide bookings. In short, there were no indications that large scale importation and distribution of foreign pictures could be a profitable business.

As foreign films remained unknown, so did their stars. In a market where films are sold to the public on the basis of actors’ names, there is slight chance for any film which cannot be publicized in this way. If an American distributor located an excellent foreign film and considered acquiring it for the United States market, he would certainly think about its merchandising possibilities. When the actor’s name is unknown, there is that much less to be said about a film, and it must be brought to the public’s attention in other ways, predominantly through the exploitation of sexual themes.¹

The integrated companies’ policy of monopolizing the market had other consequences. Since the introduction of sound, American audiences had consumed a steady diet of American accent sound tracks. These audiences grew accustomed to hear American English spoken from the screen in perfect synchronization with lip movements of actors because they had little opportunity to hear anything else. True, some foreign actors speaking English did become popular with American audiences, but these exceptions existed because their accents were often vital to the roles they played and the images they created. If non-English foreign films were to be introduced, they had to be subtitled or dubbed. Subtitling requires the audience to read the translated text of what the actors are saying. To certain types of audiences, this procedure is cumbersome and distracting.² Experienced film importers readily acknowledge that subtitled films lack wide-spread box office appeal. The alternative is dubbing, the substitution of an American sound track for the original. This solves much of the problem but only if the dubbing is precisely matched to lip movements, often impossible to achieve. Dubbing has been adopted predominantly for films and prints sent into wide distribution and is practically mandatory for television as the subtitles are often lost below the bottom of the home screen. Nevertheless, language has not been the main reason for the spotty success of foreign films in the United States.

In the face of these barriers to the importation and circulation of foreign pictures, many have had rentals of more than $1,000,000 in the American market, although this generally has occurred only during the last ten years. A series of events changed the market structure in the United States to make it more fertile for foreign films. The most obvious has been the decline in the number of films made in Hollywood, with today’s production less than half of what it was twenty years ago. Even though many theatres have closed, the current level of production does not fill American screen time, and television has stolen the market for reissues. The gap between exhibition’s demand and Hollywood’s supply is being filled by foreign films.

The antitrust decisions against vertically integrated film companies, while being linked with production declines, broke the production-distribution-exhibition chain which had prevailed for decades. Exhibition was forced to stand alone and monopolies of theatres were dissolved.³ The business of exhibition became solely to exhibit, rather than to provide the assured outlet for Hollywood’s producers. The end of vertical integration made exhibition policy one of outright self-interest—exhibitors would play any film that was likely to draw patrons. In the words of the industry: “If films made by Eskimos would bring in money, exhibitors would play them.”

At the time when the production decline and the new exhibition independence helped to open the United States to foreign films, weekly attendance here was declining rapidly. Scapegoats were sought and found to explain the diminishing audience, and the content of Hollywood’s production was one not overlooked. With the spread of television, even the uncritical eye could see that programs made for TV were similar to (Grade B) movies in content and that the Matinee Theatre and the Late Show brought stars into the living room. But there was one important difference; after the initial investment in the receiver, television was free. With competitive free entertainment being offered, exhibitors reasoned that perhaps the public was tiring of paying for Hollywood’s traditional content, so well spelled out in the old Production Code. Acquisition of foreign films offered the chance to experiment in luring the missing millions of viewers back to theatres. Foreign films with fresh (and flesh) appeal were called upon to revitalize theatre programs. This experiment produced mixed results, for some foreign films brought in attractive revenues while many others failed to display any box office value.

With the exhibitor’s new freedom to select, theatre owners had to devise ways of merchandising foreign films to a public which had hardly been exposed to them. Edward L. Hyman, vice president of United Paramount Theatres, speaking to a gathering of exhibitors in 1954, declared that because of the film shortage “it might be wise for exhibitors in this country to consider ways and means of popularizing the foreign film.” In introducing foreign films, he said, they would be “seeking to establish an audience where there has been none before,” and that they ought to “proceed with patience and foresight.” Mr. Hyman felt exhibitors should consider opening theatres “that will present art and foreign pictures in a small way—until such time as the idea has expanded….” He told the theatre operator: “You are a pioneer bringing a new entertainment form to many people and people don’t develop tastes over night.”⁴

Other factors contributed to the increased importation and success of foreign films, among them being the modification in policy of the Hollywood majors. During the years after World War II, American film earnings in Europe were not permitted to be taken to the United States. As we have seen, this stemmed from the balance of payments problem facing European nations and their desire not to export currency. Anxious to market their films in Europe, the American companies had essentially three alternatives for the disposal of their revenues. First, they could leave their earnings in blocked accounts and wait until remittance to the United States was permitted. Second, they could purchase foreign goods and ship them to the United States where they could be sold for dollars. Or, finally, they could produce films abroad. The American companies took mostly the third alternative and thereby brought about significant changes in their production policies.

