How Demand Sophistication (De‐)limits Economic Upgrading: Comparing the Film Industries of South Africa and Nigeria (Nollywood)

Abstract

More sophisticated demand is typically seen as an enabler of economic upgrading. This study questions this linearity and extends demand theory through a case analysis of the film industry in two developing countries. When unsophisticated local demand results in well-matched supply-and demand-side elements, benefits do accrue. Low exposure to technically superior products in Nigeria allowed a fully fledged film value chain to develop, as consumers were willing to support lower quality output. Although the industry is too weak to seriously threaten incumbents from the developed world on the global stage, it has substantial impact in its home country. In contrast, if demand is far more sophisticated than supply, local industry will struggle to respond to broad-based demand signals and will achieve accelerated learning only in niche areas. South Africa has become a niche producer in the global film industry rather than film producer in its own right partly because the widespread demand for Hollywood-quality products could not be met by local supply capabilities.

Transformation, job creation and subsidies to creative industries: the case of South Africa’s film and television sector

“…2012). As argued by Barnard and Tuomi (2008), the process of learning-by-doing that characterized the film industry in Nigeria, where there was very limited foreign contact, is likely to lead to a much more incremental, broad-based upgrading of skills and capabilities across the value chain. Exposure to international competition and foreign producers in South Africa has led to the rapid development of narrowly focused niche areas to a very high level, but also to the 'increasing fragmentation of the supply chain' (Barnard and Tuomi 2008, p. 662).…”

“…However, as a percentage of FTEs by production type, South African productions generate a greater percentage of high-order jobs: 8% creatives (as compared to 1.3% in foreign productions), and 6% SPVs (as compared to less than 1% in foreign productions). This, together with the larger percentage of black South Africans employed in SA productions, suggests that these smaller productions are still important in fulfilling the transformation and skills development objectives of the DTI, as well as the development of a broader-based local film production capacity (Barnard and Tuomi 2008). On average, subsidized film and television projects employ about 5700 people in direct, FTE jobs per year.…”

“…Of the 47 South African films released between 2000 and 2007, most did not earn enough at the local box office to recoup even 50% of their production costs, but the minority that are released internationally did considerably better (NFVF 2008). Barnard and Tuomi (2008) pose the question of why the Nigerian film industry (Nollywood) has been so much more successful in producing and selling films to Nigerian audiences than the far more technologically advanced local film industry in South Africa. Barnard and Tuomi (2008) argue that South African audiences have been exposed for longer to more sophisticated and technically advanced international films, especially from Hollywood.…”

“…Barnard and Tuomi (2008) pose the question of why the Nigerian film industry (Nollywood) has been so much more successful in producing and selling films to Nigerian audiences than the far more technologically advanced local film industry in South Africa. Barnard and Tuomi (2008) argue that South African audiences have been exposed for longer to more sophisticated and technically advanced international films, especially from Hollywood. There is thus a gap between the sophistication of audience taste, and the (mostly) much less well-developed supply side capabilities of the South African film industry.…”

“…The film and television sector can and does provide jobs and skill development in South Africa, building on a cluster of creative industries in the private and public sector centred on the city of Cape Town (Barnard and Tuomi 2008), which on a range of criteria (see Evans 2009) would seem to warrant the appellation of South Africa's main creative city. In addition, a report commissioned by the Department of Labour on the creative industries (Creative Industries Report 2008) found that the economic activity generated by the film and television industry in the Western Cape was R2.5b in 2003/2004 as compared to only R1.3b generated by the sector in Gauteng.…”