Theatre allocation as a distributor’s strategic variable over movie runs

Abstract

The main objective of this paper was to examine the relationship between the type of distributor and its influence on the theatre allocation process. In doing so, we study the differences in the theatre elasticity of box-office revenues between distributors, once the other determinants of movie box-office revenues and unobserved film characteristics have been controlled for. The empirical exercise involves estimating a panel for the weekly box-office revenue in the US motion picture market during the 2002-2009 period. Given the dynamic nature of our data and the endogeneity problems that some of the independent variables may present due to the presence of unobserved individual effects of movies, we use the Hausman-Taylor estimator. Regarding theatre allocation, we find evidence of similar, but not homogeneous, behaviour among the so-called Majors, which, in turn, differs from that observed for non-Majors regarding theatre allocation to films. These differences are greater when we consider a selection of more successful movies that are exhibited for a longer run, maybe due to the rise in the amount of uncertainty for this sample. Our results provide indirect evidence of the differences in the market power of distributors.

Economics of motion pictures: the state of the art

“…The Prieto- Rodríguez et al (2015) paper in this issue analyzes the way in which the allocation of theater screens to films differs between major and non-major movie distributors and the implications this has on the market power of the different types of distributors. The allocation of screens to films is palpably important:…”

The economics of movies (revisited): A survey of recent literature

“…Once a film has been produced, it is ready to be marketed and distributed to cinemas. This involves a series of decisions including selection of an appropriate title (Bae & Kim, 2019), choice of distributor (Zhang et al., 2019), target audience (Beckwith, 2009), release date (Belleflamme & Paolini, 2019; Calantone et al., 2010; Cartier & Liarte, 2012; Einav, 2010; Gutierrez‐Navratil et al., 2014; Ma et al., 2018; Yang & Kim, 2014; Zhang et al., 2017), as well as the type and scale of release (Agostini & Saavedra, 2011; Chen et al., 2013; Prieto‐Rodriguez et al., 2015). Studios often move release dates of films, which has been shown to impact the studio's parent company's share price (Einav & Ravid, 2009).…”

Prevision model and empirical test of box office results for sequels

“…The associated budget is also defined by the producer according to the expected performance of the film and its anticipated profits (Dhar et al, 2012). The producer entrusts the distributor with a mandate to define the marketing actions associated with the release strategy (Prieto-Rodriguez et al, 2015). In order to maximize revenues, the distributor determines the optimal combination of resourcessuch as advertising expenditures and distribution intensity through number of screens -by estimating the movie's potential audience.…”