Strategic Change of a Movie’s Release Date Drives up Sales

The release date of a movie in the United States is likely to be changed when competition is particularly high due to a number of other high-quality movies that are set to hit screens in the same week. In this context, competition from movies by the same director or within the same genre have the greatest influence on box office revenue. If competition is high, the decision to reschedule the release of a movie tends to increase its overall sales by up to six million dollars compared to the sales the movie would have generated with its original release date. These are the results of a study by the Centre for European Economic Research (ZEW), Mannheim, on competitive effects in product niches regarding the timing of product releases of so-called experience goods.

Given the great number of cinema releases per week, it is common in the film industry to strategically plan release dates. According to the study, an average of 4.5 new movies open per week, which then typically run between eight and ten weeks before they are taken out of the programme to make room for new releases. In addition, there is de facto no price competition on the film market, since cinemas charge standard ticket prices regardless of the movies’ quality. Exceptions are 3D movies and movies with an above-average running time.

“If competing movie productions are too similar in terms of, for instance, the movie cast, it may be profitable to change release dates,” explains Niklas Dürr, a researcher in ZEW’s Research Group “Competition and Regulation” and co-author of the study. It may therefore pay off for movie producers to strategically choose a release date at which market competition is lower. “Naturally, producers prefer to release movies during periods of particularly high demand,” says Dürr. “On the other hand, however, they also try to avoid strong competition.” As a consequence, it may be more profitable to postpone the release date, if competition is likely to be less intense at a later point of time.

“Our analysis shows that a movie’s box-office revenue decreases if a number of high-quality movies are running in the same week. By contrast, revenues increase by an average of seven to eight per cent if there is less competition on the rescheduled date,” explains Dürr. It is likely that the strategic importance of the release date also holds for other experience goods. These are goods, whose quality is only revealed after consumption. Critics’ reviews are therefore very important as quality indicators, and ultimately have a great influence on customers’ behaviour. “Once entertainment products, such as movies, books or video games, are ready to enter the market, the choice of strategic variables is fairly limited, with the release date being one of the few options remaining,” says Dürr.

For further information please contact:

Niklas Dürr, Phone +49/621/1235-368, E-mail niklas.duerr@zew.de