At the time of this decision, American producers became aware that their domestic market was no longer providing the bulk of revenue for their films. They recognized that Europe, the major overseas market, was rivalling the United States in the amount of earnings their own films generated. Perhaps in an attempt to secure the American position in Europe, producers increased the use of foreign stars in their films. The names of foreign stars incorporated in American productions, initially a move to enhance the attraction of American films abroad, soon became known to American audiences. This was a definite benefit for the foreign film in the United States because American audiences began to recognize the same names in non-American pictures.⁵

American producers, in using their blocked earnings, came to realize the advantages of shooting films in Europe. There were authentic locales available (the Riviera, for instance, being impossible to duplicate), labor costs were often less (film crews and armies of extras could be hired cheaply), and the absence of daily supervision by company management (made difficult by distance) provided a little more liberty. In addition, some European governments offered subsidies to domestic film production providing a picture met certain qualifications. American producers availed themselves of this by joining with European producers in the making of films which were technically American but legally “French,” “Italian,” or “British.” The American financial stake in these pictures dictated that they be brought into the American market for exploitation. Again, American companies were acting according to their self-interest, but how different this self-interest had become! Until the early 1950’s, it called for keeping foreign films out of the American market so that investment in domestic production could be amortized more quickly. Before the end of the 1950’s, producers’ self-interest demanded that foreign films be imported so that their investment in them could be amortized.

As American producers were joining hands with European producers, so were American distributors and to a smaller extent, exhibitors. To insure the acquisition of potential box office attractions, American distributing companies began offering distribution guarantees to secure at least the right to handle foreign films in the United States. This is a form of production financing in which a distributor advances a portion of the expected box office revenue in exchange for the distribution rights in particular markets. The acquisition of films in this way reflects the short supply of American pictures. The American distributing companies, insufficiently supplied by their own production affiliates, turn to nonaffiliates and secure films from them to fill out the lists which they offer to exhibitors. The widespread use of this method of financing today by American companies indicates they recognize the box office power of European-made films. It also means that they have brought into the American market more and more foreign films because they have a direct financial interest in them.

In some cases, major Hollywood companies acquired subsidiaries to import and distribute foreign films in the United States. The subsidiary is also a useful device for avoiding restrictions of the Production Code Administration and for handling pictures (American or foreign) which have received low or condemned ratings from the Legion of Decency or its successor, the National Catholic Office for Motion Pictures. In each case, the parent company can truthfully declare that it is not distributing films of questionable morality, while, through its subsidiary, it can participate in the box office revenues accruing to these films.

Lopert Pictures, affiliated with United Artists, was the distributor of Never On Sunday, a film released in the United States without the Production Code Administration’s approval seal and with a condemned rating from the Legion of Decency. Completed at a reported cost of about $150,000, Never On Sunday had gross rentals in the United States of about $4,000,000. More recently, Lopert distributed Phaedra, That Man from Rio, and The Knack. Kingsley-Interna-tional, which was an affiliate of Columbia Pictures, was responsible for American release of And God Created Woman, the French film which made Brigitte Bardot a star in this market.

In at least one instance, an American exhibitor became active in bringing foreign films into the United States. The scope of operation, however, went beyond mere importation, for it also involved production financing. Continental Distributing was established in the early 1950’s by Walter Reade to acquire foreign films for his Baronet Theatre in New York City. (Reade now operates almost fifty theatres, predominantly in the eastern part of the United States.) The original purpose of Continental was soon obscured by the company’s policy of distributing its imports to other theatres. To stabilize the flow of product, Reade, through Continental, began investing in foreign film production. Continental has brought a number of important and impressive films to the United States. They include two Alec Guinness pictures, To Paris With Love and The Lady Killers, Gervaise, The Entertainer, The Mark, Saturday Night and Sunday Morning, A Taste of Honey, Room at the Top, and Jacques Tati’s Mon Oncle. Several of these films were partially financed by Continental and many are now in television distribution in the United States.

