The Determinants of Movie Run Length in the Korean Movie Industry: Revenue Sharing, Opportunity Cost of Running, and Vertical Integration

This paper tries to shed both theoretical and empirical light on movie run-length, focusing on the effects of opportunity cost, the ratio of ticket revenue sharing for the theater and the vertically integrated industrial organization. The theoretical analysis is performed based on a simple profit maximization model taking some practices of Korean movie industry into consideration. The empirical analysis is done with daily screening data of 316 wide-released foreign movies exhibited in multiplex theaters in Seoul and six Metropolitan cities in Korea. Major empirical findings are as follows: the run-length of a current movie has a negative relation with expected opportunity cost measured by the highest number of open screens among the newly released movies, secondly has a positive relation with the difference in revenue sharing ratio for the theaters between the current showing movie and the next movie with the highest ticket sales potential and lastly vertical integrated theaters exhibit the movies distributed by their affiliated distributors longer than the other movies, supporting the argument that industrial organizational forms in terms of vertical integration among distributors and exhibitors matter in run-length decision by exhibitors. These empirical findings are consent with the theoretical predictions.