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The Motion Picture Industry: Critical Issues in Practice, Current Research, and New Research Directions
Vol. 25, No. 6, NovemberDecember 2006, pp. 638661
issn 0732-2399 eissn 1526-548X 06 2506 0638
inf
orms
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doi 10.1287/mksc.1050.0177
© 2006 INFORMS
The Motion Picture Industry: Critical
Issues in Practice, Current Research, and
New Research Directions
Jehoshua Eliashberg
The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104,
eliashberg@wharton.upenn.edu
Anita Elberse
Harvard Business School, Harvard University, Boston, Massachusetts 02163, aelberse@hbs.edu
Mark A.A.M. Leenders
The Amsterdam School of Communications Research, University of Amsterdam,
Amsterdam, The Netherlands, m.a.a.m.leenders@uva.nl
T
he motion picture industry has provided a fruitful research domain for scholars in marketing and other
disciplines. The industry has high economic importance and is appealing to researchers because it offers
both rich data that cover the entire product lifecycle for many new products and because it provides many
unsolved puzzles. Although the amount of scholarly research in this area is rapidly growing, its impact on
practice has not been as signicant as in other industries (e.g., consumer packaged goods). In this article, we
discuss critical practical issues for the motion picture industry, review existing knowledge on those issues, and
outline promising research directions. Our review is organized around the three key stages in the value chain
for theatrical motion pictures: production, distribution, and exhibition. Focusing on what we believe are critical
managerial issues, we propose various conjecturesframed either as research challenges or specic research
hypothesesrelated to each stage in the value chain and often involved in understanding consumer movie-
going behavior.
Key words: motion picture industry; entertainment industry; review; research and models
History: This paper was received June 1, 2004, and was with the authors 10 months for 2 revisions; processed
by Steven Shugan.
Introduction
Over the last two decades, the amount of academic
research on issues related to the motion picture indus-
try has risen sharply. There are several possible rea-
sons for this. First, the industry has a high economic
importance in the global economy. The motion pic-
ture industry employs over half a million people in
the United States (U.S. Department of Labor 2004).
Spending only on theatrical tickets was around $9 bil-
lion in the United States (and Canada) and close to
$11 billion outside the United States in 2004; revenues
from ancillary markets (particularly home video, but
also merchandising) are several times higher (Stan-
dard & Poors 2004). Motion pictures are a key driver
of the market for entertainment productscurrently
the number-one export market for the United States.
Second, the industry has high cultural signicance
and attracts quite a bit of attentionmotion pictures
have a disproportional impact on American (and per-
haps world) culture. Unlike any other product, week-
end box ofce statistics are featured in news reports
virtually every week. Third, the availability of rich
data makes the industry particularly appealing from a
research perspective. For example, many new, unique
products are released in a relatively short time. The
cradle-to-grave scope, with data covering the entire
product life cycle, provides ideal conditions for mar-
keting researchers. Fourth, industry practitioners rely
heavily on tradition, conventional wisdom, and sim-
ple rules of thumb, which often have not beenbut
should beclosely examined. Intriguing puzzles still
exist, such as the extent to which traditional contracts
among channel partners or uniform ticket pricing
policies are optimal. Fifth, insights from the motion
picture industry may help to better understand indus-
tries that share certain characteristics as well as to
examine the interface between technology and expe-
rience goods in the digital age (Schmitt 1999, Wolf
1999).
In this paper, we review the rapidly growing body
of research on the motion picture industry for two
main reasons. First and foremost, we believe that a
638 Eliashberg, Elberse, and Leenders: The Motion Picture Industry
Marketing Science 25(6), pp. 638661, © 2006 INFORMS
639
Figure 1
The Value Chain for Motion Pictures
Production
Theatrical
distribution
Exhibition
Ancillary
channels
Ancillary
distribution
Consumption
reassessment of research directions is needed, partic-
ularly when many critical issues for practice remain
unaddressed. Our goal is to share insights into the
motion picture industry to stimulate research that is
relevant to management. Second, we are convinced
that a greater focus on industry-specic research can
benet the marketing discipline; we hope that our
review will exemplify an approach to the develop-
ment of a research agenda, stimulating similar efforts
for other industries.
We focus on the theatrical motion picture industry
and divide the paper into three sectionsproduction,
distribution, and exhibitioncorresponding to the
three key stages in the value chain for theatrical
motion pictures that precede their consumption by
movie-going audiences (see Figure 1).
Different types of entities and individuals partici-
pate in each stage of the value chain. The compet-
itive landscape includes vertically integrated major
studios, independent production companies, indepen-
dent distributors, major national exhibition chains,
and smaller regional exhibitors and art houses. Stu-
dios are often simultaneously engaged in four dis-
tinct functions: nancing, producing, distributing,
and advertising (Squire 2004, Vogel 2001). Here, we
consider the rst two functions together under the
heading Production. It can be dened as the activ-
ities needed to produce one copy (or, in industry
terms, one print) of the movie. The latter two
functions are discussed under the heading Distribu-
tion. In essence, these functions encompass all of the
distributors interactions with its two main groups
of customersexhibitors and audiences. Exhibition
refers to activities performed by theater chains and
individual theater sites.
We recognize that the motion picture industry en-
compasses numerous subsequent revenue windows,
including local and global theatrical, home video,
pay television, network television, syndication, video
games, and merchandising. Although a comprehen-
sive review of nontheatrical windows is beyond the
scope of our study, we venture into these areas to the
extent that they are relevant to the behavior of players
involved in the theatrical arena.
The three sections are structured in a similar way.
We begin each with a description of the general pro-
cess and current status of research. Next, we describe
key practical issues which, in our opinion, are wor-
thy of research. We do not intend our descriptions
of practical issues to be exhaustive; instead, we set
out to highlight what we view as critical issues, for
each stage of the value chain, based on our knowl-
edge of the industry, interactions with industry execu-
tives and observers, and review of trade publications.
We propose various conjecturesinferences based on
inconclusive or incomplete evidenceand research
challenges. We acknowledge that the conjectures are
often speculative. Our aim is to examine the extent
to which critical issues have already been studied
and if so, what key ndings emergeand to what
extent they have not. Our review shows that the range
of methodologies employed in existing research is
already quite broad, and includes regression-based
econometric techniques, discrete-choice models, and
operations research methods. However, our focus is
not on the methodologies employed.
Closely related to our theme, but not reviewed in
this paper because of the availability of other reviews
(e.g., Litman and Ahn 1998), is the literature that
deals with consumers and their movie-going behav-
ior.
1
An understanding of audience behavior is funda-
mental to shedding more light on the challenges faced
by producers, distributors, and exhibitors. Attempts
to understand what drives movie consumption date
back at least as far as 1914, when DeMaday (1929)
asked Swiss school children, Why do you like going
1
The literature in this area has been divided into two research tra-
ditions: the psychological approach and the economic approach. The
psychological approach focuses on individual decisions: to choose
movies from among the vast array of entertainment options and,
more critically, to choose a particular movie (e.g., Litman and Ahn
1998). Researchers adopting this approach aim to relate such vari-
ables as opinions, needs, values, attitudes, moods, and personality
traits to consumers decision-making processes. Such studies gener-
ally use data collected by surveying individual consumers. Exam-
ples are Austin (1986, 1989), Becker et al. (1985), Cuadrado and
Frasquet (1999), DAstous and Touil (1999), De Silva (1998), Eliash-
berg and Sawhney (1994), Moller