Movie release strategy: Theory and evidence from international distribution

• Author: Luís Cabral,Gabriel Natividad
• Date: 01 April 2020
• Published date: 01 April 2020
• DOI: http://doi.org/10.1111/jems.12344

J Econ Manage Strat. 2020;29:276–288.wileyonlinelibrary.com/journal/jems276

|

© 2020 Wiley Periodicals, Inc.

Received: 19 June 2018

|

Revised: 28 January 2020

|

Accepted: 31 January 2020

DOI: 10.1111/jems.12344

ORIGINAL ARTICLE

Movie release strategy: Theory and evidence from

international distribution

Luís Cabral

1

|Gabriel Natividad

2

1

Department of Economics, Stern School

of Business, New York University, New

York, New York

2

Department of Economics, Universidad

de Piura, Piura, Peru

Correspondence

Luís Cabral, Department of Economics,

Stern School of Business, New York

University, 44 West 4th Street, New York,

NY 10012.

Email: luis.cabral@nyu.edu

Abstract

Choosing the right time to release a new movie may be the difference between

success and failure. Prior research states that the “bigger”a blockbuster is, the

more likely it is (and should be) released during a high‐demand week. We

present a theoretical framework which is consistent with this observation but

adds a rather surprising theoretical prediction: among non‐blockbuster (i.e.,

niche) movies, everything else constant, the greater a movie's appeal, the more

likely it is released during a low‐demand week. In other words, the relation

between movie appeal and high‐demand‐week release is U‐shaped: it decreases

at low levels of overall appeal (niche movies) and increases at high levels of

overall appeal (blockbusters). We provide intuition for this novel result and

argue that it is robust to a number of changes in functional form assumptions.

We then show that the theoretical results are consistent with the evidence from

an extensive data set on international releases. Specifically, we run a series of

movie‐country‐pair regressions with high‐demand‐week‐release as a depen-

dent variable and exogenous shocks to the movie's appeal as an explanatory

variable. As predicted by theory, the regression coefficients have opposite signs

for the blockbuster and non‐blockbuster cases.

KEYWORDS

entry games, international business, movies release strategy

1|INTRODUCTION

As shown by Cabral and Natividad (2016) and others, a movie's performance during the opening weekend is an

important determinant of its eventual overall success. More generally, the choice of a release date is one of the most

important strategic decisions a distributor has to make (advertising being another one). There are several trade‐offs to

take into account when it comes to picking an opening weekend. On the one hand, choosing a high‐demand weekend

allows the distributor to tap into a larger potential demand. On the other hand, it is more likely than not that several

other distributors open during a high‐demand weekend, which implies fiercer competition. Industry players recognize

the importance of this strategic dimension and how it can turn into a “highly destructive game.”

In this paper, we characterize the demand‐competition trade‐off in the choice of a release date. We develop a game‐

theoretic framework which contemplates two possible extreme cases: If the competing movies are sufficiently large

(blockbusters)—so that a particular movie's release decision has a measurable impact on rival movies' demand—then,

in equilibrium, the greater a movie's appeal, the more likely the movie is released during a high‐demand week. In the

limit, if a blockbuster is the single super‐mega‐blockbuster of the year, then it takes over whatever weekend it opens;