It would seem that foreign films are taking a portion of the American box office and making it more difficult for American producers to recoup their investments in their own home market. Eric Johnston once observed that “this rising foreign competition has come at a time when the financial position of the domestic industry has been adversely affected by a combination of factors….”⁶ It is true, of course, that pure foreign films have made inroads at the American box office. But an equally valid point is that the foreign pictures playing in the American market are here because American companies have brought them. It is not a simple case of competition between American and foreign films. It is a matter of “runaway investment” which is as real as “runaway production.” The latter term describes the practice of American companies which prefer to shoot a film abroad rather than in Hollywood’s own studios. “Runaway investment” refers to American companies’ investing their money in foreign film production, production which is foreign-based to begin with and probably never would take place in Hollywood.

The point is that there is an American investment in these films, whether they are American films shot on location abroad or true foreign films made in their native countries—although the distinction is increasingly difficult to draw. In reviewing the role of American investment in foreign production, one would have to conclude that the foreign-made films which have achieved the widest circulation and the most significant financial returns in this country have been those in which American companies have had direct monetary interests. What is happening is the increased channeling of American money into foreign-produced films which were restricted in the United States market until the early 1950’s.

The American majors, with the only worldwide film distribution system, have had a virtual monopoly of distribution in the American market. This control has consequences for the circulation of foreign films in the United States (and in other markets as well). Before the majors actively began acquiring non-American pictures, foreign producers faced the very real problem of achieving wide distribution and promotion in the United States. There existed, of course, a corps of small independent distributors working within cities or areas who were experienced in importing films. In New York City thirty years ago, a handful of theatres did exhibit subtitled films, and exhibition was often arranged for them in a few theatres in other metropolitan areas. There were other distributors, but their experience came almost exclusively from importing original versions which were shown with out subtitles or dubbed sound tracks to theatres serving ethnic minorities. In this way, a substantial number of Mexican, Chinese, Greek, German, and Japanese films were imported annually, but their circulation was limited.

Foreign producers who sought access to the United States were confronted with a problem of means. The independents who had been importing films were not geared, either in staff or finances, to launch broad promotion and distribution work. The majors, on the other hand, were organized to do this, but they were not interested in bothering with foreign-made films as long as Hollywood was maintaining its productive capacity.

The lack of an adequate distribution organization in the United States for foreign pictures was one problem which had to be solved. Few foreign distributors were large enough to be willing to undertake a venture of this size, for it meant starting an organization that might be larger than the ones existing in their home markets. One company, however, elected to try. The Rank Organisation, through its managing director John Davis, consistendy charged that vested interests in the United States were at work to discourage the importation, distribution, and exhibition of foreign, notably British, films. In early 1957, the Rank Organisation announced that it was establishing Rank Film Distributors of America (RFDA) to penetrate the United States market while by-passing American companies. By March of that year, ten offices had been set up and theatres were leased in key cities to play Rank products. Variety reported:

There is no question in the mind of American observers that the Rank willingness to lease houses in cities where he feels he isn’t getting proper release is a wise one and could pay dividends…. [The] only question raised … is whether the Rank product is strong enough to meet the competition on a continuous basis.⁷

The Rank Organisation did not expect immediate profits from its expansion move and recognized that it would take time to establish itself in the American market. By mid-1958, RFDA had more than one dozen offices in the United States even though industry rumors insisted that the company was absorbing great business losses. In March, 1959, after a two-year experiment, the Rank Organisation announced that “owing to difficulties existing in the industry” it was closing its offices in the United States.⁸ The statement revealed that Lopert Pictures had been engaged to distribute films which Rank already had available in the American market.

At the annual Rank stockholders meeting in September, 1959, John Davis declined to reveal how much the Organisation had lost in its attempt to penetrate the United States market. He told stockholders:

Unfortunately, after 18 months operation it became clear there was no reasonable prospect of achieving a profitable operation … and it was decided to terminate our losses, full provision for which has been made in the accounts. Our attempts to open up this valuable market for British films through our own distribution organisation have thus failed, but I feel that at the time we commenced the venture we were justified in our efforts. Unfortunately, the trend of the industry has been against us.⁹

It was felt that many films Rank brought to the United States were simply not good box office material here. In contrast to Pursuit of the Graf Spee, which reportedly had rentals close to $500,000, a large number of other Rank films did not earn more than $50,000 or $75,000. One other factor possibly contributing to the collapse of RFDA was the large overhead caused by the operation of more than a dozen offices throughout the United States. It is known that during the months immediately preceding the halt in operation, Rank undertook stringent economy moves by reducing staffs and closing several of its branch offices. The unsuccessful attempt by Rank to penetrate the market by establishing its own distribution system has been one of the few large scale efforts in this direction by European producers. They realize that if they want to sell their products in the United States they must work through American distributors, either the independents or the majors. This sore experience is behind the current thought in Europe which looks toward an amalgamation of several key European companies to establish a competitive distribution chain, not only in the United States, but world-wide.

