Revenue Sharing Distortions and Vertical Integration in the Movie Industry

Posted: 22 Sep 2009

See all articles by Ricard Gil

Ricard Gil

Queen's University (Canada) - Smith School of Business; Johns Hopkins University - Carey Business School

Date Written: October 2009

Abstract

I analyze how variation in firm boundaries affect economic outcomes in the movie industry. Specifically, I focus on movie distributors and their contracts with exhibitors to show their movies on their screens. I argue that vertical integration solves the distortion on movie run length created by the revenue sharing contracts used in the industry. Since I observe the same movie showing in the same period under different organizational forms in the Spanish market, I use a difference on different approach to exploit this variation and study differences in outcomes across organizational forms. I show that integrated theaters run their own movies longer than other movies, and longer than nonintegrated theaters do. This effect is stronger for movies of more uncertain demand due to higher contractual complexity. I also find that integrated distributors specialize in the movies of higher demand uncertainty. (JEL L14, L22, L82)

Suggested Citation

Gil, Ricard, Revenue Sharing Distortions and Vertical Integration in the Movie Industry (October 2009). The Journal of Law, Economics, & Organization, Vol. 25, Issue 2, pp. 579-610, 2009. Available at SSRN: https://ssrn.com/abstract=1476647 or http://dx.doi.org/10.1093/jleo/ewn004

Ricard Gil (Contact Author)

Queen's University (Canada) - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu

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