DVDs and Movie Theaters

A lot of people have argued that DVDs, home theater, and the shrinking time from big screen to DVD sales are spelling doom for the movie theater business.  Michael Campbell, CEO of Regal, the nation’s largest chain of theaters, has some smart things to say in response.  I particularly like his first response which shows a keen appreciation of market inter-dependencies, "general equilibrium" in econ-speak.

I think DVD’s have been the savior of not only the studio model but
have been beneficial to theater owners, too, because it funnels more
money back into the studios, which in turn fuels higher production
budgets, greater numbers of films, and so on.

We have seen the
window shrink from an average of about six months between theatrical to
video 10 years ago to about four and a half months today. Some
compression of that window over time is justified, or has been
justified at least in the past, because we generate our piece of the
pie at the box office much quicker today than we did a decade ago.

People
who run the studios are smart people, and I think they realize the
tremendous value of having that theatrical launch pad. And I don’t
think that’s going to change. They make films to be released on the big
screen.