The British film industry has not been the only one interested in penetrating the American market. Several years before the Rank effort, the Italian film industry had made an abortive invasion but had relied upon American companies for financial support.

The Italian expansion move can be traced to early 1951 when the MPEA was negotiating with the Italian industry for a film trade agreement on the importation of American pictures in Italy. In February of that year, the Italian industry, supported by the government, demanded that financial returns on their films in the United States be guaranteed. The Italians asked American companies to distribute some thirty films annually with a guaranteed net return averaging about $40,000 per film. The MPEA rejected this proposal and negotiations became deadlocked.

Three months passed before an agreement could be reached between the MPEA and ANICA. The resulting pact, effective in July, 1951, and running for two years, declared that 12.5 percent of American earnings in Italy were to be paid to a new Italian company. One of its functions was to be importing Italian films for the United States market. In essence, this agreement authorized American companies operating in Italy to indirectly subsidize the circulation of Italian films in this market. Apparently nothing of this nature had been done before. The new company, Italian Film Export (IFE), was supposed to become a dollar earner for Italy, which was facing a serious balance of payments problem. A trade source in the United States reported:

American companies are anxious that IFE get going full force, since they feel the pact is advantageous to them. They think that by creating dollar income for the Italians through exhibition of their [pictures] in the U. S., the government in Rome will be encouraged to allow [American companies] to withdraw all or most of their [blocked] earnings there. Should IFE not prove effective, there’s a likelihood the government won’t permit its continuance and cut off the funds now being converted as part of the subsidy deal.¹⁰

IEF began operating in the American market by publicizing Italian pictures and by having Italian film stars make personal appearances. By the end of 1952, it had also established a subsidiary, IFE Releasing Corporation, to handle the distribution of Italian pictures. Producers in Italy were not obligated to channel their films through IFE although the company hoped to attract them by offering specialized knowledge of Italian film making and broad promotional work.

In early 1953, negotiations were resumed between the MPEA and ANICA for a new film agreement to replace the one expiring in June, 1953. The MPEA opposed a further subsidy. On the other hand, the Italians insisted that the subsidy be continued, although they were willing to reduce the amount from 12.5 to 10 percent of American earnings. Meanwhile, independent film distributors in the United States were growing unhappy over the role of IFE. The Independent Motion Picture Distributors Association of America (IMPDAA) charged that IFE was acquiring the good Italian films for the American market and distributing these on terms which the independents could not meet. IMPDAA contended that IFE was not interested in making a profit and was willing to pay Italian producers higher fees for their films. The MPEA had not liked the 1951 subsidy arrangement but had accepted it in exchange for Italian concessions on other points. In 1953, the MPEA found itself the target of charges from IMPDAA, which claimed the MPEA was subsidizing IFE, and the target of proposals from the Italians who wanted the subsidy to be continued. The dilemma was that the MPEA was being charged with restraining competition, yet if it discontinued its policy of subsidization, it might face further restrictions in the Italian market, which was worth at least $15,000,000 annually at that time.

The MPEA was able to devise a compromise that seemed to suit all parties except itself. It agreed to continue the payments to IFE but at a rate of 10 percent of American earnings in Italy. The MPEA demanded, and the Italians agreed, that the money could not be used for the distribution of Italian pictures in the United States—it could be used only for promotional work. This agreement was to become effective in July, 1953, and run for one year.

Later in 1953, independent American distributors, renewing their charges that IFE was competing unfairly, again brought their case to the MPEA. The MPEA reportedly responded that it had understood the subsidy paid under the 1951 agreement was to be used only for promoting and publicizing Italian pictures, not for distribution. The MPEA declared that it was surprised when IFE organized its distribution subsidiary in 1952. Nonetheless, when the 1951 agreement was announced in the American trade press, there was clear reference to IFE acting as a distributor in addition to a film promoter. In August, 1951, Variety reported:

Several former top sales [executives] for major American companies are reportedly under consideration by the recently-formed co-op of Italian film producers to head a nationwide distribution organization for Italo films in the U. S. Setup will be financed, in effect, by Hollywood, with a potential of $3,000,000….

