The Perfect Storm: Using Snowstorms to Analyze the Effect of Theatrical Attendance on the Demand for Subsequently Released DVDs

57 Pages Posted: 4 Aug 2015

See all articles by Patrick Choi

Patrick Choi

Bocconi University - Department of Marketing

Peter Boatwright

Carnegie Mellon University - David A. Tepper School of Business

Michael D. Smith

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Date Written: June 2015

Abstract

Movies are distributed through multiple, carefully segmented, channels. This paper investigates how consumption in a movie’s theatrical channel affects demand in the subsequent DVD retail channel. We exploit exogenous variation in events that affect theatrical attendance in a geographic market to estimate the causal impact of theater attendance on home entertainment demand. Specifically, we use the occurrence of major snowstorms surrounding a movie’s theatrical opening weekend as an exogenous shock to theatrical demand in a local market.

Using this instrumental variable (IV) approach, we find evidence that theatrical attendance causally impacts home entertainment demand: lower theatrical attendance in a geographical market that experiences an opening weekend snowstorm leads to lower DVD/Blu-ray sales in the movie’s subsequent home entertainment release window in that geographical market. Specifically, we estimate a 10 percent rise (drop) in theatrical attendance causes an approximate 8 percent increase (decrease) in the volume of DVDs/Blu-ray discs sold in the first eight weeks of the DVD release window. This result provides important managerial guidance in an industry undergoing significant changes in the how movies are marketed across theatrical and home entertainment channels.

Keywords: Movie sales, DVD sales, snowstorms, empirical analysis

JEL Classification: L11, L82, M2, M3

Suggested Citation

Choi, Patrick and Boatwright, Peter and Smith, Michael D., The Perfect Storm: Using Snowstorms to Analyze the Effect of Theatrical Attendance on the Demand for Subsequently Released DVDs (June 2015). Available at SSRN: https://ssrn.com/abstract=2639303 or http://dx.doi.org/10.2139/ssrn.2639303

Patrick Choi

Bocconi University - Department of Marketing ( email )

Via Roentgen, 1 (4th floor)
Milan, 20136
Italy

Peter Boatwright

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Michael D. Smith (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

HOME PAGE: http://www.heinz.cmu.edu/~mds

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