The Economic Impact of the UK Film Industry - BFI - British Film ...

Economic Contribution of the UK Film Industry
July 2007
Education has developed a range of publications and services to supply educational material on film. This
in turn helps young people develop a broader cultural appreciation for art and society, which may have
further positive spin-offs through the encouragement of good citizenship.
These so-called ‘externalities’ that arise from the characteristics of indigenous film imply that the overall
social value of UK film may well exceed the price that consumers pay to see it at the cinema. They also
mean that there is a risk that the film industry, which is dominated by US majors, will not produce as many
UK films as would be socially desirable. That is a key justification for the Film Tax Relief in the UK.
8.2. A monetary estimate of the cultural value of UK film
To see a film at the cinema, an individual has to purchase a ticket. By doing so, the person signals he or
she expects to get benefits from viewing the film that are at least as great as the admission price. A
movie’s box office revenue is therefore a guide to the monetary value of the total benefits the film delivers
to the audience. It is a ‘guide’ as the prospective audience will not have a true view of the satisfaction
they derive from seeing the film until after they have seen it. But advertising, trailers and reviews should
help inform the prospective audience about the film’s contents.
One approach to assessing the value people place on UK film is therefore to look at box office data to see
if there is evidence that UK films attract higher revenues simply for being indigenous. The UK Film
Council maintains detailed databases that allow for a comparison of the effects of country of origin on box
office revenues (see Box 8-1 for more details).
We focus here on the subset of films released in both the UK and US between 2000 and 2006. We begin
our analysis of UK film-goers’ valuation of UK films by looking at how large each film’s UK box office
receipts are as a share of its US box office earnings. Table 8-1 shows various points in the distribution of
all films’ UK box office receipts as a share of their US earnings.
We might generally expect each film’s UK box office receipts to be a small fraction of what it earns in the
US. And this is what the data in Table 8-1 show - the typical film earns in the UK just 15% of its US box
office receipts. This is partly because the potential audience in the US is substantially larger than in the
UK: there are over 300 million people in US compared to just over 60 million people in the UK. But
Americans also typically go the cinema more frequently than British people (5 times a year as opposed to
less than 3 times a year).
Table 8-1 also shows how rare it is for a film to earn more box office revenue in the UK than in the US. In
only 10% of cases 32 (the 90 th percentile in Column 1) does a film earn more this side of the Atlantic.
But Table 8-1 also shows that the probability of a film earning more in the UK than the US changes
markedly once the country of origin of the film is taken into consideration. For foreign films, the probability
is very small: in only 5% of cases has a foreign film earned more box office revenue in the UK than in the
32 The cells shaded grey indicate where films earn more at the UK box office than the US box office.
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