The risk and return trade-off in the film industry : a comparative empirical analysis

Despite its proved riskiness, the film industry is one of the most economically relevant industries in the world, constantly undergoing rapid change and development, since every day millions of dollars, pounds, euros or other currencies are invested in film productions. Although restricted to the theatrical release sector of the market, this thesis aims to explain why this industry attracts so many investors, and in doing this to add to the body of knowledge and understanding of the manner in which the industry works. At its core is the analysis of the trade-off between risk and return that characterises the industry. The work, hence, is based not on models and predictions of the expected returns, profits or losses of film investments, but rather on the assessment of indicators that can depict the scale or degree of dispersion of these expected values - that is, the risk that the companies are willing to entertain. The work makes an in-depth comparative analysis of the investment risk and return trade-off by empirically investigating the different behaviour of the film industry in the United States and in Europe, drawing in detail upon the Italian film industry to represent the European context. In this perspective, the work also aims to analyse why state support is justified in Europe and not in the US, and the financial effectiveness of Italian state support to film industry, by identifying to what extent it contributes to improving cultural identity. The investigation extends significantly current knowledge, showing that the financial effectiveness of the US film industry is incomparably superior to that of the Italian film industry, and that public policy in Italy towards the current system of film subsidisation is inequitable and inefficient. The work also introduces a new dataset into the literature, the Italian dataset constructed by the author