Two recent events—the vote for “Brexit” in the United Kingdom and the rise of Donald Trump in the Republican party of the United States—suggest that nationalism may be gaining some ground against globalism as a preferred economic and political philosophy. Though these developments have been widely debated in the public press, little has been discussed about the potential impact on the business of exhibition. With certain caveats, this writer strongly believes that globalization over the past few decades has benefitted motion picture theater operators, and that a potential return to protective national policies could be bad for business.
What are Nationalism and Globalism Anyway?
Much has been written about the way people identify with their government, economy, and culture and how that identification shapes legal and emotional geo-political boundaries. The driving forces of this identification matrix can be religion, language, ethnicity, philosophy, patriotism, xenophobia, or many other factors. Simply put, nationalism is identification with a country and a belief in the commonality of the values and people of that country. Globalism, on the other hand, is identification with international integration and shared worldviews.
At times, nationalism can manifest in resentment toward other communities or foreign powers and can support policies designed to protect the culture, beliefs, jobs, and economy of its own citizens as opposed to foreigners. Globalism fosters the international exchange of products and ideas and the travel or migration of people across national borders. Globalists generally favor the “best” product, idea, or worker regardless of national origin.
How Has Globalization Benefited Exhibitors?
Over the past few decades, globalization has generally benefited the exhibition industry. Consider six examples to support this conclusion.
- Immigration can drive attendance.
Globalists believe that people should be freer to move around the world in search of a better life for themselves and their families. More often than not, originally disadvantaged people improve their standard of living after migrating to another country. With their improved standard of living comes an ability to increase their spending habits on leisure activities, such as buying movie tickets.
The United States offers a prime example of this phenomenon. Hispanics have constituted the largest source of immigration in recent years, and Hispanics also go to the movies more than anyone else. Between their rates of immigration and their rates of giving birth after they have located in the United States, one-fifth of American households are now of Hispanic origin, and that number will grow to one-third by 2050. Given the fact that Hispanics in the United States go to the movies more than six times a year on average (compared to less than four times a year for other ethnicities), these population trends benefit American exhibition tremendously.
- Immigration can improve the available workforce.
What distinguishes a hard worker from a lazy one generally cannot be associated with being a “native” to any nation’s workforce. Indeed, many scholars have written that the opposite is true. That is, immigrants often demonstrate a willingness to work harder than nationals, because a desire to improve their lives drove them to immigrate in the first place. Exhibitors need many entry-level minimum-wage employees to do basic jobs that do not require a higher education. Simply put, recent immigrants supply a significant percentage of exhibition staff in many countries around the world.
- Free trade agreements make equipment imports more economical.
Nationalists typically promote trade policies that favor local products and services, to protect the jobs and culture of that nation’s citizens. Globalists tend to favor free trade, to promote easier exchange of goods and services across national boundaries. This broad philosophical divide can have real economic consequences for exhibitors. According to an estimate from Pitney Bowes, for example, the average movie-theater-equipment import duty around the world is between 9 and 10 percent. Some countries have no such duties at all, while other countries impose duties up to 100 percent, effectively doubling the price of imported equipment.
Consider the challenges of a new Africa-based exhibitor with whom this writer met recently. That exhibitor (and proud member of NATO) explained that every piece of theater equipment he needs, with the exception of seating, has to be imported because no theater equipment manufacturers operate in Africa. Or consider exhibitors in Brazil, who have confronted for many years a national government that has imposed both import taxation on movie theater equipment and other supplies and local content restrictions. Free trade agreements serve to reduce import duties and local content restrictions.
- Reductions in film and screen quotas can grow attendance.
Over the years many countries have imposed a limit on the number of foreign movies that can be exhibited each year and/or the number of screens that must be dedicated to local film. With a strong caveat about the importance of local content and diverse movie supply (a subject that deserves a column of its own), this author believes that these quotas inhibit growth in ticket sales more than they promote it. Screen quotas have been imposed over the years in countries as diverse as the United Kingdom, France, South Korea, Brazil, Pakistan, Italy, Greece, Spain, and Mexico, to name but a few (many of those quotas have since been repealed, while some have not). A free-market philosophy would suggest that exhibitors might want to program the movies that can sell the most tickets, regardless of where those movies were produced.
