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.