Managing the supply of short-life products. A duration analysis approach using the UK film industry

Movies are uncertain products. Nobody knows much about them prior to their screening and their attempt to survive in the risky motion picture market week by week. This paper studies short-life products using the example of the UK film industry, including high and low-budget films. Using a clog-log methodology and a sample of 552 films, the empirical results highlight the importance of the distributor's strategy and word-of-mouth for success in experience goods industries. Two strategies, cross-subsidisation and opportunity cost, not previously addressed are considered. The results show these effects to be especially significant for low budget movies.