CKGSB website

CKGSB Knowledge

Box Office Sales: It’s all a Matter of Timing (Part 1)

by Brian Viard

April 7, 2014

 

box-office-sales

Box office sales are a function of movie release timings, but warding off competition is a different ball game altogether.

 

If you have ever watched James Dean in the movie Rebel Without a Cause, you probably remember the famous scene in which Dean’s character Jim Stark plays a game of “chicken” against the local bully Buzz Gunderson. The two drive stolen cars at a high speed toward a cliff. The first to jump out, letting his car fly over the cliff, is the “chicken” and loses. Of course, the trick is to hope that the other driver chickens out early enough that you still have enough time to jump out before you go over the cliff with your car.

The game of “chicken” is not just a subject for movies, but it also applies to those who make them. A movie usually earns the most revenue on its opening weekend and some weekends are much better than others. The biggest movie weekends of the year are in the summer when kids are out of school and during holidays when they are on vacation. Studios particularly like to open expensive movies with blockbuster potential on these big weekends because the amplification of revenue is greater. To see who gets to release their movie on these big weekends, they often play a game of “chicken”.

The game goes like this. Several studios might announce well in advance that they will each open a movie on a big weekend. The problem is that if all these movies, especially if they are similar, actually open simultaneously, competition will be intense and none of the movies will do well. So studios want to avoid direct face-offs on the same weekend but each studio wants the best weekends. What each studio hopes is that the others chicken out first and move their releases to a different weekend. The last one standing is the winner–they open their movie alone on a big weekend.

For example, last year two studios announced that they would both release big-production movies on December 18, 2015–a big weekend because it falls during Christmas vacation. On October 1, Universal Studios announced that it would release Warcraft (based on the video game) on that day. On November 7 Lucasfilm announced that it would release the next installment of the Star Wars franchise, Episode VII, on that same day. The problem for the two studios was that these are both very similar movies, fantasy science fiction, which would create intense competition for viewers. Both wanted to open that weekend but neither wanted to go head-to-head with another potential blockbuster with a similar theme.

What happened? Even though it had announced first, Universal Studios blinked first. A little over three weeks after Lucasfilm’s announcement, Universal Studios changed the release date for Warcraft to March 11, 2016, an okay weekend because some kids are on spring break but not nearly as good as the December 18 weekend.

Universal Studios’ initial statement is an example of what game theorists call “cheap talk”–easy to say but not worth much. A studio can always announce that they will release a movie on a particularly good weekend but that doesn’t mean that other studios will be deterred from doing the same. This sort of gamesmanship goes on with studios all the time. In fact, since movie ticket prices are virtually the same no matter what the movie, most of the competition among studios is over timing not price.

So what is a studio to do? The best thing is to turn “cheap talk” into what game theorists call a credible commitment. A credible commitment requires that you bear a heavy cost if you reverse your statement later. In the game of “chicken” that Jim Stark played you might tell your opponent that no matter how long he waits, you will wait longer before jumping out of your car. Your opponent is unlikely to be deterred by this because it is “cheap talk”. When you are close to the cliff edge, you have every incentive to jump even if your opponent has not. There is a way to turn this into a credible commitment but it requires some high-tech equipment. Once in the car handcuff yourself to the steering wheel and set a timer to release the handcuffs at the last second. This will deter your opponent. It is a credible commitment because there is no way for you to back out.

So how might studios make a credible commitment to release a movie on a particular date? This is not easy but there are some clever ways. Independence Day, the action vehicle for Will Smith, was released nationwide on July 2, 1996 and had been marketed with the tagline: “We’ve always believed we weren’t alone. On July 4, we’ll wish we were.” Other studios likely perceived this as a credible commitment to claim the big July 4 movie weekend. Fox hopes to claim the same for the sequel, Independence Day 2, slated for release on July 1, 2016. Similarly, Focus Features has announced that they will release Fifty Shades of Grey (based on the romantic novel) on February 11, 2015, three days before Valentine’s Day. Again, the hope is to deter rival studios from releasing other big-production films that day.

Of course, these kinds of clever word associations don’t come along very often. A more general way to credibly commit to a release date is to spend significant amounts in advertising the release date. Since you can’t get that money back if you later change the release date, it serves as a credible commitment. Unlike Stark’s game of “chicken” which selects on bravery (or maybe foolhardiness) this game selects those movies with the highest potential commercial success. They will tend to claim the prime weekends because they have a better chance of earning back the marketing dollars at the box office.

Next time in Part 2 of this column, I will discuss how the timing game works in China’s movie market. Things work a lot differently there.

You may also like

A Counter Narrative

Kevin Rudd, former Prime Minister of Australia, discusses the cost of protectionism and foresees trade as the major battlefield of the future.

by Mable-Ann Chang | Oct. 11 2021

Coming of Age

Key Opinion Leaders are becoming the vital link for brands to reach online consumers in China.

by SHI Weijun | Oct. 11 2021

Leap of Wealth

Becoming a billionaire in China is eminently possible, but maintaining a top spot is becoming increasingly difficult.

by Faye Bradley | Sep. 23 2021

Special Delivery

Chinese logistics companies are beefing up efforts to apply unmanned technology to logistics and delivery activities.

by Mark Andrews | Sep. 23 2021