Heinz College researchers show that HBO television exposure increases DVD sales for all movies — but has a much stronger impact on “Long Tail” movies than on big hits.
Authors: Anuj Kumar, Michael D. Smith, and Rahul Telang
Abstract: Recent papers have shown that, in contrast to “the Long Tail” theory, movie sales remain concentrated in a small number of hits. These papers have argued that concentrated sales can be explained, in part, by heterogeneity in quality and increasing returns from social effects. Our research analyzes an additional explanation: how incomplete information may skew sales patterns.
We use the movie broadcast on payable channels as an exogenous shock to the availability of information, and analyze how this shock changes the resulting sales distribution.
Our data show that the pay-cable broadcast shifts the distribution of DVD sales toward “Long Tail” movies, suggesting an information spillover from the broadcast. We further develop a learning-based model of DVD demand to precisely quantify the lost DVD sales due to incomplete information. Our study contributes to the academic literature on information provision and market outcomes, and the dynamics of long tail markets.