The Effects of Vertical Integration on the Release of New Films

Claudio Agostini and Eduardo Saavedra

ILADES-UAH Working Papers from Universidad Alberto Hurtado/School of Economics and Business

Abstract: This paper both theoretically and empirically addresses how a vertical structure in the motion-pictures industry determines the number of prints a distributor releases of a new film. A simple theoretical model shows that the optimal number of copies is increasing on the expected demand for the film and the revenue share of the distributor, and decreasing on the cost of each copy. The model also predicts that the optimal number of copies will decrease with the number of theaters that are vertically integrated with the distributor, as long as running a cinema requires financing a non-negligible cost of capital. The theoretical results are empirically tested using a very rich dataset of films exhibition patterns in the major Chilean markets. The empirical results show that, on average, a non-integrated distributor releases 8 more copies than an integrated distributor.

Keywords: Motion-Pictures; Vertical Integration; Release of New Films (search for similar items in EconPapers)
JEL-codes: C25 L22 L82 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2009-06
New Economics Papers: this item is included in nep-com
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Related works:
Journal Article: The Effects of Vertical Integration on the Release of New Films (2011)
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