Demand for movies in Europe and the effects of multiplex diffusion : a aanel approach

After three decades of decreasing admissions, cinema attendance in Europe showed a significant rise during the nineties despite the competition of several audiovisual media. This growth in ticket sales must be compared with the declining share of exhibition in total film revenues. Exhibition is still very important to signal the quality of a movie, revealing through the tickets sold the consumer preferences, but its role in overall revenues of film industry has been declining from a share of 50% in 1980 to less than of 15% in 2008 at least for Hollywood productions. In this paper we try to test the role of multiplex. While usually multiplex is analysed in supply side since it can reduce the cost of exhibition through scale economies in several function, we focus on demand side. The positive role of multiplex is related to the risk reduction of the audience and the improved condition of new theatres. We explore the movie demand evolution in Europe with a data set of 15 countries from 1989 to 2003. We estimate with a panel approach a simple demand function of film exhibition with yearly tickets per inhabitant as dependent variable where as expected price coefficient is negative and income coefficient is positive. Multiplex diffusion, indicated as the percentage of multiplex seats over total seats, appears to be moderately positive and is 1% significant. The results are robust to different model specification