The Box Office and the Long Tail: An Examination of the Effects of Streaming on the Distribution of Box Office Revenue

The long tail theory suggests that the development of online distribution channels will increase the demand for niche products and shift the demand towards the tail of the sales distribution. Conversely the body of literature that has analysed the effects of online distribution channels on the film industry has shown that the opposite has happened here. In the film industry sales have become more concentrated on a small number of hits. The existing literature on the long tail theory in the film industry has put little focus towards the effects on the primary source of income in the film industry: the box office revenue. Moreover in recent years streaming has become an increasingly popular form of online distribution in the film industry. The literature regarding the effects of streaming is currently relatively limited. This research analyses the effects of streaming as an online channel on the distribution of box office revenue. The research uses box office data from all movies that were screened in cinemas in North America in the period from 1996 until 2019. A time series analysis is used to determine whether the distribution of revenue has become more concentrated after the introduction of streaming. For this research the launch of the streaming platform of Netflix in North America has been considered as the introduction of streaming. The results of this research show that the distribution of revenue has become more concentrated on the top films since the introduction of streaming. Furthermore the results show that the combined market share of the six major film distributors has not increased after the introduction of streaming and only one major distributors has been able to increase its market share in this period. Thus this research provides additional evidence that revenue in the film industry has become more concentrated and supports the claims from previous research that the long tail effect is not present in this particular industry.