Impact of vertical integration on movie scheduling in Korea

Abstract

ABSTRACT This study investigates the impact of vertical integration on movie screening decisions using data from the Korean movie industry (Korea in the text refers to the Republic of Korea, also known as South Korea). Previous studies have found that movie exhibitors (i.e. theaters) that own distributors allocated more screens when they release their affiliated movies. The novelty of this study is that it focuses on the impact of vertical integration on showtime scheduling of integrated players that own both distribution services and theaters. Controlling for seasonality, levels of competition, and expected quality of movies, the study found evidence of the dominating power of integrated players in the market that occupied more screens and put their movies in more favorable time slots. However, this power weakened after the opening week and did not appear by the fourth week. Although the integrated exhibitors are likely to screen their affiliated distributors’ movies more in the opening week, they did not block other distributors’ movies over time. Our study suggests that the integrated theaters’ screening decisions favorable to their own movies are better understood as the result of pursuing incentives rather than as the result of blocking competitors’ movies.