Organization, to be known as Italian Film Export (IFE), is an outgrowth of the Italo-U. S. film pact which became effective July 1. Under that agreement a sum equal to 12½ percent of their earnings in Italy … is to be advanced by American distribs to Italian producers for establishment of the distribution and promotion organization in the U. S.¹¹

In February, 1954, the Independent Motion Picture Distributors Association of America brought its case to the Federal Trade Commis sion. The independents declared that the subsidized IFE, by distributing Italian films, was interfering with “free and fair competition” and that “a monopoly in the distribution of such films” was being approached. The complaint stated that “the manner in which IFE has been subsidized is also, in the opinion of IMPDAA, a violation of law” because “funds derived from a United States export association [MPEA] were utilized to lessen competition within the United States.”¹² While IMPDAA’s charges seemed to implicate the MPEA on one hand, they tended to absolve the MPEA on another by declaring that “IMPDAA does not contend that MPEA intended or even suspected that its funds would be utilized by IFE to subsidize the distribution of films in the U.S.”¹³ It would appear that the independents either accepted the MPEA’s contention that it knew nothing about IFE’s distribution activities, or that they reached an entente with the MPEA. Conceivably, the agreement could have resulted in the complaint against IFE but was worded to make MPEA appear innocent of the affair. The anticipated outcome could have been an FTC ruling that MPEA subsidies were illegal and had to stop. This would serve the purpose of IMPDAA while extracting the MPEA from the subsidy arrangement which it had never liked.

At the time IMPDAA made its charges to the FTC, the MPEA was preparing to resume negotiations with the Italian industry for a new agreement to replace the one expiring in June, 1954. These negotiations produced the 1954 film agreement which formally ended MPEA’s payments to IFE. In reporting the details of the new pact, Variety noted:

Elimination of the subsidy is a major victory for the Americans who have pointed out to the Italians that, due to a variety of circumstances including Federal Trade Commission pressure, they’ll no longer be in a position to grant the aid.¹⁴

It appears that IMPDAA’s complaint to the Federal Trade Commission had brought desirable results for itself and the MPEA.¹⁵

The 1954 pact officially terminated the relationship between the American majors and IFE. For three years, the MPEA had been subsidizing the Italian film industry in its efforts to penetrate the American market. Eric Johnston estimated that during this period the MPEA had paid between $4,000,000 and $4,500,000 to the Italians.¹⁶ In one sense, this can be considered the price Americans had to pay for the privilege of doing business in Italy. If they had not agreed to the subsidy, probably they would have faced severe restrictions on their films in the Italian market. The affair also indicates that the MPEA was so concerned about its position in Italy as to agree to the subsidy even though this allegedly jeopardized the position of independent distributors in the United States. As for IFE, sources in the American industry believe that while the company did make an effort to penetrate the market it was never particularly successful in generating bigger box offices for Italian films. Some observers believe that IFE Releasing was not even a money-making subsidiary for IFE and that few dollars were ever remitted to Italy. In 1955 IFE closed its dubbing studio in New York, and in the months following the entire IFE structure underwent organizational changes. Subsequently, export promotion for the Italian film industry became a function of a newly created official body, Unitalia, which now operates on a worldwide basis. IFE, as it was originally established in 1951, no longer exists.

At the time the MPEA was involved with IFE, the French realized they too might be able to obtain a subsidy from American companies to penetrate this market more extensively. The French plan was announced as early as July, 1951, and called for the MPEA to donate approximately a quarter of a million dollars to finance an organization which would promote and release French films in the United States. The proposal was not pursued seriously until the following year when discussions took place concerning a new film agreement covering the circulation of American films in France. In contrast to negotiations in Italy which were carried on between the MPEA and ANICA, those in France were conducted on the governmental level with American State Department representatives there, assisted by the MPEA, bargaining with the French government for a film agreement.

Negotiations in early 1952 became deadlocked when the French insisted that, in exchange for increasing the importation of American films, the MPEA agree to pay a subsidy to French producers so their films could be promoted more extensively in America. The MPEA and the State Department rejected the proposal, the latter believing that the film subsidy would set a bad precedent for other industries.

During the summer of 1952, the French revised their demands by withdrawing the subsidy proposal and replacing it with a “discount” plan. Details of the plan are somewhat vague but apparently it was to bring at least $250,000 to French producers, the amount originally said to be needed for the creation of a French film office in the United States. While the sum would not come directly from American companies’ earnings (as it did in Italy), the arrangements were such that American companies would have earnings $250,000 less than if there had been no “discount.” In this form, the agreement probably was more palatable to the State Department as it expressly did not involve a direct subsidy. Moreover, the pact between France and the United States is said to have specified that the money could not be used for distributing French films in the American market, but only for promotion and publicity.

