The origin of film festivals can be traced to the rise of film societies and cine-clubs, which sprang up in various countries during the 1920s, often as a reaction to what many regarded as the dominance of the newly powerful Hollywood film industry over the cinemas of less well-endowed nations and over noncommercial movements devoted to such causes as documentary and avant-garde film. Such clubs and societies flourished in countries as different as France, where they fostered the emergence of the historically important impressionist and surrealist cinemas, and Brazil, where they provided the only consistent outlet for domestically produced movies. Although most film clubs and societies were in Western Europe, some were established in Latin America and the United States as well. As such groups grew and spread, they started to arrange international conclaves where their members—many of whom were practicing or aspiring filmmakers—could share ideas and inspirations without regard to national borders. Activities like these were the predecessors and prototypes of film festivals per se.

The first true film festival came into being as a direct result of Italian dictator Benito Mussolini's (1883–1945) enthusiasm for motion pictures as a tool for political public relations and propaganda. Eager to spur the development of state-run Italian cinema in the face of competition from Hollywood and elsewhere, he spent lavishly to build up the native film industry while imposing heavy taxation on the dubbing of foreign-language movies, thus hampering their distribution and exhibition. Among the cultural projects he chose to support through his Ministry of Information was the already existing Venice Biennial Exhibition of Italian Art, which gave birth to the International Exhibition of Cinematographic Art in August 1932 as part of an effort to make the Biennial more varied and multidisciplinary in content. The first cinema program commenced with the premiere of the horror classic Dr. Jekyll and Mr. Hyde (Rouben Mamoulian, 1931) and included twenty-four other entries from seven countries. The declared purpose of the exhibition was to allow "the light of art to shine over the world of commerce," but it soon became clear that power politics were a major subtext of the event. In 1935, its first year as an annually scheduled festival, it marked the ongoing rise of European fascism by instituting official prizes in place of the popularity poll and "participation diploma" of the 1932 program. This paved the way not only for a yearly Best Italian Film award but also for productions of Nazi Germany, an Italian ally at that time, to win the Best Foreign Film laurel four times between 1936 and 1942. The arrangement also allowed Leni Riefenstahl's (1902–2003) two-part Olympia (1938), a paean to Aryan supremacy in the 1936 Olympic Games, to share the highest prize (the Mussolini Cup) in 1938 with an Italian drama about a fascist soldier in the Ethiopian campaign. It seemed hardly coincidental that Mussolini's oldest son, Vittorio, appeared in the credits as "supervisor" of the latter film. American and British members of the festival jury resigned as soon as these awards were made public.

French participants in the festival also walked out, protesting the Mussolini Cup decisions and expressing belated anger over the 1937 veto by festival authorities of a top prize for Jean Renoir's great war drama La grande illusion ( The Grand Illusion , 1937), the much-admired French entry. This proved to be an unofficial first step toward the establishment of a French film festival designed to outdo and overshadow its Italian counterpart, which was now politically and morally tainted in the eyes of much of the cultural world. The cinema authority Robert Favre le Bret and the historian Philippe Erlanger, who was chief of an organization called Action Artistique Français, headed the committee charged with creating such a festival, and pioneering filmmaker Louis Lumière (1864–1948) served as the group's president. Overcoming fears that such a move would provoke Mussolini's anger, the French government declared its willingness to provide necessary funding, and a few months later the Riviera city of Cannes—having staved off competition from sundry French, Belgian, and Swiss cities—started planning a state-of-the-art Palais des Festivals to house the new event.

