CZECH ACADEMIC CITY - ERBIL

The Impact of Hollywood

on the Economy of United
Sates
In partial fulfillment of acceptance to Thomas
Bata University in Zlin

Presented to Faculty of Management and Economics

Ahmed Hassan Omer

ID Number: B02031834

January 7th, 2020

 In the following report we are going to discuss how Hollywood has affected and inflated
the US economy in the past, and how it still continues to do so to this day. This is due to the fact
that Hollywood is the most famous entertainment industry in the world, as well one of the
biggest culture dispersers of the United Stated of America. Hollywood is the reason of the
existence of the many “Americanized” Cultures in the world. Hollywood makes billions of
dollars year in year out, which makes it a rather large contributor to the GDP of the US.

According to Paul Whitington from the Indepemdent.com, it was Hollywood that saved
the US economy after the great depression and crash of wall street, as not only did Hollywood
get the economy of the US better, it did in a manner that got the people’ morale up, especially in
the era after 1929. This period of Hollywood, is known as the golden age of Hollywood. In the
period after the great depression, many people were turning to suicide as medicine for their
depression due to their financial situations, but comedy movies and speaking movies got them
the laughs they lacked at the time. More and more people went to the movies by the month, and
so more and more money was coming into the markets.

Hollywood provides for the people as well. It is true that it is the populations that make
Hollywood profit and Hollywood in part provide 2.6 million jobs in the US alone. The wages
Hollywood pays is almost twice as the national median wage, which is about $68,000 compared
to the national wage of $31,000. Hollywood and the Motion Picture Association of America
(MPAA) also support 93,000 small firms across the United States. This means that up to %87 of
the companies Hollywood works with are small businesses. This in part contributes to boosting
the local economies of many states out of the 50.

One can go on and on about how much GDP, or jobs, or even wage contributions
Hollywood makes to the US economy, but in fact it very difficult to analyze how that profit is
made. Long ago a budget of $15 million was considered ginormous for a movie, is what now
considered to be a low budget film in Hollywood as the value of money is very lower. A movie
ticket in the 1930s and 1940s was just a nickel, 5 cents, and now price for a movie ticket is $9.26
on average. Although ticket sales do contribute revenue, but they are not exactly the only money
makers; some movies make money largely from merchandise sales. The most notable example of
this is the Star Wars: The Force Awakens, this movie made revenue of about $2 billion in ticket
sales alone, it made more than double that amount from retail sales which is more than $5 billion
dollars.

Profits from films and TV series has varied very much over the last few years, as
nowadays DVD and Blu-rays are not exactly demanded in the market. Phrases like “let’s rent a
DVD” are almost obsolete and has turned into “Netflix and chill”. As VODs (Video-on-demand)
are way more convenience, and in the long run could be cheaper. Netflix for example, can be
accessed for an annual fee of $12.99, while the average price for a DVD movie is about $15 and
above, a full TV series package can go above $100. Netflix, on the other hand, has hundreds of
movies and TV series. One can save up to 100s of dollars per year, from not buying DVD
movies and movie tickets.

Getting back to the impact Hollywood on the GDP of the United States, it is reported that
in 2011 Hollywood contributed of figures about $504 billion, which is around %3.2 of the total
US GDP. This figure was expected to grow even further at the time, due to the increasing
demand of American movies and entertainment around the world. Some reports from then stated
that up to %50 of the Chinese population are paying US based businesses, henceforth generating
more income into the States. The predictions that these figures were on the rise were true as well,
in 2014 Hollywood and the arts and culture department was at a massive $730 billion, with a
%4.8 of the total GDP. It is safe to say that this will only grow from here on, since nowadays
there is ease of access to cinemas and theatres almost all over the world.

Going back to the basics of marketing, Hollywood, the people behind it to be specific,
use the 4 main Ps of marketing (Product, Price, Place, and Promotion). Hollywood’s main focus
is on a service rather than a product. They entertain people; give them some time away from their
reality. Their prices are rather reasonable; almost anyone can go and watch a movie. It is not
some luxury with very high prices that only people from the higher classes can enjoy. As for
place, they are almost everywhere, although physically, Hollywood is in Los Angeles California,
their services are all over the world. Where can we go that do not have a cinema? Rarely so we
see places without the influences of Hollywood whether it be a movie, a play or could even be a
toy. As for promotions, it is one of the most important focus points of Hollywood. They use
billboards, cinematography companies, TV advertisements, social media etc. to promote a new
movie or series. Sometimes they even play these advertisements before a movie starts at the
cinema.

