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Revenue-Sharing in Movie Exhibition and the Arrival of Sound

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  • 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.

Suggested Citation

  • F. Andrew, 2002. "Revenue-Sharing in Movie Exhibition and the Arrival of Sound," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 380-402, July.
    • Handle: RePEc:oup:ecinqu:v:40:y:2002:i:3:p:380-402
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    Citations

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    Cited by:

    1. 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.
    2. Darlene Chisholm, 2005. "Hollywood Economics: How Extreme Uncertainty Shapes The Film Industry," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 29(3), pages 233-237, August.
    3. John Sedgwick & Michael Pokorny, 2005. "The film business in the United States and Britain during the 1930s," Economic History Review, Economic History Society, vol. 58(1), pages 79-112, February.
    4. Retsef Levi & Georgia Perakis & Cong Shi & Wei Sun, 2020. "Strategic Capacity Planning Problems in Revenue‐Sharing Joint Ventures," Production and Operations Management, Production and Operations Management Society, vol. 29(3), pages 664-687, March.
    5. Fleck, Robert K. & Hanssen, F. Andrew, 2016. "Persistence and change in age-specific gender gaps: Hollywood actors from the silent era onward," International Review of Law and Economics, Elsevier, vol. 48(C), pages 36-49.
    6. Jang, Moonkyoung & Baek, Hyunmi & Kim, Seongcheol, 2021. "Movie characteristics as determinants of download-to-own performance in the Korean video-on-demand market," Telecommunications Policy, Elsevier, vol. 45(7).
    7. W. D. Walls, 2009. "The Market for Motion Pictures in Thailand: Rank, Revenue, and Survival at the Box Office," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 8(2), pages 115-131, August.
    8. 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.
    9. W. Walls, 2010. "Superstars and heavy tails in recorded entertainment: empirical analysis of the market for DVDs," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 34(4), pages 261-279, November.
    10. Joonhyuk Yang & Eric T. Anderson & Brett R. Gordon, 2021. "Digitization and Flexibility: Evidence from the South Korean Movie Market," Marketing Science, INFORMS, vol. 40(5), pages 821-843, September.
    11. Gerben Bakker, 2005. "The decline and fall of the European film industry: sunk costs, market size, and market structure, 1890–1927," Economic History Review, Economic History Society, vol. 58(2), pages 310-351, May.
    12. Pierre-André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory : A Survey of Some Recent Work," Working Papers 2002-11, Center for Research in Economics and Statistics.
    13. 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.
    14. Wen-jhan Jane & Wei-peng Chen & Yuan-lin Hsu, 2015. "The impact of deregulation on the movie box office after Taiwan’s entry into the WTO: the difference-in-differences estimation," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 289-308, December.
    15. Daniel Barron & Robert Gibbons & Ricard Gil & Kevin J.Murphy, 2020. "Relational Adaptation Under Reel Authority," Management Science, INFORMS, vol. 66(5), pages 1868-1889, May.
    16. Galina A. Orlova & Kristina A. Tanis & Marina N. Balakhonskaya & Anastasiia A. Balykova & Alexander A. Berlov & Alina A. Zaripova & Maxim Yu. Lukin, 2022. "How To Turn Towards Soviet Temporality? Setting The Analytical Optics," HSE Working papers WP BRP 211HUM/2022, National Research University Higher School of Economics.
    17. Benjamin Bridgman, 2017. "Market Entry Mode: Evidence From The Golden Age Of Hollywood," Economic Inquiry, Western Economic Association International, vol. 55(2), pages 778-793, April.

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