Sex, Drugs & ECONOMICSSex, Drugs & ECONOMICSby: Diane Coyleby: Diane Coyle

Chapter 12:Chapter 12:Why Subtitles Need SubsidiesWhy Subtitles Need Subsidies

PowerPoint by: Ryan OttPowerPoint by: Ryan Ott

A General Overview A General Overview Commentary by Diane CoyleCommentary by Diane Coyle

• Bridget Jones’s Diary was co-produced by three movie companies– Canal Plus of France– UK –based Working

Title– Hollywood’s Miramax

http://movies.yahoo.com/movie/1804536438/info

A General OverviewA General Overview

• This movie was untypical of many commercial successes.

• It was a best selling book and an English newspaper column.

• There almost wasn’t anything resembling conventional Hollywood

• EXCEPT the plot spanned two Christmases and showed a wintry England.

• It almost never snows in England at Christmas!!

Hollywood Values and American Hollywood Values and American CultureCulture

• Dominant in the global industry• Diane Coyle said, “nothing delights a wanna-be

intellectual as much as art house movies. It’s a mark of free thinking and sophistication. Beautiful French actresses taking their clothes off-fantastic! Subtitles-even better.”

• “The chasm between commercial Hollywood films and arty European ones is all too often exaggerated, as the two traditions feed each other.”

French GovernmentFrench Government

• There are more similarities between Hollywood and European Art films than people think.

• The French governments have aggressively defended their right to protect French films.– Including: Minimum local content on television

channels– Holding up all EU – U.S. trade negotiations

specifically to safeguard the industry against Hollywood

• French call this the cultural exception• Can there be a cultural exception to free trade?

French FilmgoersFrench Filmgoers

• Despite the fear of the intellectuals…– French audiences are as likely as any other

nationality to prefer the popular Hollywood blockbusters to the obscure and homegrown alternatives.

– The people’s choice seems to be Hollywood

How do European politicians How do European politicians justify special trade protection justify special trade protection

for their own cultural for their own cultural industries?industries?

Cultural Exception for their Cultural Exception for their countriescountries

Free TradeFree Trade

• Offers the lowest price for consumers at the lowest price.

• Gives consumers choices

Economies of Scale in the Movie Economies of Scale in the Movie IndustryIndustry

• Do not arise in production because of low budget movies.

• Costs of film-making is less expensive due to technology

• Returns to scale occur in:– Buying Superstar Talent– Marketing and distribution– Diane Coyle said, “Anyone can make a film as a

hobby at no cost, but few can translate their creative skill into box office success.”

Hollywood Studios vs. European Hollywood Studios vs. European CompetitorsCompetitors

• Hollywood has an advantage due to extensive, increasing returns to scale even in the European market.

• They are in this position because the U.S. is the biggest single English-language country in the world.

• There are large language fragments in the European market.

Diane Coyle’s Closing ArgumentsDiane Coyle’s Closing Arguments

• It’s isn’t enough to say that the film industry is part of the nation’s cultural heritage.

• Defenders of subtitle films need to make a stronger case.

• Diane feels that an afternoon spent watching something subtitles is as much hard work as a few hours sitting at the computer running regressions.

• Hollywood has the best special effects, but not the place to look for the intellectual cutting edge.

Economic Concepts That Are Economic Concepts That Are Needed to Address This Topic Needed to Address This Topic

Are...Are...• What are subsidies and what do they do?

• The idea of free trade

• Economies of Scale

• Returns to Scale

• Diminishing Returns to Scale

• GDP

What are subsidies and what do What are subsidies and what do they do?they do?

• They provide domestic firms a cost advantage

• It allows the domestic firms to be able to market their products at prices lower than warranted by their actual cost or profit considerations.

The idea of free tradeThe idea of free trade

• Reducing or eliminating trade barriers

• Allows exports to come in and imports to leave with little or no taxes or barriers

Economies of ScaleEconomies of Scale

• Situation when long-run average total costs decrease as output increases

• Situation where cost per unit of output falls as output increases

Returns to ScaleReturns to Scale

• Refers to a technical property of production.

• What happens to output if we increase the quantity of all input factors by some amount.

• Diminishing Returns to Scale

Gross Domestic ProductGross Domestic Product

• The total market value of all final goods and services produced in an economy in a one-year period.

My ThoughtsMy Thoughts

• Diane Coyle made some valid arguments.

• Movies are a reflection of cultures.

• With free trade though, you let the people decide what they want to watch, opening up more choices.

Economic StandpointEconomic Standpoint

• Free trade allows countries to see more Hollywood blockbusters than does banning of trade.

• If anything, bringing these movies to other countries makes the domestic moviemakers become more creative and innovative and raises the art of movie making to the next level.

• The most important thing to remember is that in the end the consumer wins, because with more choices, the result causes prices to be lower.

Domestic Country StandpointDomestic Country Standpoint

• I see where countries don’t want movies imported in from other countries because that hurts their local production studios.

• Movies for these countries also give a representation (sometimes not accurate) of their particular cultures, giving them an identity.

ConclusionConclusion

• Movies weren’t something I thought of as a trading issue before reading this article.

• Products like coffee, cotton and sugar I know have trade restrictions throughout the world but as far as an item like movies, I never thought of it as an issue.

• Choice is ultimately great for the consumer, because if foreign countries just showed their local films, then people that prefer action as opposed to more intellectual films, might not even go to the movies.

Conclusion, continuedConclusion, continued

• Outside competition either makes a firm better or puts them out of business.

• In the case of the movie industry, I see Hollywood films maybe hurting countries art-like films but if people prefer more Hollywood, than local films, than that would cause countries to make a better product, more appealing to their local citizens.

BibliographyBibliography

• Coyle, Diane. Sex, Drugs & Economics: An Unconventional Introduction to Economics. Thompson/Texere. 2004

• Carabaugh, Robert. International Economics 9th Edition. Thompson Southwestern. 2004.

• Bridget Jones’s Diary, 2001 http://movies.yahoo.com/movie/1804536438/info