Competitive Dynamics in the Release Date Pre-announcements of Motion Pictures

Release timing is widely recognized as a critical determinant of motion picture box office revenues. It is also one of the most critical competitive tools used by the studios in the motion picture industry. To facilitate the release date selection, studios decide and pre-announce the targeted release dates on a weekly basis long before the actual release of their forthcoming movies. Their choices of release dates and then subsequent changes in these during the preannouncement period are highly strategic in nature. We examine these strategic interactions in this research. In particular, we examine the following few aspects of the strategic interactions. They span over multiple decision or pre-announcement periods. In every period, studios make simultaneous decisions on whether to pre-announce and which weekend to target. More importantly, these decisions are essentially discrete in nature; this is in contrast with the more traditional choices of continuous price or advertising levels. When making these simultaneous decisions, studios might also conjecture their competitors’ decisions and account for the intertemporal effects of these current actions on the future competition; that is, competitive dynamics may play an important role in the studios’ release date decisions. Given these features of the release date pre-announcement game, traditional tools used to study competitive interactions are not appropriate in this context. Therefore, we apply the Markov Perfect Nash Equilibrium (MPNE) framework developed in industrial organization to capture the key features, particularly the competitive dynamics, of the game and forecast the competitive responses to pre-announced release date decisions. We apply a newly developed methodology to empirically estimate the proposed dynamic model using historical data of preannounced release dates from the U.S. motion picture industry. We further compare the proposed dynamic model with the conventionally used static model and myopic model in the literature. Our results demonstrate that studios are forward-looking and maximize the inter-temporal expected payoffs during decision making; ignoring such critical competitive dynamics produces inaccurate inferences on studios’ decision processes and strategic interactions; accounting for the competitive dynamics increases a studio’s predictive power of competitor decisions and responses to pre-announced release date decisions. Therefore, our study can help improve the studio’s managerial decision making of the release timing and hence the potential revenues. The analytical framework and methodology can be generalized to study other interesting marketing problems in various industries, such as books and music releases, TV programming, and so on.