Other, smaller festivals had sprung up in the wake of Venice's early success, but it was the advent of Cannes that established the film festival as a staple of the modern cultural scene. Formally dubbed the Cannes International Film Festival, it debuted in September 1939, a time of year selected so as to extend the traditional tourist season by a couple of weeks. The program included The Wizard of Oz (1939) and Only Angels Have Wings . Gary Cooper, Mae West, Douglas Fairbanks, Norma Shearer, and Tyrone Power were on the "steamship of stars" dispatched to Cannes by Hollywood's mighty MGM studio. A cardboard model of the Cathedral de Nôtre-Dame was erected on the beach, heralding William Dieterle's (1893–1972) version of The Hunchback of Notre Dame (1939) as the festival's opening-night attraction. In a shocking twist, however, the opening film was the only film to be screened: Germany's invasion of Poland on the same day (1 September) led the festival's leaders to close its doors only hours after they had opened. The doors would not reopen until September 1946. (Ironically, the Venice festival also reopened in 1946 after three years of suspension due to the chaos of World War II.) Despite technical problems—projection glitches interrupted the opening-night screening, and reels of Alfred Hitchcock's (1899–1980) thriller Notorious (1946) were shown out of order—the Cannes program of 1946 was a great success. Still, the 1947 edition was diminished by the absence of such major countries as England and the Soviet Union, and the 1948 program was canceled. Not until 1951 did Cannes become a dependable yearly event, changing its dates to the spring, when more major movies are available. Since then it has reigned as the world's most prestigious and influential film festival, attracting thousands of journalists to its daylong press screenings and armies of industry professionals to both the festival and the Film Market held concurrently in the Palais and theaters scattered throughout the city.

Festivals proliferated at a growing rate in Europe and elsewhere during the 1950s, affirming the ongoing artistic (and commercial) importance of film at a time when global warfare was becoming a memory and world culture was energetically entering the second half of the twentieth century. Politics played a far smaller role in this phase of festival history than when the Venice and Cannes festivals were founded, but political considerations did not entirely vanish from the scene. The large and ambitious Berlin International Film Festival, for example, was established in 1951, presenting itself as a geographical and artistic meeting ground between East and West as the Cold War climbed into high gear. This was not an easy position to assume, given that socialist nations of the Eastern bloc did not participate officially until 1975, although individual films did represent such countries in the program from time to time.

The most important new festival to emerge in the 1960s was the New York Film Festival, founded in 1963 at Lincoln Center, one of the city's leading cultural venues. Modeled to some extent after the London Film Festival, the New York festival took advantage of Lincoln Center's enormous prestige in the artistic community—as home to such various institutions as the Metropolitan Opera and the New York Philharmonic, among others—to underwrite the aesthetic pedigree of the art films, avant-garde works, and documentaries that dominated its programs. Such cinema found an enthusiastic (if limited) audience at a time when sophisticated spectators were unusually receptive to innovative foreign movies (from Europe and Japan especially) presented in their original languages with subtitles. Unlike the heavily programmed festivals at Cannes and Berlin, the New York festival showed a limited quantity of films—about two dozen features and a similar number of shorts, chosen by a five-member selection committee—and it declined to give prizes, asserting that its highly selective nature made every work shown there a "winner."

Two key events in film-festival history took place in the 1970s. The first was the 1976 debut of the Toronto International Film Festival, originally known as the Festival of Festivals, a name that underscored its commitment to importing major attractions from other festivals for Canadian audiences. Its first year was marred by the withdrawal of expected contributions from some Hollywood studios, apparently because its Toronto audience base was considered too parochial. Still, in subsequent years it has grown into one of the most all-embracing festivals in the world, with an annual slate ranging from domestic productions to international art films and (ironically) more Hollywood products than are likely to be found at any comparable event. Canada also hosts two other major festivals, the Montreal World Film Festival and the Vancouver International Film Festival.

The other major development of the 1970s was the founding of the United States Film Festival in Salt Lake City in 1978, devised by the Utah Film Commission as a means of spotlighting the state's assets as a site for film production. After concentrating its energies on retrospectives and discussion-centered events for three years, during which it also sponsored a nationwide competition for new independent films, the event moved to the smaller community of Park City in 1981 and began to seek a higher profile. It was acquired in 1985 by actor Robert Redford (b. 1936) and the four-year-old Sundance Institute, which Redford had established to foster the growth of "indie" filmmaking outside the Hollywood system. Renamed the Sundance Film Festival in 1989, it has become an eagerly covered media event as well as a wide-ranging showcase for both independent and international productions.

Alongside the attention-getting world-class festivals, over a thousand more modest events have cropped up. Some have tried to establish uniqueness by using a word other than "festival" in their names, such as the French-American Film Workshop held in New York and Avignon, France, and the Lake Placid Film Forum in upstate New York, which emphasizes relationships between cinema and the written word. Major festivals also exist outside the United States and Europe, such as the Ouagadougou Festival in the African nation of Burkina Faso and the Shanghai and Tokyo festivals in Asia.

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