As for film importation restrictions, China serves as the classic example. Even though foreign blockbusters can do huge business in China, the government has traditionally limited the number of foreign movies that can be exhibited in a given year. That limit has improved in recent years, but only marginally, from 20 foreign films per year to 34 per year (14 of which must be in 3D or IMAX). The Chinese exhibition market is the fastest growing in the world. It would grow even faster with free trade.
- International agreements can globalize the protection of intellectual property.
According to a recent study from the Carnegie Mellon University, box office revenue in the United States would increase by 16 percent if no movie theft (or “piracy”) occurred. The study also demonstrated that even if movie theft were only delayed by a week or two from initial theatrical release, millions of dollars more would be spent on movie tickets for just one big movie. Yet movies can be stolen anywhere in the world in the modern era of global day-and-date releasing. To reduce the effects of movie theft, laws protecting intellectual property generally, and prohibiting the recording of movies in cinemas specifically, must be enacted. Through international trade agreements driven by countries that produce movies and other intellectual property, those national laws are being required and enacted.
- International expansion in exhibition can drive value and growth.
In the first 75 years or so of the history of exhibition, theater owners operated almost exclusively on a local basis. In the past 35 years, exhibition has become an international business in two ways. First, some companies (e.g., Cinemark, Hoyts, Cinépolis and National Amusements in Latin America; Cinépolis in India; Warner Bros. International Theaters in Asia; Village in Southern Europe and elsewhere; CinemaCity in Eastern Europe; CJ-CGV in Southeast Asia; Ster-Kinekor in Africa; Caribbean Cinemas beyond Puerto Rico throughout the Caribbean) helped to develop under-screened markets by building new cinemas in countries outside their base nation. Second, other companies (Wanda in the United States and Australia; CJ-CGV in Turkey; Cinépolis in Spain; Odeon and Vue throughout Europe; Nordic Cinemas beyond Sweden throughout the Baltics) are now bringing added value to exhibition by acquiring companies in foreign territories and gaining efficiencies and strength through international consolidation. Only free and open market policies can stimulate this kind of international growth in the industry.
For these reasons and more, globalism has been good for the theater business.
How Can we Tell that Nationalism is on the Rise?
The pollsters and the politicians confidently predicted that the United Kingdom would not vote to leave the European Union. The stock markets reflected that confidence. Even Nigel Farage, leader of the nationalist UK Independence Party (UKIP), spoke on election night as if his side would lose and the U.K. would stay in Europe. They were all wrong. The people voted for “Brexit.”
Though voters in London and Scotland voted to stay in Europe, voters in the heartland of England, and in Wales, voted overwhelmingly to leave. Interviews with voters after the fact revealed an undercurrent of strong nationalism and anti-globalism. Ordinary English people voted against free trade and against immigration and against giving authority to people in Brussels with different values and heritage. Perhaps the only silver lining is that young people in Britain overwhelmingly voted to remain in Europe, and young people are very important to the theater business.
Meanwhile, in the United States, Donald Trump has proposed a long list of nationalist policies, from building a wall on the border of Mexico to temporarily banning the immigration of Muslims to abolishing many free trade agreements and more. Despite (or perhaps because of) Trump’s complete lack of experience in government, angry voters across the United States propelled him to the presumptive nomination of the Republican Party. To be sure, Trump is not the only presidential candidate who has moved toward nationalist policies. Democratic runner-up Bernie Sanders aggressively attacked free trade, while Democratic presumptive nominee Hillary Clinton has somewhat abandoned her previous free trade philosophy in response to Sanders.
Nationalist political parties or candidates are growing in strength in many other countries as well.
It is difficult to predict how wide, and how long, this nationalist surge will be. But in the opinion of this writer, it can’t be good for business.