In an announcement on September 18, the Motion Picture Association-MPA (formerly the Motion Picture Association of America-MPAA) announced that it was rebranding all its regional offices, which in the past have had different names and different logos, with the new identifier MPA-(Region) and the “globe and reel” logo familiar to US audiences. Thus, for example, the MPAA becomes MPA-America. This completes a process that began a few years ago to bring the various MPA offices under one common branding umbrella. As an example, in Canada for many years the association that represents the MPA members (the now five major Hollywood studios with the recent addition of Netflix) was called the CMPDA (Canadian Motion Pictures Distributors Association), which often led to confusion with the CMPA (Canadian Media Producers Association), an association of producers of Canadian media. A few years ago the CMPDA became MPA-Canada, a much clearer statement of who it was, with its own bilingual (English-French) logo featuring, naturally enough, a maple leaf. Now it will have a unified logo in common with other MPA affiliate organizations.
The global rebranding reflects the MPA’s global reach in terms of distribution, production and impact. It is heavily exposed to foreign markets and dependent on foreign consumers. In 2018, 71% ($29.2 billion—all dollar figures USD) of global box office revenues were generated outside the US and Canada. This is consistent with the average over the past 5 years. (For historical reasons, the US and Canadian box office returns are bundled). US/Canada receipts reached a new dollar record of $11.9 billion. The most significant single overseas market by far was China, which generated film revenues of $9 billion, far in excess of the second largest market, Japan, at $2 billion. Other markets exceeding $1 billion were, in order, the UK, South Korea, France, India, and Germany, with Australia, Mexico and Russia nudging the $1 billion mark.
Films viewed in cinemas are only part of the story. More revenue was generated from various forms of home entertainment than from theatre-going. Given the many ways of consuming content these days, this is not surprising. Spending on home entertainment exceeded box office revenues, reaching $55.7 billion, $32.4 billion of which came from international markets. Digital entertainment (streaming, downloading, pay-TV and cable-more revenue from fewer subscribers in the case of cable) showed strong growth while consumption of content in physical formats declined. In the US digital entertainment revenues increased 24% while physical formats declined by 15%. International digital spending increased even more, by 34%, while physical spending had a similar drop to that in the US. This is borne out by any visit to a Best Buy or similar store. Physical discs are almost unavailable now. More and more content is accessed online. In total almost 2/3 of combined revenues for the MPA companies come from overseas markets. This truly is a global industry.
But it’s not just distribution that is global. While the entertainment industry is a major contributor to the export of US services, accumulating large surpluses to help offset the US trade deficit in goods, those “Hollywood” films and television programs actually contain large amounts of foreign inputs. (Trade figures can be deceiving, since they often don’t adequately reflect foreign components or inputs in a finished product). Much of the production of the five studios (Disney, Paramount, Sony, Universal and Warner Bros), plus new member Netflix is filmed outside the US. While Hollywood is still the base, filming takes place in many locations in the US but also, significantly, in Canada, the UK, Australia and New Zealand, continental Europe and elsewhere. Whether it is actors or scriptwriters in Hollywood, visual effects software designers or caterers in Vancouver, cameramen or costume designers in Melbourne or sound stage workers and extras in London, the economic impact is global. According to MPA-Canada, “The total volume of Foreign Location Service (FLS) production in Canada in 2017-18 was $4.77 billion and supported the employment of over 95,700 Canadians on a full-time basis, with over three-quarters (77%) of all FLS projects in Canada originating from US producers.”
As these figures from the Canadian Media Production Association show, not all FLS projects were from the US (it ranged from Bollywood musicals to British, French and German productions) and not all were from MPA companies, but a significant proportion were.
Foreign Location Shooting (FLS) not only keeps people working, the economic activity that it creates builds industry infrastructure. For example Canadian productions for film or television, while growing in number, are insufficient to support all the people working in the industry all the time, yet that infrastructure is needed to support Canadian production. The FLS investment not only helps sustain full-time employment in the industry, it incentivizes innovation and brings in investment, nurturing and sustaining the required ecosystem for a successful film and television industry—and thus helping to ensure the facilities to produce Canadian content are alive and well. The same is true in Australia and other jurisdictions with thriving but smaller content production industries.
When the international production of Netflix is added to that of the studios, the result is even more impressive. A quick scan of the Netflix line up, where Netflix has often partnered with a local production company, reveals series from Scandinavia, France, Latin America, Israel, Spain, Australia, Canada (where Netflix has announced the creation of a dedicated production hub, in Toronto), Britain (where it has announced plans to spend $500 million on British productions over the next year), and so on. All this investment is based on business-driven decisions to provide returns to the shareholders of the studios and Netflix, of course, but that does not diminish the positive impact that it has on local economies and content production infrastructure around the world.
