Behaviour of Firms in Leisure Markets
- The behaviour of firms in leisure markets is influenced by both their structure and contestability
- For cinema firms:
- Relatively oligopolistic
- There are barriers to entry in the form of the relationship that a cinema has with the distributors, making it difficult for entrants to get ‘first run’ films. There may also be brand loyalty.
- There is non-price competition, in the form of cinemas competing for the best sites, offering facilities such as car-parking, etc.
- High profits in the long-run
- For tour operators:
- Relatively oligopolistic – merges have increased the concentration ration, and hence the power of the largest companies
- However, the market may still show some aspects of monopolistic competition
- It is not hard to set up a travel agency
- This is evident by a number of high street travel agents which work below full capacity, offer slightly differentiated products, and engage in small-scale advertising
- For TV broadcasting:
- Started off as a monopoly, and then moved to oligopoly, due to the other firms partaking in non-price competition
- Due to the increase of technology, the barriers to entry are lower, and hence the number of channels has increased, moving the market towards monopolistic competition
- As a result of the increased competition, companies are bidding fiercely for the rights to broadcast major events.
- For TV production:
- Is become more and more competitive, due to legislation requiring broadcasters to have more of their programmes produced by outside production companies, making the market also more contestable.
- However, in recent years, larger production companies have been buying up smaller ones, making the market less competitive
- Legislation such as the 2003 Communications Act has also helped, as this gives the producers, and not the broadcasters, the rights to what they make.
- For spectator sports:
- It can be hard to assess, as it depends how you define your market
- g. Manchester United can be regarded as a monopoly, as its product may be regarded as unique, but it could be an oligopolist, as it’s one of the ‘big four’ that dominate the premier league.
- There are very high barriers to entry for the premiership
- A manager would need a big stadium, top-class players, good manager and strong training staff – all of which are expensive
- There would also be a time delay, as it would take several seasons to get up to the premier league.
- Other barriers to entry include brand loyalty, and planning permission to build a stadium.
- It can be hard to assess, as it depends how you define your market