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July 4, 2005

The East Is Green

Ever since 1948, when the Justice Department won its lawsuit, U.S. v. Paramount, against the major movie studios, it has been illegal for a company to produce and distribute movies while also owning the theaters in which they are shown.

If you read carefully the article in today's New York Times about the high hopes of Hollywood in China, you will notice that the rule laid down by that 1948 case does not apply there. For example, Time Warner is investing not only in production and distribution but also in "more than 70 cinemas around the country in preparation for a potential theater-going boom."

Americans like to think that our movies are just so wonderful, the world can't get enough of them. On the whole, we reject the left's now stale-sounding accusations of "US cultural imperialism." But despite the genuine popularity of our films worldwide, there has always been an element of coercion involved, as well as a distinctly double standard regarding business ethics.

This is an old story. During World War I, the fledgling studios made domestic propaganda films for the Committee on Public Information, and after the war, Washington repaid the studios by pressuring war-weakened European governments to allow the import of US films. Without this help, countries like France (then the leading supplier of films in the world) would have been more successful in keeping the US out of European markets.

This process got racheted up after World War II, when despite much rhetoric about free markets, Washington exerted extremely heavy pressure toward the same goal, while in the process allowing the studios to engage in monopolistic practices overseas that were outlawed at home. In a nutshell, they were allowed to form a cartel, the Motion Picture Export Association, that conspired against foreign theater owners by acting as a single distributor, booking films in “blocks,” threatening to cut off supply if theater owners showed non-US films, and allocating foreign profits based on domestic box-office receipts.

The studios were also given a huge advantage over foreign competitors by the Informational Media Guaranty Program (1948), which reimbursed them in dollars for all films sold to countries with soft or inconvertible currencies. And finally, the Marshall Plan for Europe contained provisions linking financial aid to the willingness of foreign governments to reduce or eliminate import quotas on American films.

A few years later, TV followed same pattern. In 1960 the Television Program Export Association enlisted the aid of the State Department in overcoming foreign resistance to “Batman,” “Mod Squad,” and “The Fugitive.” Especially after the movie studios began producing TV shows, they made the same case for the small screen that they had made for the large - that exporting entertainment was not just good business but also good PR. As Harrison Salisbury once said, “American pictures are the best and most forceful medium for selling the United States.”

This may still be good business, but is it good PR? That is a question very much on my mind these days...

Posted by at July 4, 2005 1:45 AM