Strategic Promotion and Release Decisions for Cultural Goods

TLDR: In this article, the authors study how producers of cultural goods can strategically increase their promotion budgets to secure the most profitable release dates for their goods in a game-theoretic setting, where two producers choose their budget before simultaneously setting the release date of their good.

Abstract: We study how producers of cultural goods can strategically increase their promotion budgets to secure the most profitable release dates for their goods In a game-theoretic setting, where two producers choose their budget before simultaneously setting the release date of their good, we prove that two equilibria are possible: releases are either simultaneous (at the demand peak) or staggered (one producer delays) In the latter equilibrium, the first-mover secures its position by investing more in promotion We test this prediction on a dataset of more than 1500 American movies released in ten countries over 13 years Our empirical analysis confirms that higher budgets allow movie studios to move release dates closer to demand peaks

Figures

Table 3: Estimation results

Figure 1: Equilibrium release dates

Figure 3: Budgets per week and per genre (USA, 2008)

Figure 2: Subgame-perfect equilibrium (in pure strategies)

Table 5: Weeks qualifying as peaks (yearly basis)

Figure 5: Movie releases by Fox in the U.S. in 2008

Full text

2015/37
■
Strategic Promotion and Release Decisions for
Cultural Goods
Paul Belleflamme and Dimitri Paolini!
!

CORE
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http://www.uclouvain.be/en-44508.html!

CORE DISCUSSION PAPER
2015/37
Strategic Promotion and Release Decisions for
Cultural Goods
Paul Belleflamme
1
and Dimitri Paolini
2
July 22, 2015
Abstract
We study how producers of cultural goods can strategically increase their promotion
budgets to secure the most profitable release dates for their goods. In a game-theoretic
setting, where two producers choose their budget before simultaneously setting the
release date of their good, we prove that two equilibria are possible: releases are either
simultaneous (at the demand peak) or staggered (one producer delays). In the latter
equilibrium, the first-mover secures its position by investing more in promotion. We
test this prediction on a dataset of more than 1500 American movies released in ten
countries over 13 years. Our empirical analysis confirms that higher budgets allow
movie studios to move release dates closer to demand peaks.!
Keywords: Non-price competition, Strategic promotion, Strategic tim- ing, Motion
pictures.!
JEL Classification: L13, L82
1
CORE and Louvain School of Management, Universit !e catholique de Louvain, 34 Voie du
Roman Pays, B-1348 Louvain la Neuve, Belgium, Paul.Belleflamme@uclouvain.be; also
affiliated with CESifo.
.
2
Universita degli Studi di Sassari, CRENoS and DiSea, 07100 Sassari, Italy, dpaolini@uniss.it;
also affiliated with CORE.

Strategic Promotion and Release Decisions for
Cultural Goods
∗
Paul Belleflamme
†
Dimitri Paolini
‡
July 22, 2015
Abstract
We study how producers of cultural goods can strategically increase
their promotion budgets to secure the most profitable release dates for
their goods. In a game-theoretic setting, where two producers choose
their budget before simultaneously setting the release date of their
good, we prove that two equilibria are possible: releases are either si-
multaneous (at the demand peak) or staggered (one producer delays).
In the latter equilibrium, the first-mover secures its position by invest-
ing more in promotion. We test this prediction on a dataset of more
than 1500 American movies released in ten countries over 13 years. Our
empirical analysis confirms that higher budgets allow movie studios to
move release dates closer to demand peaks.
Keywords: Non-price competition, Strategic promotion, Strategic tim-
ing, Motion pictures.
JEL-Classification: L13, L82
∗
This research was initiated when Paul Belleflamme was visiting the Faculty of Eco-
nomics of the University of Sassari, whose generosity is gratefully acknowledged. We are
extremely grateful to GP Meloni for initiating the painful data collection. We also thank
William Addessi, Gianfranco Atzeni, Michel Beine, Luisito Bertinelli, Juan de Dios Tena,
Claudio Detotto, Wing Man Wynne Lam, Thomas Lambert, Elena Mattana, and semi-
nar participants at Saint-Louis University-Brussels, University of Sassari, Paris-Jourdan
Sciences Economiques, University of Modena and Reggio Emilia, University of Cergy-
Pontoise, and PET 15 Luxembourg for their help and useful comments on previous drafts.
†
CORE and Louvain School of Management, Universit´e catholique de Louvain, 34 Voie
du Roman Pays, B-1348 Louvain la Neuve, Belgium, Paul.Belleflamme@uclouvain.be; also
affiliated with CESifo.
‡
Universita degli Studi di Sassari, CRENoS and DiSea, 07100 Sassari, Italy,
dpaolini@uniss.it; also affiliated with CORE.

