Evolution of Preannouncements and Their Impact on New Product Release Timing: Evidence from the U.S. Motion Picture Industry

Abstract

This research examines the process by which firms preannounce and adjust the targeted release dates of their new products in the context of U.S. motion picture industry. To model the evolution of these preannouncements leading up to the final release dates, we construct a dynamic model under the Markov Perfect Nash Equilibrium (MPNE) framework and account for firms' discrete strategic choices of release dates, heterogeneity among new products, and unobserved payoffs in the course of the preannouncement game before the new products are released and revenues accrued. Our primary findings are that preannouncements in this industry contain important competitive intelligence and are not vaporware or cheap talk. The dynamic model of firms accounting for rivals' preannouncements increases their ability to forecast rivals' future moves and hence improves their preannouncement and release timing decisions. We also demonstrate the managerial usefulness of the model in conducting what-if analyses e.g. seeing how a change in the attractiveness of a release date influences the optimal preannouncement and release timing of a new product.