Review of Industrial Organization 19: 81–98, 2001.
© 2001 Kluwer Academic Publishers. Printed in the Netherlands.
The U.S. Motion Pictures Industry: An Empirical
E. RAY CANTERBERY
Florida State University, Tallahassee, FL 32306, U.S.A.
University of Houston-Downtown, One Main Street, Houston, TX 77002, U.S.A.
Abstract. We hypothesize that the U.S. motion pictures industry is structured so that star presence
increases box ofﬁce receipts and (less so) admissions, but places Ricardian limits on the output
of blockbusters. The few dominant studios (majors) rely on a modiﬁed star system to generate
supra-normal box ofﬁce by stimulating admissions at exhibitors. Rising costs (from stars and their
promotion) are required for rising revenues; that is, the majors gain revenue only at higher costs.
Although the industry has unique features, the empirical results are surprisingly relevant to other
Key words: Movie stars, oligopoly, Ricardian rents, survey data, U.S. motion pictures industry.
JEL Classiﬁcations: D43, D12, J44, C42.
Empirical studies of the structure of the motion pictures industry are rare. Several
simulation studies (Wildman and Siwek (1988), Frank (1992), Waterman (1993))
depict an industry greatly dependent on initial conditions, especially the initial size
of the domestic market. Most non-simulation empirical studies of the industry are
based strictly on samples of movies, but still reveal important stylized facts about
the industry’s structure. In Prag and Casavant (1994), the “quality” of a ﬁlm is pos-
itively associated with costs of production related to movie stars and their publicity
costs. Through advertising the studio can capitalize on the star as an input. Thus,
the major studios must incur rising costs (from stars and their promotion) not only
to have rising revenues, but to maintain market shares. De Vany and Walls (1997)
provide further insights while supporting the Prag-Casavant ﬁndings.
Studies of the success of individual ﬁlms explain the ﬁlms, but not necessar-
ily the industry. Still, from these ﬁndings we can move from individual ﬁlms to
a broader industry analysis. The major studio/distributors distinguish themselves
through their efforts to produce “hits” or blockbusters. De Vany-Walls (1997, p.
787) ﬁnd only 20 percent of a weekly Top-50 sample of ﬁlms earning 80 percent