Beyond distribution and production, the MPA’s global activities also encompass advocacy for its member’s film and TV content (opening and protecting markets) and significant anti-piracy efforts. China is an interesting example. Despite the rapid growth of the Chinese box office, there continue to be distribution, revenue-sharing and censorship issues with China. MPA members cannot distribute their films directly in China (nor can film producers from other countries). All foreign content producers have to work through an agency of the Chinese government, China Film, which sets quotas on film imports and determines distribution arrangements (timing, rollout by city, share of revenues etc). The last agreement between China Film and the MPA was signed in 2015 but is due for an update. Needless to say, the current US-China trade dispute is not helpful. At the end of the day, however, both the MPA and China Film have a mutual interest in reaching an agreement as both organizations need each other.
The MPA has been particularly active on the anti-piracy front for many years. Piracy, especially in online distribution, is an ongoing issue in China as it is elsewhere, in parts of Asia, Latin America, the Middle East, Europe and indeed to some extent still in the US and Canada. In China, and in many other countries, the MPA works with local authorities to combat online and physical piracy. In some cases, this involves technical assistance, in others it involves working with local stakeholders to bring about a strengthening of the local legal framework or law enforcement activity. The MPA was the lead in pushing for the creation of ACE (Alliance for Creativity and Entertainment) in 2017, an association of 30 leading content and on-demand companies from around the world. All MPA members are represented, along with a number of broadcasters and online distribution platforms. Among the members are Bell Media (Canada), Village Roadshow (Australia), BBC Worldwide (UK), Canal + (France), Grupo Globo (Brazil) and Televisa (Mexico) as well as a number of non-MPA US companies. ACE now has 33 companies and is stepping up its anti-piracy activities. This is good news for all those governments and workers who are engaged in the entertainment industry, across the gamut from production to distribution, as it will help to maintain a vibrant and sustaining industry, where new investment continues to be possible and tax revenues flow back to legitimate authorities.
MPA members have also been among the leaders in transforming the content industry and embracing new forms of distribution. For film releases, it is more and more common to have global “day and date” releases. Getting the films into global markets quickly undercuts the demand for pirate copies and helps build a healthy distribution ecosystem, while making the latest content available to audiences everywhere. New digital technologies make simultaneous global distribution possible, although there will always be circumstances where films will be released at different times in different markets (differing school holidays being one obvious example). This more timely global distribution has had a global impact on audiences and is no doubt one of the reasons why strong audience and revenue growth has continued.
We live in a global environment where time and distance barriers have shrunk. Social media has created global demand for the latest “hot” content, no matter where it is produced, although US content (often produced with significant foreign input as discussed above) is still compelling and has strong market share. For many years, the MPA and its members have had a significant impact in global markets—on the changing forms of entertainment consumption (cinemas to pay-TV to online distribution), on tastes and production methods, on growth of local talent and industries, on tourism, on consumer awareness and methods of tackling piracy—in short across the board.
While some may decry the “homogenization” of culture, and blame it on Hollywood, at the end of the day it is global audiences who are the arbiters. A bad movie—however you define that term–even one produced with lots of glitz, generally doesn’t do well, domestically or internationally. Content that tells a compelling story well generally has wide appeal that crosses cultural boundaries. The world today is a richer place in terms of content options available to audiences, creativity and cultural development and, yes, escaping from reality for a period of time. That is what entertainment is all about.
The MPA is not the only game in town, but it is an important one in the era of global entertainment, whether engaged in production, distribution or content protection. Its new logo reflects that global engagement and commitment.
(In the interests of full disclosure, I worked for a decade or so in the entertainment industry, as a senior executive for Time Warner, at that time the parent company of Warner Bros (an MPA member). I was based in Hong Kong with a mandate for public policy for the Asia-Pacific region and saw first-hand the transformation of content delivery in Asia, the challenges arising from piracy particularly as digital distribution emerged as a leading form of content delivery, and the engagement of the MPA and its members in promoting the industry, working with local stakeholders and addressing the challenges of content protection. As a current resident of British Columbia, I also see first-hand the positive economic and technological impact of FLS production on BC’s film industry. One is always shaped by one’s personal experiences and no doubt this blog posting reflects mine).
© Hugh Stephens, 2019. All Rights Reserved.
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