Heterogeneous changes across consumer segments in movie-going demand and theater patronage during growth in the exhibition sector

Abstract

Movie-going demand started to grow in many nations because of the introduction of multiplex theaters. While major exhibitors keep opening new multiplexes to create more demand, the growth rate in demand is getting slow because of nonlinear response of consumers to the supply. What is worse is that the continuous entries of competing new theaters become a big threat to existing theaters due to customers shifting their patronage to the new theaters. The firms are, therefore, interested in knowing how opening a new theater affects movie-going demand and theater patronage, and this interest raises the following research questions: (i) which characteristics of consumer response to the new entrant are more important in generating nonlinear growth patterns, (ii) which characteristics of new theaters mainly cause patronage shifting behavior, and (iii) how much the behavioral changes are different across consumer segments in terms of geo-demographic characteristics. This dissertation addresses these questions by analyzing repeated survey data and theater market share data containing dynamics during growth in the exhibition sector. A stochastic model and a spatial market response model are developed and applied to the motion picture exhibition market in Korea. Empirical studies provide major exhibitors with some suggestions on whether their market expansion strategy should be suspended or not and how to manage their incumbent theaters in order to restore their losses. The first study focuses on the impact of new movie theaters on heterogeneous change in movie-going demand across consumer segments. Assumptions on the movie-going behavior are that consumers respond to the increasing number of movie screens in a nonlinear manner, and that three response characteristics play key roles in generating nonlinear growth patterns: the spatial likelihood of moviegoers going to movie theaters in their neighboring areas, the threshold levels for consumers to elicit movie-going inte...