Whether the arrangements with France constituted a subsidy is a moot point. In any event, the French obtained money from American companies to penetrate this market. There was at least one group, however, which did consider this to be a subsidy. The president of the Society of Independent Motion Picture Producers (SIMPP), Ellis Arnall, brought the matter to the State Department. In a letter to the then Secretary of State John Foster Dulles, Mr. Arnall asked whether the terms of the agreement with France were “in line with the general economic and foreign policies of the government.” Mr. Arnall, a former governor of Georgia, declared that the pact enabled the French to obtain funds from the MPEA

to use in an unrestricted fashion for the production, exploitation, advertisement or even the exhibition of French pictures in the U. S. as well as in other countries in competition with pictures of American producers who are not members of the MPEA to their injury and detriment.¹⁷

He charged that the agreement amounted to a purchase by the MPEA of economic privileges from the French government, privileges denied to American competitors of the MPEA who also desired to do business in France. He declared that SIMPP wished to be advised whether “such subsidy arrangements have the approbation and approval of the Department of State.”

It is important to distinguish Mr. Arnall’s charges from those IMPDAA made against the MPEA’s relations with IFE. IMPDAA was concerned lest IFE monopolize the distribution of Italian pictures in the United States. Mr. Arnall and SIMPP charged that money which found its way to the French industry was being used to support distribution of French films in the American and other world markets.

The MPEA responded to the complaint by denying that it was subsidizing French films. It declared that the money, representing “the setdement of an outstanding debt,” was being paid to an agency of the French government which could dispose of it in any way it saw fit.¹⁸ In addition, the MPEA said that the State Department had been kept fully informed of this arrangement and had not expressed disapproval of it.

Mr. Arnall’s charges to the State Department apparently brought no result as the pact continued to be operative. This meant that the State Department was in tacit agreement with the principle of American companies’ paying tribute for the privilege of operating in certain foreign countries. It also reflected the State Department’s concern with the propaganda value of American films and its desire to see that they be circulated abroad with as few restraints as possible. It is known that “subsidies” similar to the one executed with France existed in other countries. The arrangement with France helped to secure the position of MPEA companies in that country and allegedly worked to support the circulation of French films in foreign markets at the expense of pictures from independent American producers.

Did French films in the United States benefit from this plan? Eric Johnston said in 1954 that the MPEA paid about a quarter of a million dollars to the French, an amount “hardly enough for them to set up any distribution organization” in the American market.¹⁹ He declared he did not know what the French intended to do with the money but he thought they would use it to promote their films in the United States. The payment to the French government, he said, was a necessary compromise which had to be made during the negotiations for a film agreement.²⁰

An increase in French film earnings in the United States as a result of the “subsidy” is unlikely. Jacques Flaud, then the director of the Centre National de la Cinematographic, declared in 1956 that the French considered their returns from the American market to be insignificant. He was quoted as saying that “even if they improved 100 percent, they would still be ridiculously small.”²¹ This was supported later the same year by a report from France’s Economic Council, an advisory group composed of industrial, governmental, and labor union representatives. The Council’s report on the film industry recommended, among other points, an export policy based on “equitable and reciprocal exchanges” which would do away with a “shocking lack of proportion.” The report pointed to the “still insufficient” returns from the foreign markets and, as if speaking about the American market, declared:

It is abnormal and unjust that certain foreign countries are able to make enormous receipts in France … while their market rejects all reciprocal exchange and remains closed to French pictures.

(In 1956, American films in France returned to their distributors approximately $15,500,000 while French films in the United States reportedly earned only $2,200,000.) The report continued:

… in regard to the American market, impenetrable to French films, particular encouragement should be given to French companies who would attempt opening this market with a university circuit. If this circuit would, financially speaking, bring no immediate profit… it would at least create customers for French pictures later, say in five or ten years.²²

The Council’s report also recommended financial aid to French companies which sought to operate showcase theatres in the United States.

Thus, the three major European film industries, the British, the Italian and, to a lesser extent, the French, had developed plans and organizations for penetrating the American market and for bringing wider circulation to their films. Each of these formal attempts collapsed or was replaced by a modified structure. While these efforts may have failed to bring greater immediate revenues for European films, they have succeeded in the long run by introducing previously “unknown quantities” to the American public.

