Vertical Integration, Movie Screening, and Theatrical Performance
By Dr. Hailiang CHEN
Department of Information Systems
City University of Hong Kong
In Mainland China, vertical integration between producers/distributors and exhibitors is quite common in the motion picture industry. For instance, a producer or distributor can have a significant equity interest in an exhibitor, and vice versa, or a producer or distributor and an exhibitor are owned by a large parent company. This study examines the effects of vertical integration on exhibitors’ movie screening decisions and theatrical performances. We conduct our empirical analysis on a sample of 100 movies released in the first half of 2016. Daily screening and theatrical performance data such as box office revenue and number of moviegoers are collected for the top 20 theater chains in the market. We find that exhibitors favorably allocate more screens to integrated movies, whose producers or distributors have vertical integration relationships with the exhibitors. However, integrated movies attract less audience and bring in less box office revenues (either daily total or average per screen). This result is surprising because vertical integration is often used to facilitate market foreclosure and gain monopoly power. Our findings imply that the opportunity cost associated with selective screening due to vertical integration may outweigh its benefit.
Hailiang Chen is an associate professor at the Department of Information Systems, College of Business, City University of Hong Kong. He is interested in the research areas of social media, financial technology, multichannel management, business analytics, venture capital, entrepreneurship, mobile commerce, economics of information systems, and design science. His research has been published in elite business journals in information systems, finance, and management, including Information Systems Research (ISR), Management Science (MS), Review of Financial Studies (RFS), and Strategic Management Journal (SMJ). Hailiang Chen received a PhD in Management Information Systems from Purdue University. He also received a master degree in Economics from Purdue University and a bachelor degree in Information Management and Information Systems from Tsinghua University.
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