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Revenue-Sharing in Movie Exhibition and the Arrival of Sound

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Author Info

  • F. Andrew

    ()
    (Department of Agricultural Economics and Economics, Montana State University, Bozeman, MT 59717.)

Abstract

During the silent film era, film companies rented the vast majority of their films to exhibitors for flat per-day fees. A technology "shock" in the form of the coming of sound led to the widespread replacement of flat fees by revenue sharing. This article seeks to determine why. It finds that sound technology altered the structure of incentives in movie exhibition, significantly reducing the scope for exhibitor shirking, reducing the cost of dividing attendance revenue ex post (necessary for revenue sharing), and, initially at least, raising the difficulty of negotiating lump-sum rental fees. As a result, percent-of-gross pricing became the norm. These findings allow additional light to be shed on the reasons for share contracts in general--most previous studies have been limited to an examination a cross-section of contracts. Copyright 2002, Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 40 (2002)
Issue (Month): 3 (July)
Pages: 380-402

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Handle: RePEc:oup:ecinqu:v:40:y:2002:i:3:p:380-402

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Cited by:
  1. W. D. Walls, 2009. "The Market for Motion Pictures in Thailand: Rank, Revenue, and Survival at the Box Office," Working Papers 2009-15, Department of Economics, University of Calgary, revised 01 Sep 2009.
  2. W. Walls, 2010. "Superstars and heavy tails in recorded entertainment: empirical analysis of the market for DVDs," Journal of Cultural Economics, Springer, vol. 34(4), pages 261-279, November.
  3. Darlene Chisholm, 2005. "Hollywood Economics: How Extreme Uncertainty Shapes The Film Industry," Journal of Cultural Economics, Springer, vol. 29(3), pages 233-237, August.
  4. Pierre-André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory : A Survey of Some Recent Work," Working Papers 2002-11, Centre de Recherche en Economie et Statistique.
  5. Ch'ng, Kean Siang, 2007. "Evolutionary Concept, Genetic Algorithm and Exhibition Contract in Movie Industry," MPRA Paper 5387, University Library of Munich, Germany, revised 19 Oct 2007.
  6. John Sedgwick & Michael Pokorny, 2010. "Consumers as risk takers: Evidence from the film industry during the 1930s," Business History, Taylor & Francis Journals, vol. 52(1), pages 74-99.
  7. James G. Mulligan & Daniel J. Wedzielewski, 2012. "Government Intervention to Prevent Bankruptcy: the Effect of Blind-Bidding Laws on Movie Theaters," Working Papers 12-03, University of Delaware, Department of Economics.

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