Multichannel management in the motion picture industry

Abstract

Motion picture industry is largely transformed by information technology (IT) in recent years. IT has given rise to new models and approaches of doing business, which may either complement, substitute, or function independently with traditional channels. The issue of how to orchestrate multiple channels poses critical managerial challenges for industry and interesting research questions for academia. This thesis aims to investigate multi-channel management issues of two business processes, namely, advertising and distribution activities, in the motion picture industry. Over the years, social media have become a popular advertising tool for firms to promote their brands. Although existing studies have examined the effect of social media marketing on various business outcomes, little has been known about how this new channel interacts with tradition advertising. The first study in this thesis investigates how movie studios should conduct traditional media advertising (e.g., television commercials, print ads, and outdoor ads) and social media marketing (e.g., Facebook marketing) together, and how product characteristics (e.g., product appeal) may play a role in moderating the interaction between these two channels. A simple analytical model is first developed to propose the central hypothesis, and then it is tested by empirical analyses. The result suggests that traditional media advertising is more likely to complement social media marketing for narrow appeal movies, but is more likely to substitute social media marketing for broad appeal movies. This study provides a theoretical explanation that reconciles mixed results documented in the multichannel marketing literature and offers managerial implications for advertising channel coordination. Another business process profoundly transformed by IT in this industry is movie distribution. Online subscription-based video streaming services (e.g, Netflix and Hulu) have rapidly grown into the second largest home entertainment revenue source for studios in 2015. The second study in this thesis examines how this emerging distribution channel affects sales of physical discs (e.g., DVDs) on both online and offline retail channels. The question is addressed by exploiting a natural experiment in which a content owner changed its streaming partner from a larger streaming service provider to a smaller one. This event created an exogenous shock that sharply reduced the streaming availability of affected movies, through which we are able to quantify the causal effect. Results of the difference-in-differences analyses show that the decline in the streaming availability of videos affected by the event causes a 24.7% increase in their DVD sales in the three months after the event. Namely, video streaming service cannibalizes physical DVD sales. In addition, the cannibalization is stronger for movies whose DVD releases are more recent and whose theatrical performances are stronger. This study contributes to the understanding of multi-channel distribution and provides important managerial implications for content owners on how to select suitable titles for streaming. In sum, this thesis studies burgeoning IT-enabled platforms and business models in the motion picture industry, and addresses current managerial questions facing studios on how to coordinate multiple channels in both advertising and distribution activities. It advances our theoretical understanding of how multiple channels interact with each other, and discloses interaction mechanisms through investigating how interactions are moderated by contextual factors. Additionally, this thesis provides managerial implications for firms’ strategic decision making on cross-channel orchestration.