Strategic Decision-Making in Hollywood Release Gaps∗

Hollywood blockbusters are usually released in the U.S. before other foreign markets. The release gaps have declined significantly over time and varied greatly across countries. While movie piracy has been suggested as an important determinant for the release gap decision of distributors, theory and evidence suggest there are other important determinants. In this paper, we use a discrete choice release gap decision game model to disentangle the impacts of the i) release gap effect, which includes factors that provide incentives for a distributor to shorten the release gap; ii) word-of-mouth effect, which provides incentives for a distributor to lengthen the release gap; and iii) competition effect, which accounts for the incentives blockbusters have to avoid each other. We obtain box office and release gap data from the private industry source Boxofficemojo.com. We provide results on the economically significant impact of these three factors on distributors’ release gap decisions and box office revenue. JEL Classification: F14, L82, 034