The Korean Journal of Economic Studies
Vertical Integration, Market Foreclosure and Movie Budgets: A Case of Imported Movies in Korean Movie Industry
Filmun Jeong (Sungkyunkwan University)Year 2017Vol. 65No. 4
AbstractThe recent issue of vertically integrated distributors’ screen monopoly in theKorean movie industry has been empirically analyzed to investigate its potentialmarket foreclosure effect. This paper, unlike the others, examines theforeclosure effects of discriminatory screening allocation by controlling theater’sprofit structure and dividing the samples into different budget groups. The datafor 569 imported films released in the Korean movie theaters from January2010 to December 2016 is used for the estimation. This paper finds that if thefilms are close to the low-budget group, the size of discriminatory screeningallocation becomes substantial. Other things being equal, if the films are inthe low-budget group, vertically integrated distributors’ films are allocated50% to 80% more than non-integrated distributors. When the production costof the film is high, the size of discriminatory screening allocation between thetwo types of distributors decreases and loses its statistical significance. Thispaper also finds that the screening allocation behavior of theaters to their rivaltheaters’ distributors differs depending on the film production cost. Otherthings equal, if the films are in the low-budget group, the theaters allocate40% more of its screens for their rival theaters’ distributors than they do tonon-integrated distributors. When the films are in the high-budget group, thisrelationship becomes negative and loses its statistical significance.