Hollywood has a rather large range of products, whether it be dolls or toys, to posters of a
movie, all the way to DVDs and the actual movie itself. Another product of Hollywood is a
character based video game, Batman for example, has over 8 video games recreated based on the
character. The way Hollywood created movies from comics has also created a bigger value on
the comics as well. Marvel, a once comic producing company, has its own studios now. Marvel
is one of the largest comic companies that have highly benefited from the fact that the film
industry produces comic based movies. Marvel made a massive $2.77 billion from the movie
“Avengers: Endgame” alone. Six of the actors who played 6 different avengers made a huge
$340 million from this movie. Not a single other film industry has even come close to those
figures.

As for the prices, Hollywood has a strategy of making a larger number of sales instead of
trying to make a huge number of profits from a single customer. To begin with, they use a price
creaming strategy, as in, they start with a high price on the opening days of the launch of a new
movie, and they reduce it a bit a time, until they reach a specific price. If the movie still has
viewers they keep it in cinemas for longer periods of time. Another way Hollywood controls
prices on products is through toy licensing, this all started back in 1977 with the Star Wars film
series. One company who benefited highly from this is Disney. Revenues that reach up to
billions of dollars were brought in by Disney’s Toy Story characters in toy sales. Another way
Hollywood controls prices is the sales of movie licenses to foreign countries. this forces cinema
owners of those foreign countries to first, keep ticket prices at a usually higher price than that of
the US, and second, this promotes of running the movie for as long as possible.

One fun fact about the place of Hollywood is that it is true this indeed is a place in the
US; Hollywood does not have a specific place. Hollywood and along all its products and services
are seen on a global level. They target the world as a target market. Let’s say that a horror movie
is in production, and only %20 of population like horror movies, Hollywood would try and reach
that %20 of every country. This leads to the next point, promotions. Hollywood uses all sorts of
promotion methods. Whether it be TV or social media, with the release of any new movie they
try to reach the largest amount of people all over the world. A really smart thing Hollywood
does, like for example with Empire Cinemas Erbil, they sell them the movie license and in turn
the Cinema feels like they need to promote the movie as well since they want to make a profit as
well. This is another one of Hollywood’s promotion tricks, this way they sell the movie, and are
not forced to spend any more on promoting that movie in that area where the cinema is.
Although the larger number of profits for cinema owners comes from the sales of the
confectionaries and foods. Most cinemas do not allow the customers to bring their own food into
the cinema, forcing them to buy from the theatres. The prices of these foods are almost 2-3 times
higher than normal, thus making twice the amount of profits.

Extending on the main Ps of marketing, there are still 3 more: People, Processes, and
Physical Evidence. Hollywood tends to use the best people on high budget films so that it does
not become a “bad investment”. To articulate of “using the right people”, they use large name
actors and producers; the higher the budget, the bigger the name. For example, whenever the
now world renowned Leonardo DiCaprio is starring in a new movie, there are large expectations,
hence a larger audience willing to go see what he is starring in. Furthermore, Quentin Tarantino,
whenever he is producing a new film action and blockbuster fans will probably go see the movie,
as there is usually violence is included in his movies.

Another P, Processes, is to make sure the customer gets the value of what he or she has
paid for. This makes sure everything goes right, efficiently and effectively. When it comes to
Hollywood, the main focus point is to release the movie at the official release date, and the story
is actually interpreted in the film. Not interpreting the actual story is usually troublesome in
biographical and historical movies, as well as famous stories where most of the potential
customers have already read the stories. This P also makes sure that there are no mistakes in the
movie, like the Starbucks takeaway coffee cup on Game of Thrones which was trending on
Twitter for two weeks, and millions of memes were made about it.

Regarding Physical Evidence of Hollywood, first we have the movie tickets, second the
movie posters and third the Hollywood stars and fourth, character based toys. All these are parts
of physical evidence of Hollywood. Although none of these are exactly what Hollywood movies
really are, but movies are a memory whether a good or bad memory, does not matter but movies
still don’t have much physical evidence.
 Anyhow, all these processes and steps of Hollywood only contribute to the US economy
even if it’s only in taxes. Earlier we stated how Hollywood sells movie licenses to the cinemas in
foreign countries, well if you look at it in a different perspective; they are taking money from a
foreign country and taking back to the US. Another way Hollywood impacts the US economy is
how it Americanizes other cultures and indirectly leading those people to buy from American
brands. There are very clear examples of this from Dwayne Johnson; one of the most
commercially successful actors in the world continuously promotes Under Armour on his
Instagram. We can also notice how the movie “Need for Speed” promotes and speaks highly of
the Ford Mustang. Another movie that promotes the Ford automotive company is the newly
released movie “Ford vs Ferrari” or in some place “Le Mans 66”. Such movies have indirect
effect on people, me included. I only got my first pair of Converse All-stars after I watched the
movie “I, Robot” and saw how highly the main protagonist, played by Will Smith, spoke of
them.

