Ágúst Einarsson About this book This book recounts the development of film as a part of culture and the crea- tive industries, both in Iceland and elsewhere. The discussion touches on the demand for films, their supply and production and the significant business risk in the sector. Iceland has various comparative advantages in the motion picture industry and has made good use of them. Government plays an important role in sup- Industry Picture the Motion of Impact Economic porting the film industry and it has been shown that each Icelandic króna contributed by government to the sector gives fourfold returns. The motion picture industry is already an important element of the Icelandic economy. All the conclusions presented in the book are supported by figures, as in an earlier work by Dr. Einarsson, the Economic Impact of Music (in Icelandic), which demonstrated the economic significance of the music industry. In the present book, Dr. Einarsson describes various economic indicators relating to the motion picture industry in detail and illustrates them using a number of charts and tables. The discussion is interspersed with short biographies of twenty-nine individuals who have made their mark on the international motion picture industry over the past 100 years. This book is a good find for anyone who has an interest in culture and particularly in film. About the author Dr. Ágúst Einarsson is Professor of Economics at the University of Bifröst in Iceland and former Rector of Bifröst University. He studied business economics in Germany and defended his doctoral thesis at the University of Hamburg. Dr. Einarsson worked for a number of years as CEO of a major fisheries and fish processing enterprise in Reykjavík. He has held a number of positions of trust in Iceland and served as chairman of the board of numer- ous enterprises. The Icelandic Model Dr. Einarsson was active in politics for a number of years and was a Member of Parliament from 1978 to 1979 and 1995 to 1999. He has also occupied vari- ous government posts, including positions as chairman of the board of the Central Bank of Iceland, the Icelandic Collective Wage Bargaining Commit- tee and member of the board of directors of the National Power Company and the Reykjavík City Theatre. Dr. Einarsson was Professor of Economics at the University of Iceland for many years, where he held the position of Head of Department and Dean of Faculty. Dr. Einarsson has published twenty-three books, including two collections of articles, two works on microeconomics, a book on the economic impact of music and another on cultural economics, in addition to a book on the eco- ISBN-978-9935-9052-5-3 nomic impact of the film industry, on which this book is partially based. He has also published articles in scientific publications on business economics, fisheries and culture, as well as chapters in various books and proceedings 9 789935 905253 of conferences. Economic Impact of the Motion Picture Industry The Icelandic Model Ágúst Einarsson Economic Impact of the Motion Picture Industry The Icelandic Model 2014 Economic Impact of the Motion Picture Industry: The Icelandic Model ©Ágúst Einarsson Publisher: Bifröst University Design and layout: Oddi, Ecolabelled Printing Company All rights reserved. Without limiting the rights under the copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the prior permission of both the copyright owner and publisher of the book. Printed in Iceland ISBN-978-9935-9052-5-3 To my granddaughters Contents Preface ......................................................... 9 1. Motion pictures, culture and history ....................... 13 1.1 Economics and the creative industries ....................... 13 1.2 The consumption of culture in the Nordic countries . 25 1.3 The origins of motion pictures .............................. 29 2. Supply and demand ........................................ 35 2.1 Private demand .......................................... 35 2.2 Supply of motion pictures .................................. 44 2.2.1 Basics of production.................................. 44 2.2.2 Comparative advantages and the value chain ............. 52 2.2.3 Producers, external economies of scale and uncertainty ..... 61 3. Role of government in motion picture production .......... 71 3.1 Why should the government support motion picture production? . 71 3.2 Financing of motion pictures ............................... 82 3.2.1 Icelandic Film Centre, government appropriations and allocations ...................................... 83 3.2.2 Reimbursement of motion picture production cost.......... 86 3.2.3 Other funding....................................... 88 3.3 Impact of the film industry on the job market, tourism and government finances ...................................... 92 4. Production, distribution and exhibition .................... 103 4.1 Production............................................... 103 4.2 Distribution and exhibition................................. 106 4.2.1 Distribution of films .................................. 106 4.2.2 Distributors, cinemas and multiplexes ................... 112 4.2.3 Cinema attendance .................................. 113 4.2.4 Film festivals ....................................... 119 4.2.5 Television, DVDs and computers........................ 122 4.3 Operation and finances of companies ........................ 123 4.3.1 Production ......................................... 123 4.3.2 Distributors, cinemas and video rentals .................. 128 Contents 7 5. Education and social framework ........................... 129 5.1 Education in the film industry .............................. 129 5.2 Associations of stakeholders in the motion picture industry ..... 133 6. Conclusions and future prospects .......................... 135 6.1 Motion pictures, culture and history ......................... 135 6.2 Supply and demand ....................................... 136 6.3 Role of government in motion picture production............... 137 6.4 Production, distribution and exhibition....................... 139 6.5 Education and social framework ............................ 140 Annex 1: The motion picture industry in Iceland until 1979.......... 141 Annex 2: Film legislation, film rating and film museums in Iceland .. 145 Annex 2.1 Act on motion pictures.............................. 145 Annex 2.2 Film rating ........................................ 146 Annex 2.3 National Film Archive of Iceland...................... 148 List of illustrations and tables .................................. 151 Index of names ................................................. 153 References...................................................... 157 Brief biographies David Attenborough........... 18 Katharine Hepburn............ 78 Brigitte Bardot................ 20 Alfred Hitchcock.............. 82 Ingmar Bergman.............. 24 John Huston ................. 86 Humphrey Bogart ............. 27 Akira Kurosawa .............. 90 Marlon Brando................ 31 Sophia Loren ................. 92 Charles Chaplin .............. 38 Marilyn Monroe .............. 97 Sean Connery ................ 42 Paul Newman ................ 100 Marlene Dietrich .............. 46 Leni Riefenstahl .............. 108 Walt Disney .................. 51 Peter Sellers.................. 112 Sergei Eisenstein ............. 54 Frank Sinatra................. 116 Federico Fellini ............... 58 Steven Spielberg.............. 119 Jean Gabin .................. 60 Elizabeth Taylor .............. 122 Clark Gable .................. 65 Shirley Temple ............... 127 Greta Garbo.................. 69 Orson Welles . 131 Jean-Luc Godard.............. 76 Preface There is something fascinating about films, something mysterious that captures our imagination. Most children remember their first experi- ence of film and some people preserve the memory of their first trip to the movies for their entire lives. Each generation remembers its own youthful experience of motion pictures in an enduring way and every- one has different and personal memories of films. The term ‘cinema’, which can be used either as a synonym for ‘film’ or as a word for a building designed for showing films, has its origins in the Greek word ‘kinema’, which means ‘movement’. The same applies in other languages, such as German, where the word for cinema is ‘Kino’. The Nordic languages use the word ‘bio’ in various compound words meaning film such as ‘biograph’ in Danish and ‘bíómynd’ in Icelandic; this also originates in Greek, where the word ‘bios’ means life. Recalling that a little more than a hundred years ago this form of recreation did not even exist brings home the enormous changes that have occurred over this very brief period. The advent of motion pictures is not a main cause of these changes, of course, but it is still a clear example of the way that society and daily life have changed in the last century or so. The world’s population has grown fivefold in the last hundred years, having grown only tenfold in the two thousand years before that. Hardly any useful comparison can be made between our contemporary societies and those of several hundred years ago as regards living conditions and the options available to the general public for leisure and recreation. This is particularly obvious to Icelanders, who were a poor and