Competitive Dynamics and the Introduction of New Products: The Motion Picture Timing Game

Abstract

The extremely short life cycle and the rapid decay in revenues after opening coupled with the rapid and frequent introduction of new competitive products makes the timing of new product introductions in the motion picture industry critical, particularly during the high-revenue Christmas and summer seasons. Each studio wants to capture as much of the season as possible by opening early in the season. At the same time, each wants to avoid head-to-head competition. The authors model competition between two motion pictures in a share attraction framework and conduct an equilibrium analysis of the product introduction timing game in a finite season. The following three different equilibrium configurations emerge: (1) a single equilibrium with both movies opening simultaneously at the beginning of the season, (2) a single equilibrium with one movie opening at the beginning of the season and one delaying, and (3) dual equilibria, with either movie delaying opening. A key factor is the product life cycle, which can be captured well with a two-parameter exponential decline. The authors relate the life-cycle parameters to these possibilities with the general result that the weaker movie may be forced to delay opening. These results are related to case studies of the opening of recently released movies. A statistical analysis of the 1990 summer season in North America provides support for the conclusions and suggests that current release timing decisions can be improved. The authors discuss the rationale of “avoiding the competition” in the general context of product introduction timing.