Digitization and Distribution: The Ends Against the Middle
In this paper, we examine the transition from 35mm film to digital cinema technologies in the South Korean movie industry. Using detailed data on theaters’ daily scheduling decisions between 2006-16, we use two quasi-experimental analyses to measure the impact of digitization. We find that digitization helps theaters provide consumers with increased product variety and that digitization leads theaters to disproportionately pursue blockbusters. We also develop a theoretical model of theaters’ scheduling decisions, which yields a set of predictions about the moderating role of relative demand on the supply of screens for blockbuster movies in pre-digitization periods. We test the predictions by exploiting within-week fluctuations in the level of demand for movies. The results support the model’s predictions: the blockbuster effect is moderated by the relative demand for blockbusters on weekend evenings versus other time slots. Thus, this study reveals a new mechanism—distribution costs—through which digitization reshapes product assortment.