The international success of Bertolucci's Last Tango in Paris and Fellini's Amarcord may mark the high-water mark of Italian cinema's commercial and artistic success. From the dawn of Italian neorealism to the beginning of the 1970s, Italian cinema was universally regarded as one of the most original and innovative national cinemas, often rivaling Hollywood in its artistic achievements if not always in its commercial success. Subsequently, in 1976 both Bertolucci and Fellini attempted big-budget films, romantic epics more typical of Hollywood productions, the former with 1900 , a historical treatment of the rise of Italian socialism with touches of Gone With the Wind , and Fellini's Casanova . In spite of their undeniable qualities, neither lived up to expectations. Leone attempted the same leap from Italian production norms to Hollywood blockbuster standards with Once Upon a Time in America (1984), challenging the association of American gangsters with Italians by telling the story of Jewish gangsters. Finally, with The Last Emperor (1987),

Giancarlo Giannini and Shirley Stoller in Lina Wertmüller's Pasquelino Settebellezze ( Seven Beauties , 1976).

Bertolucci scored a bulls-eye, winning nine Oscars ® for his epic portrayal of the Emperor of China who eventually becomes a simple citizen and dies during Mao's Cultural Revolution. But the artistic merits of such films could not detract from the air of crisis circulating throughout the industry. Gradually the old lions, the great art film directors, disappeared one by one or simply ceased making interesting films; the economically profitable genre films, such as the peplum, western, or horror film, dried up and became no longer events at the box office but cult collectors' items on video and DVD. International co-productions, such as Last Tango or The Last Emperor , to cite only the most profitable examples by Italian directors, raised the embarrassing question of whether such films ought to be considered really "Italian" or whether they were more accurately to be labeled as Eurofilms.

Talented Italian directors, actors, and technicians did not disappear (indeed, there was a migration of Italian cameramen, makeup artists, special effects people, and set designers to Hollywood during this period). But Italian film theatres began to close: in 1985, almost 5,000 theatres existed; by 1998, that number was reduced to 2,600. Basically, individual great films continued to be produced, but these films were created within an industry that had become increasingly weaker. In the mid-1970s, Italian-produced films controlled approximately 60 percent of its home market, but by 1993, that figure had dropped to 13 percent. During the 1990s, some 140 to 180 Hollywood films circulated in Italy as opposed to around 100 Italian films, but the Hollywood products gained almost 75 percent of the market share. In 1999, the year that witnessed the international success of Life Is Beautiful by Roberto Benigni (b. 1952), only 14 percent of Italian production had any life at the box office at all; many were never distributed or were only screened in ten cities or less. In spite of this depressing situation, Italian films continued to produce some authentic gems in spite of its weak industrial base and the dearth of energetic and skillful producers.

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