NOT ALL RIVALS LOOK ALIKE: ESTIMATING AN EQUILIBRIUM MODEL OF THE RELEASE DATE TIMING GAME

... a very serious game of strategy is at work--a cross between chess and chicken--which studio distribution chiefs play year round, but with increasing intensity during the summer and holiday release period. (New York Times, December 6, 1999) Hubris. Hubris. If you only think about your own business, you think, "I've got a good story department, I've got a good marketing department, we're going to go out and do this." And you don't think that everybody else is thinking the same way. In a given weekend in a year you'll have five movies open, and there's certainly not enough people to go around. (Joe Roth, chairman of Walt Disney Studios, answering a question about the large number of major movies opening within days of each other; Los Angeles Times, December 31, 1996) I. INTRODUCTION The number of Americans who go to the movies varies dramatically over the course of the year, and sometimes more than doubles within a period of two weeks. At the same time, the first week accounts for almost 40% of the box office revenues of the average movie. The combination of these two facts makes the timing of launching a new movie a major focus of attention for distributors of movies. With virtually no subsequent price competition, the movie's release date is one of the main short-run vehicles by which studios compete with each other. In this paper, I develop and estimate a model of discrete games, which allows me to analyze this release date timing game. Most empirical industry studies focus on price and quantity competition, taking other product characteristics as given; in many industries, however, prices play a very small role, and competition is channeled through other product attributes. The entertainment industry is a prime example; competition among movies, television programs, or Broadway shows is on nonmonetary product attributes, such as content, advertising, and time. Therefore, understanding competition in such industries requires a model that endogenizes some of these product attributes, especially those that can be changed in the short run. This paper provides a framework in which release decisions can be endogenized and nonprice competition can be analyzed. The absence of price competition is useful because it allows the focus of the analysis to be on the timing dimension without relying on assumptions about the nature of the postrelease price competition. (1) Together with the frequent timing decisions associated with different movies, this makes the motion picture industry quite attractive for empirical analysis of the timing game. This industry, however, is not the only example in which timing decisions play a central role. Similar timing considerations are also important in the release decisions of books, compact disks, and other new products, as well as in the scheduling decisions of major events, television programs, flight schedules, and promotional sales. (2) When taking on a new project, distributors of movies typically plan for a Friday release, which falls within a relatively short window of time carefully chosen to match the type of the movie. This makes the choice of the release date a very discrete one. The exact Friday within the season is generally determined by a strategic timing game played among distributors. Before each release season, distributors scramble to release their movies on big holiday weekends, when demand is high. When doing so, each distributor tries to release on the attractive holiday weekend and at the same time to deter competitors from doing the same. The extent to which distributors are successful in doing so largely depends on the quality of the movies at their disposal, and on the way they can compete with movies released by other studios. Thus, modeling this timing game must account for the asymmetries among movies, and for the variation in these asymmetries across release seasons. Specifically, I develop and estimate a sequential-move game with private information; I assume that the observed release date decisions are the equilibrium outcome of such a game. …