The road for foreign films in the United States has not been easy, yet it must be admitted that they have made progress. The advance can be attributed to several things. There has been the outstanding success of a handful of foreign films which have attracted public and industry attention, significant box office returns, and great critical acclaim. At the same time, foreign industries have been constandy pushing to get more of their products into the American market. This has coincided with a subde reeducation of the American audience and the American industry—the producer, distributor, and exhibitor. In addition, the policy of the American majors has undergone a significant change which is directly related to the decline in availability of Hollywood films. The interaction of these factors has generated a market condition in which foreign films are now a fairly consistent offering in the nation’s theatres. Moreover, as the supply of Hollywood films dwindles because of television’s demand for programming material, foreign-made films are finding their way to the home screen.

As for statistical material pertaining to the circulation of foreign films in the American market, it must again be recognized at the outset that there are no official or precise tabulations available. European governments often report transfers of film earnings from the United States but this hardly gives a clue to actual box office receipts. Moreover, the United States government, unlike most in Europe, does not maintain checks on box office receipts by nationality nor on the number of films imported. This lack of reliable data is regrettable. Even the American industry, as far as can be determined, does not maintain records on the circulation and earnings of foreign films.

Evidently the only estimates are those published by Variety, but even they exist only for 1956 through 1964. In itself, this indicates two trends. First, it is quite probable that the revenue earning ability of foreign films was so limited in the early 1950’s that the American trade press did not bother compiling and reporting the results. For example, Variety noted in reporting foreign film activities in 1956 that “foreign grosses in U. S. have never been published until now.”²³ Second, discontinuance of Variety surveys after 1964 points to the increasing difficulty of determining exactly what is a foreign film. It is impossible in many cases to differentiate the source of financing in the increasingly complex production arrangements involving American and foreign companies. While this might not be true for, say, Swedish pictures, it is the case for British, Italian, and French films. Without a workable standard for determining precisely what makes a film “foreign,” it becomes impractical to try to estimate earnings.

Variety tabulations have spotlighted this problem.²⁴ From 1959 to 1964, foreign films include those either wholly or partially financed by American interests and which met nationality requirements of the countries in which they were made. The same might also be true for the 1958 data. Although Variety made no explicit statement that year, it recognized as “British” Bridge on the River Kwai, a film produced by Sam Spiegel and distributed by Columbia, which had gross rentals of more than $14,000,000 in the United States. The 1957 data, by contrast, do not include a number of American-financed British films, even though they met nationality requirements. In 1956, Variety made no mention of the problem in reporting its findings.

Variety obtained its figures by questioning film importers. It is possible that a few distributors have not been checked (or declined to cooperate) and so the data should be considered as representing the minimum number of films imported. As for earnings, there might be a tendency on the part of some importers to swell their stated revenues to paint a healthy picture. On the other hand, some importers and their earnings might have been missed.

Another point for caution is that Variety’s tabulations refer to the American and Canadian markets. Unfortunately, there is no way to determine the portion of earnings or the number of films for only the American market. It is reasonable to assume, though, that a film dubbed or subtitled in English would be released in both markets. Regarding earnings, the situation is somewhat more difficult because it is not known whether Canadian movie-going habits differ from those in the United States, or if rental arrangements differ. Of course, the population ratio of the United States and Canada is approximately 10 to 1, and based upon this it is to be expected that the great majority of rentals accruing to a film would come from the American market. Possible exceptions might exist for British and French films which could earn proportionately more revenue in Canada because of the country’s ties to Great Britain and the large French-speaking population. There are, however, many independent distributors in Canada who import pictures directly from Great Britain and France. The earnings of these films would not be reflected in the Variety tabulation because it covers only American distributors. Nevertheless, in examining the total revenues, one cannot help being impressed by their smallness even though they come from two markets.

TABLE 1

Foreign Films in Circulation in the United States-Canadian Market¹

Table 1 shows the number of foreign films in circulation in the United States-Canadian market from 1956, while Table 2 reports the estimated revenues which they earned for their distributors. The latter table indicates a clear difference between 1957 and 1958 for the earnings of “British” films. In 1957, excluding American-financed pictures, “British” films earned about $6,300,000. The following year, including American-financed films, “British” pictures returned almost $27,200,000 to their distributors. British earnings hit a peak in 1964 with a reported $49,100,000 in rentals which includes significant returns for from Russia With Love, Tom Jones, and A Hard Day’s Night, all involving participation by United Artists. The peak year for French earnings, 1958, shows a considerable jump from the previous year. The increase from $3,200,000 to $8,300,000 can be attributed almost entirely to Brigitte Bardot and the film in which she appeared, And God Created Woman, which had rentals of approximately $4,000,000. Italian films have hit two earning peaks in the American market for the years considered. In 1960, they had estimated rentals of more than $12,200,000, although about a third of this was earned by only four pictures. They starred strongman Steve Reeves in a series of Hercules-type films. In 1963, Italian pictures returned more than $17,200,000 to their distributors, about three-quarters of this amount being earned by spectaculars such as Barabbas and Sodom and Gomorrah in which American companies had investments. The phenomenal success of Greek films in 1961 is somewhat deceptive because all but about $100,000 was earned by Never On Sunday.

