The evolution of entertainment consumption and the emergence of cinema, 1890-1940

"At the end of the nineteenth century, in the era of the second industrial revolution, falling working hours, rising disposable income, increasing urbanisation, rapidly expanding transport networks and strong population growth resulted in a sharp rise in the demand for entertainment. Initially, the expenditure was spread across different categories of entertainment, such as live entertainment, sports, music, bowling alleys, skating rinks, etc. One of these categories was cinematographic entertainment, a new service, based on a new technology. Initially it seemed no more than a fad, a novelty shown at fairs, but over time it quickly emerged as the dominant form of popular entertainment. The demand for entertainment that first had found other outlets was increasingly being spent on cinema. This paper argues that the take-off of cinema was largely demand-driven, and that an evolutionary process in consumer spending caused more and more expenditure to be allocated to cinema. It will analyse how consumer habits and practices evolved with the new cinema technology and led to the formation of a new product/service. As methodology the paper will transfer the concepts used by Nelson and Winter (1982) to study mainly firms related to the area of households and consumers. Three strata will specifically be addressed: the development of consumption routines, skills and capabilities; the role of selection, replication, imitation and modification in their evolution; and finally, the role of random events and mutations. It will also be examined what role is played by the concepts of novelty and variety, by consumers’ desire for status and distinction (cf. Bourdieu 1979), and by the way in which consumers discount time, i.e. the tension between instant and delayed gratification (Bowden and Offer 1994). This issue is worthy of examination because a lot has been written on the technology and production aspects of cinema, on the creative-artistic side of film production, and on film consumption when cinema was already established, but little economic research has been done on the role of consumption in the emergence of cinema. Second, cinema is an interesting case in the study of the evolution of consumption, because it was a new product/service, it was largely intangible, and it contained many different product varieties. The paper compares and analyses detailed quantitative data sets on consumer expenditure from the US, Britain and France, as well as more qualitative data on consumer spending and habits. Key insights from the paper are that consumption and its evolution were essential for the evolution and selection of film production and distribution methods, and also that direction of the development of the entertainment industry was not clear from the start, but that for a considerable time it was undecided in what direction the entertainment industry would develop and that this indecision was mainly based on an evolutionary process driving the development of consumer expenditure."