Hollywood also has an effect on the American music industry. There are many songs
made famous by the movies. Footloose by Kenny Loggins is a perfect example of this, as this
song is iconic and was the most famous hit of 1984 with the release of the film “Footloose”.
Another example of a song made largely iconized by a movie is Whitney Houston’s “I will
always love you” from the movie “Bodyguard”. The point here is, the more famous the artist the
higher the album sales, especially in modern day since everyone can access the music online and
simply pay through a click of a button. This revenue and cash generation is highly beneficial for
the US government since more taxes are being collected and more jobs are created.

Another point to be further specified is the retail products from Hollywood. It is not only
toys that are retailed, clothing, perfumes, and even posters and pictures are retailed. A Star Wars
costume, or a Star Trek shirt, or even the Marvel hoodies and baseball caps that were very trendy
amongst the youngsters after the release of Marvel’s Endgame could also be considered retail
products. It is fair to say that Hollywood can impact almost any factor of the US economy. It is
also Hollywood that promotes living lavish and owning luxurious items or living luxurious
items, which in turn can be provided by some American companies like Tommy Hilfiger, or
Ford or Dodge.
 Some of the sports themed movies also promote American sports. This in turn motivates
people from all around the world to practice that sport, whether it is baseball, or basketball, or
even American football. Of course when they practice these sports they will need equipment,
basketballs, footballs, and bats and so on. This equipment again can be provided by American
companies, the most famous basketball maker is Wilson, American, and most famous basketball
shoe makers are Nike, again an American brand. Some of the impacts made by Hollywood
crosses the people’s minds since they are not direct and statistical as how much it contributes to
the total GDP or how many jobs it provide; in reality all these are the side product of Hollywood.

In addition to the promotion of American products and culture, Hollywood promotes the
country as well. In some films it shows the beauty of the country. Miami Beach is one of the
famous scenes that appears in many movies. Many places of Texas have also been promoted
highly in cowboy movies and westerns. Hollywood tries to introduce people to historical US
landmarks and places to visit, the movie Twilight led to 100s and thousands of people visit the
town of Forks. The movie Lord of the Rings led to a noticeably high increase in number of
tourists to New Zealand where the movie was filmed. The TV series Grand Canyon also led to a
larger number of people visiting the canyon more frequently.

One more business sector that Hollywood affects is the hospitality and service sectors.
Certain movies like the Hangover part 3 have made Caesar’s Palace in Las Vegas an iconic
place, Vegas in general seems to be the target of many films, the movie Wildcard focuses on the
Golden Nugget. Of course when it comes to Vegas the list of movie go on and on. Anyhow
Hollywood also affects the restaurant business of the states as there are dozens of movie themed
restaurant across the Unites States. The Café Jack restaurant is a restaurant that has taken its
theme from the movie Titanic; there is also the Bubba Gump shrimp, which has the Forrest
Gump theme.

Hollywood makes the hospitality and service industry more challenging, as it exerts a
psychological cue that hotels have to be more entertaining. In movies, most of the time the hotels
have this vibe around them that indicates an interesting mood for the guests to expect when they
go. In most of the Vegas movies though, have a focus on gambling, it is almost like the movies
are promoting it. In certain movies, like 21 and Wildcard were the protagonist win millions of
dollars through gambling and this might in turn encourage more people to gamble. On the other
hand, many times Hollywood indicates that the gambling machines in Las Vegas have been
tampered with and it is almost impossible to win certain games. Anyhow, Hollywood themed
restaurants and Hollywood quality (the quality shown in most movies) have become almost an
expectation from restaurants, which can be good for the people and the restaurants. The people
enjoy a good service provided for them. The restaurants finally get that quality that customers
look for and perhaps will continuously come back for. It sort of builds a loyal customer base,
especially with a movie themed restaurant.

To sum this up, Hollywood has affects and continually affects the US economy both
directly and indirectly. Whether you count the direct sales of movie tickets, or movie retail sales,
promotion of American brands, or even the promotion of the country itself, we can conclude that
it has contributed rather well. Part of the contribution can be put into numbers and graphs, or are
rather quantitative, like contribution to GDP or how many jobs it provides, we cannot overlook
the fact that it also indirectly promotes American based concepts. Las Vegas is another iconic
movie place having appeared in over 50 world famous movies is another supportive example of
the idea. Whether this indirect contribution is on purpose or not, it works quite well. We can also
take into consideration how the movie Like Mike promotes Air Jordans, another American
brand. As long as Hollywood is there, so are Americanized cultures and brands, as well as
tourists to the country,
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