The Last Picture Show? Timing and Order of Movie Distribution Channels

TLDR

Movies are traditionally distributed across sequential channels such as theaters, home video, and video‑on‑demand, yet the optimal timing and order of these openings remains a contentious debate among industry experts and scholars. The study develops a revenue‑generation model for four sequential distribution channels. The model integrates choice‑based conjoint data with additional information. Empirical results from stratified random samples of 1770 consumers in the United States, Japan, and Germany indicate that sequential distribution timing and order changes can raise studio revenues by up to 16.2%, with revenue‑optimizing structures varying strongly across countries, and in the United States simultaneous theater and rental home‑video releases maximize studio revenue but harm theater chains, while the authors discuss implications and implementation barriers.

Abstract

Movies and other media goods are traditionally distributed across distinct sequential channels (e.g., theaters, home video, video on demand). The optimality of the currently employed timing and order of channel openings has become a matter of contentious debate among both industry experts and marketing scholars. In this article, the authors present a model of revenue generation across four sequential distribution channels, combining choice-based conjoint data with other information. Drawing on stratified random samples for three major markets—namely, the United States, Japan, and Germany—and a total of 1770 consumers, the empirical results suggest that the studios that produce motion pictures can increase their revenues by up to 16.2% through sequential distribution chain timing and order changes when applying a common distribution model for all movies in a country and that revenue-optimizing structures differ strongly among countries. Under the conditions of the study, the authors find that the simultaneous release of movies in theaters and on rental home video generates maximum revenues for movie studios in the United States but has devastating effects on other players, such as theater chains. The authors discuss different scenarios and their implications for movie studios and other industry players, and barriers for the implementation of the revenue-maximizing distribution models are critically reflected.