How Complex Do Movie Channel Contracts Need to Be?

Abstract

The motion picture industry is characterized by a dynamic market environment, limited shelf space and product category management, and consequently, complex channel contracts specifying the split of box office revenue between distributors and exhibitors. Although such a contracting practice creates a considerable administrative effort and channel conflict, it is not clear whether such complexity is necessary for superior channel performance. This study investigates this question by analyzing the impact of movie contract structure on movie scheduling and channel member profitability. We develop and analyze a game-theoretic model using the genetic algorithm approach and a decision support system, , to capture strategic behaviors of channel members in a complex market environment. We find that simpler two-part tariff or 50/50 split contracts perform as well as the current contracts. Thus, the complexity of the market environment need not be reflected in the complexity of the channel contracts. Channel contract structure has significant impact on channel member profitability and the exhibitor's movie-scheduling behavior. In particular, our results indicate that the flat rate contract structure represents an attractive alternative to the current practice for distributors.channel contracts, movie industry, game theory

Research on the Motion Picture Industry: State of the Art and New Directions Off the Beaten Track Away From Theatrical Release

“…By using a game‐theoretic model, Raut et al . () demonstrate that a simplification will cause lower transaction costs but will not result in a decline in sales for neither market side.…”

“…Second, there is academic research dealing with economic problems regarding the contractual relationships between stakeholders at a national market level. The economic ties between talent, production companies, distributors, and exhibitors are examined (e.g., Raut et al ., ). Third, there are several studies analyzing international competition in the film industry.…”

A two-echelon sustainable supply chain coordination under cap-and-trade regulation

“…Several types of contracts are widely designed to be effective tools to coordinate supply chain systems, such as revenue-sharing contract (Cachon and Lariviere, 2005), buy back contract (Raut et al, 2008), two-part tariff contract (Cachon and Gürhan Kök, 2010), all-unit quantity discount contract (Xiao and Qi, 2012), and revenue-and-cost-sharing contract (Bai et al, 2015). There is limited literature on the coordination mechanisms for the green (or sustainable) supply chain after analysing decision behaviours.…”

Implementing Coordinative Contracts between Manufacturer and Retailer in a Reverse Supply Chain

“…If there is just one partner who loses benefit, there is no coordination. Raut et al [23], who studied contracts between exhibitor and producer in movie industry, emphasized that optimal contract design between manufacturer and retailer is affecting profit of coordination members. It is an extremely complicated mechanism given that a reverse supply chain consists of complex decision-making of partners in interdependent and interconnected business relation.…”