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Economic effects of vertical disintegration: the American motion picture industry, 1945 to 1955

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  • Silver, Gregory Mead

Abstract

In 1948, the United States Supreme Court declared the operations of eight of the nation’s largest motion picture studios in violation of the 1890 Sherman Antitrust Act. The decision ordered them to disintegrate their producer-distributor roles from cinemas. The Court believed this would promote competitive practices in a hitherto uncompetitive industry. However, these desired benefits were not entirely reached. Instead, by leading the Hollywood studio system to collapse, the Court also distorted the supplychain for motion pictures. This work utilizes Coasian analyses of transaction costs to show that institutional integration was an efficient structure for the motion picture industry. It explores the motives to integrate and the benefits it garnered. Having laid this groundwork, it then assesses the effects theatre divorcement had on the industry and offers plausible counterfactuals had the studios remained intact after 1948.

Suggested Citation

  • Silver, Gregory Mead, 2010. "Economic effects of vertical disintegration: the American motion picture industry, 1945 to 1955," Economic History Working Papers 30043, London School of Economics and Political Science, Department of Economic History.
  • Handle: RePEc:ehl:wpaper:30043
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    File URL: http://eprints.lse.ac.uk/30043/
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    References listed on IDEAS

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    1. Weinstein, Mark, 1998. "Profit-Sharing Contracts in Hollywood: Evolution and Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 27(1), pages 67-112, January.
    2. Kenney, Roy W & Klein, Benjamin, 1983. "The Economics of Block Booking," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 497-540, October.
    3. Lamson, Robert D, 1970. "Measured Productivity and Price Change: Some Empirical Evidence on Service Industry Bias, Motion Picture Theaters," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 291-305, March-Apr.
    4. Bakker, Gerben, 2001. "Stars and Stories: How Films Became Branded Products," Enterprise & Society, Cambridge University Press, vol. 2(03), pages 461-502, September.
    5. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
    6. Sedgwick, John & Pokorny, Michael, 1998. "The Risk Environment of Film Making: Warner Bros in the Inter-War Years," Explorations in Economic History, Elsevier, vol. 35(2), pages 196-220, April.
    7. Hanssen, F Andrew, 2000. "The Block Booking of Films Reexamined," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 395-426, October.
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    More about this item

    JEL classification:

    • N0 - Economic History - - General
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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