1 Introduction
Since the extraordinary successes of Jaws in the summer of 1975 and Star
Wars two summers later, the big Hollywood studios have increasingly cho-
sen to release their would-be blockbusters in the United States during the
summer period (starting Memorial Day weekend, at the end of May), when
a bigger audience is available (because kids are out of school, adults are
on vacation, and heat waves drive them all inside air-conditioned theaters).
This trend culminated in the summer of 2013 with the release of 31 movies
aiming at a large audience.
1
Although summer 2013 outperformed the previ-
ous summer in terms of overall box-office revenues, it is not really surprising
that an important number of these 31 movies flopped.
To avoid a repeat of such a congested release schedule and its resulting
head-to-head competition, some studios decided to make summer 2014 start
earlier: Walt Disney, 21st Century Fox and Time Warner made their po-
tential blockbuster debut in April.
2
They may have been inspired by some
previous successful releases that took place outside the summer months.
3
Yet, even though the scheduling of movie releases looked smarter in 2014,
summer 2015 was congested again and the same is likely to go for 2016 with
speculations about a possible clash of superheroes in May.
4
These recent events demonstrate that choosing release dates is a major
strategic issue for movie studios, which places them in a configuration that
resembles a game of chicken: all studios want to have their movies released in
periods of large audience and although none of them is willing to yield, they
all admit that spacing out releases is preferable. Release decisions are all the
more important that movie studios do not seem to compete in prices. It is
1
Rampell (2013) reports that each of these 31 movies played on at least 3,000 screens
in the US; over the previous decade, only an average of 23.3 movies reached the same
distribution scale during the corresponding period.
2
Respectively Captain America: The Winter Soldier, Rio 2, and Transcendence.
3
For example, The Hunger Games in March 2012, Gravity in October 2013 or The
Lego Movie in February 2014.
4
“Following the recent announcement that Captain America 3 was not moving from
the May 2016 release window despite the opening of WB’s Man of Steel sequel (dubbed
Batman vs. Superman), Warner Bros. president of domestic distribution, Dan Feldman,
basically told Bloomberg that Marvel can move their release because they have no plans
to do so: ‘It doesn’t make a lot of sense for two huge superhero films to open on the same
date but there is a lot of time between now and 5/6/16. However at this time, we are not
considering a change of date for Batman vs. Superman’.”(quoted in Kendrick, 2014)
2

Frequently asked questions

Q1. What have the authors contributed in "Strategic promotion and release decisions for cultural goods" ?

The authors study how producers of cultural goods can strategically increase their promotion budgets to secure the most profitable release dates for their goods. In a game-theoretic setting, where two producers choose their budget before simultaneously setting the release date of their good, the authors prove that two equilibria are possible: releases are either simultaneous ( at the demand peak ) or staggered ( one producer delays ). The authors test this prediction on a dataset of more than 1500 American movies released in ten countries over 13 years. 

Q2. What future works have the authors mentioned in the paper "Strategic promotion and release decisions for cultural goods" ?

Besides the extension already mentioned in the previous section, it would be interesting in future research to test the predictions of their theoretical model for other cultural goods ( e. g., books or video games ). 

Q3. What is the main testable hypothesis that the authors can draw from their model?

The main testable empirical hypothesis that the authors can draw from their model is that movie studios may decide to increase their budget as a way to secure release close to demand peaks and discourage their rivals from doing the same. 

Q4. What is the key concern for their analysis?

the key concern for their analysis is whether sequential release decisions would challenge their result that higher production budgets are used to scare off competition and secure the most profitable release dates. 

Q5. What is the conduct for a producer?

Lemma 1 Producer i’s best response to tj ≥ 1 is either t∗i (tj) = 1 or t∗i (tj) = tj + s.According to Lemma 1, the best conduct for a producer is to release its good either immediately or just after the other producer’s good ceases to be sold. 

Q6. What could be a concern for their analysis?

This could be a concern for their analysis insofar as size and reputation (which are omitted from the regression model) could affect both studios’ ability to release movies closer to demand peaks and the way studios set production budgets. 

Q7. What is the main argument for the rescheduled release?

In support for this view, Dürr et al. (2014) estimate36 that “movies which have been rescheduled and therefore observed the market conditions very carefully, were able to avoid competition and thus achieved better results at the box office.” 

Q8. What does the author say about the importance of seasonality in the production of cultural goods?

”Hartmann and Gil (2009) establish empirically that exhibitors do7As far as the shape of demand is concerned, seasonality plays an important part for many cultural goods. 

Q9. Why did some studios make their summer 2014 release earlier?

To avoid a repeat of such a congested release schedule and its resulting head-to-head competition, some studios decided to make summer 2014 start earlier: Walt Disney, 21st Century Fox and Time Warner made their potential blockbuster debut in April.