Does Vertical Integration of Distributors and Theaters Ensure Movie Success?: Evidence from the Korean Film Industry

초록

This study examines the relationship between vertical integration within the film industry and individual film success. Within the movie industry, the integration of distribution companies with their own theaters is deemed to be effective due to the reduction in transaction costs. However, an analysis of data on Korea’s film industry from 2001 to 2010 reveals that the market share growth of non-integrated distributors is positively associated with film success but the growth of integrated distributors is not significantly associated with film performance. To add to this, an increased screen number of market share of integrated firms was revealed to be negatively associated with film outcomes. In Korea, the integration of distributors and multiplexes by major companies has been criticized for being unfair as it gives companies’ own films more advantages regarding the number of screens they are played on, duration of release, and marketing. However, findings from this study reveals that a market share increase of integrated movie companies can lead to investment decisions based on unvarying selections, limiting rational decisions of theaters and cast a negative impact to their own film’s success. Thus, vertical integration in the movie industry should be reassessed not only from the perspective of fairness but from the perspective of efficiency and policy making as well.

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