Research On Vertical Integration Of Chinese Film Industry Under Box Office Split System

The Chinese film industry has developed into the golden stage since film industry reform in 2002.the level of marketization and industrialization in film industry is greatly improved. In the first half of 2015, The total box office revenue is up to 20 billion yuan. China become the world’s second largest film market except the United States. With the expansion of the film industry scale, the vertical trading between film producers and film sellers become more and more frequent. Vertical restraints and vertical integration become mainly mode of vertical trading. Because of high risk of film industry and market uncertainty, The relationships between upstream and downstream firms are complex and changeable. In recent years, Vertical restraints among firms led to the distortion of the income distribution, which eventually led to contradiction. Some film companies have its way forward or back towards integration through vertical merger or equity participation, one of the prominent characteristics is that the proportion of vertical integration adopted in different links is gradually increased and highlight its importance.The paper regard the production and distribution as the industry’s upstream, theaters as the downstream industry, the analysis process revolves around industry upstream and downstream. Considering the actual situation of Chinese film industry, the paper use the industrial organization theory and transaction cost theory as the theoretical basis. Then adopting the model analysis and case analysis analyze the reason of vertical integration and its competition and welfare effect. In particular, With the propotion of vertical integration of Chinese film enterprises increased and the scale of vertical integration expanded, What’s the effect on industrial organization structure and consumer benefits.The following is the main content of paper:Firstly, I referred to literature on the vertical constraint and the vertical integration which become an important reference research.at the same time, I reviews the domestic and foreign research related to the film industry,which provide theoretical foundation of the later research.Secondly, Then I introduce the current situation of Chinese film industry. Including characteristics of film industry, the relationship and structure of production, distribution and theater industry. On the basis of analyzing the existing problems of vertical restraints and using the theory of industrial organization and transaction cost theory, I analyze the motive of vertical integration among film firm in different links and the main model of current integration.Finally, the paper analyzes the influence of vertical integration on the upstream and downstream enterprises in different condition by constructing the model, discuss the welfare effect of integration in the film industry In combination with the specific case. What’s more, it’s necessary for Chinese film industry to discuss whether put forward antitrust policy or not.I draw the conclusion of the paper through the model and case analysis. The current movie market is both competitive and monopolistic. Vertical integration is helpful to reduce transaction costs, promote technological progress and improve consumers’ welfare. But some film firms have already owned certain market power in the market. If it continues to deepen the integration, it will produces market foreclosure effect and is harmful to the non-integration firm. Therefore, relevant policymakers should alert major film group to use the vertical integration as a means of maintaining monopoly. Vertical mergers between large film group should be given a reasonable guide and regulation.The paper combine firms’ internal efficiency with external monopoly, Considering the characteristics of the film industry. Then analyze the motives of vertical integration and vertical integration competition and welfare effect. When analyze competition effect, it considering the scale of the vertical integration within the film industry and integrated firms’ market power.