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we first explore how the institutional logics approach can help us make sense of the complex institutional environment in the film industry. we use the hollywood studios as our case study, and explain why the transformation of cinema from a film industry into an online streaming industry has been a top-down affair. we show how the studios were able to take advantage of the early stages of the online streaming industry to dominate it, a process we call vertical integration. but we also show how the studios have been forced to adapt, in response to innovations in online streaming services, most notably competition from netflix. we then describe how the convenience institutional logic has also shaped the industry. the convenience logic emanates from the way that audiences have been conditioned to expect convenience from online streaming services. they are willing to pay for the convenience of being able to watch movies online at any time, on any screen, and from anywhere. this convenience creates an incentive for online streaming services to offer increasingly diverse and sophisticated content to capture the attention of subscribers. the industry has responded with a proliferation of new platforms, but only a handful are able to compete successfully.
we then outline how the institutional economics model provides a context for understanding the key decision-making issues facing studio executives. these include how the film studios determine which films to produce, and how they decide where to release them. we use scenario analysis to create four scenarios based on their decisions. in the first scenario, a few studios are able to successfully resist the temptation to vertically integrate, maintaining their long-standing traditional production and distribution arrangements. in the second scenario, studios are forced to capitulate to vertical integration because the overwhelming majority of new films are not profitable. in the third scenario, the studios are able to maintain vertical integration and continue to make movies for cinemas, but they take advantage of their increased distribution power to restrict the rights to online streaming services and channel them instead to their own proprietary platforms. in the fourth scenario, online streaming services are able to complete the process of vertical integration, while also becoming the principal distributors of films to cinemas. we conclude with a set of recommendations to help studios and online streaming platforms navigate the complex landscape of the movie industry. we make recommendations based on what we think hollywood executives would do if they were not worried about being blamed for disappointing box-office revenues.
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