Quality vs. variety: Trading larger screens for more shows in the era of digital cinema

Abstract

Movie exhibitors currently face two forces vying for the limited footprint of their properties. Recent advances have enabled exhibitors to satisfy consumers' long-standing desire for increasingly larger screens. On the other hand, digital tech- nology has reduced the cost of playing the same movie on multiple screens, thereby creating an incentive for screen proliferation to increase the number of show times for a given movie. Increasing the screens also has the added benefit of allowing the exhibitor to expand the number of unique movies screened at a given time. This is fundamentally a tradeoff between quality (larger screen size) and variety (more movies or showings). The goal of this paper is to evaluate consumers' relative valu- ations of the large screens vs. more shows tradeoff. We use a new data set on movie showings in India at the movie-chain-market-week level to estimate an aggregate discrete-choice demand model providing measures of customer preferences for the number of movie showings and screen size. India provides a valuable setting to study this question because the densely populated cities face substantial space constraints and regional heterogeneity in tastes and languages suggest the option of more shows may be more important in some cities than others. Our findings suggest that regions which are more urban and have a greater share of people with higher education prefer larger screens (quality) while most other regions prefer more showings (variety).