TABLE 2

Division by Nationality of Distributors’ Share of Foreign Film Box Office Receipts in the United States-Canadian Market¹ ($,000)

Other significant points are apparent. The data reveal that from 1958 to 1964, foreign films (including those financed by American interests) returned to their distributors an estimated $390,000,000. Foreign film earnings in the United States-Canadian market are compared in Table 3 with earnings of films with American nationality in certain European countries. While 1958 through 1964 are the high points for European earnings in this market, they are not necessarily the peak years for American earnings in Europe. Moreover, in the case of Italy and France, the distributor’s share for American films was calculated at 30 percent and 33 percent, respectively, of the gross receipts, figures admittedly low for many films. The contrast in earnings is more striking because the average ticket price in the United States during the period considered approached $.80 while that for France, Italy, and West Germany was only about $.40.

TABLE 3

Comparison of Rentals; French, Italian, and German Films in the Combined United States-Canadian Market; Films with American Nationality in the French, Italian, and German Markets, 1958 to 1964 ($000,000)

Before this discussion of foreign films in the United States-Canadian market is concluded, the role of the major American distributors must be considered. Table 4 indicates the number of films handled by ten (eleven in 1963 and 1964) major American distributors and the estimated rentals accruing to these films, and contrasts them with the activities of independent distributors. Variety did not provide tabulations of major vs. independent until 1960. The ten or eleven major distributors questioned by the trade journal represent less than a third of the total number of distributors surveyed. Although they have distributed no more than a quarter of the foreign films, they have earned between half and three-quarters of the total estimated rentals, with the most impressive shares being in 1963 and 1964. To a great extent, this reflects the fact that the majors, by virtue of their greater monetary reserves and sources of funds, are able to buy into or finance outright large-scale foreign productions with name stars who attract higher box office revenues. As a recent example, United Artists’ Goldfinger (a “British” film) is reported to have been rented in the United States for as much as 80 percent of a theatre’s gross²⁵ while the same company’s Thunderball is said to have hit a maximum rental of 90 percent of the gross in some theatres.²⁶ In this way, it is not surprising that the latter film reportedly recovered its $15,000,000 cost after only seven weeks in release in the United States and Canada.

TABLE 4

American Majors’ Share of Foreign Imports and Earnings in the United States-Canadian Market¹ ($,000)

The position of the majors also reflects the kind of foreign films which have been distributed by the independents. Generally, they have been of the “art house” type—likely to play in a more restricted and limited market.²⁷ The independents normally operate on smaller budgets and are able to devote less money to acquiring and promoting their films. In recent years, it appears that the popularity of “nonart” foreign films has eclipsed that of the “art” film and this has had an impact on distributors. A few small independents have left the business, while some others are moving into the less “arty” films. This does not mean that “art” film distribution is dead. However, the independents who wish to compete with the majors can find themselves at a serious disadvantage because with rising production costs overseas, more money is needed to be a coproducer. In addition, foreign producers are asking higher prices for American distribution rights to their films. Gone are the days when American rights could be bought for a few thousand dollars. With foreign film content changing due to the investment pattern of the majors, it seems that the “art” film is declining in importance. Although small independents might never be completely squeezed out of business, it appears that many of them are finding it increasingly difficult to stay in. Like many other economic activities, film distribution is moving toward fewer, but larger, companies.

In the United States today, there is a fairly wide market for some kinds of foreign pictures where practically none existed fifteen years ago because of the structure and policy of the American industry. Their position here will continue to be solidified not only by their occasional unique tone and content, but also by the continued American investment in them. As long as producers hold to their practice of making a relatively small number of pictures in Hollywood, there will be room in the American market for the foreign-made film. Moreover, American audiences have demonstrated at the box office that they are willing to pay to see non-American pictures, although in many cases the audience probably does not realize it is seeing a film made abroad. As European-made films continue to have success in the United States, American companies will be more likely to invest in them. This will increase the problem of defining the nationalities of films and accelerate the vanishing of what little dividing line remains today.