Release Strategies in the Movie Industry: Why Arthouse Movies Benefit From a Day-And-Date Release. Thesis (Final version) Date of submission: 22-6-2018 Author: Merel Six Student number: 5893798 Supervisor: Peter van Baalen MSc. in Business Administration – Digital Business track Statement of originality This document is written by Merel Six who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents. Abstract The author aims to reveal the benefits of two standard release strategies for arthouse and mainstream movies in the Dutch movie industry through multi-study research. Releasing a movie according to a release schedule requires a specific combination of channel type, order, timing and pricing aspects. Currently, the ‘sequential’ release strategy is dominant in the market. Recent developments in the market have given rise to an alternative release strategy, named ‘day-and-date’. The ‘day-and-date’ strategy eliminates the timing gaps between theatrical and post-theatrical channels in order to meet customer’s preferences and potentially benefit from the more concentrated popularity and demand. However, many theatre owners remain averse to applying this new strategy due to uncertainties regarding its effects. This thesis aims to eliminate these uncertainties by researching the relationship between a day-and-date strategy and consumers overall purchase intentions. In addition three variables are studied that influence the relationship between release strategies and movie type; consumer preferences, opening strength and demand decay. The findings suggest that a day-and-date release benefits both arthouse and mainstream movies. Moreover, the sequential release strategy has less benefit for arthouse than mainstream movies because they have a low opening strength and high demand decay which reduces revenue generation in post-theatrical channels. The findings suggest that small arthouse movies that already struggle to reach an audience benefit most from a day-and-date release strategy, though in order to implement day-and-date there needs to be an alignment of interests for distributors, theatre owners and home video providers. 2 Acknowledgements I would first like to thank my thesis advisor Prof. Peter van Baalen at the University of Amsterdam, faculty of Operations Management. His door was always open and his comments, reviews and suggestions were always helpful and of a high academic standard. I would also like to thank all the respondents that participated in the online experiment that was conducted as part of this research. Thank you all for sharing the survey invitation and in helping me to collect such a large amount of data without any financial incentivization. I would also like to acknowledge Pathé-Thuis, especially Jaap Bruijnen for sharing his company’s data. I also want to thank Anke van Diejen and Noortje van de Sande from the day-and-date platform Picl who also contributed to the research by sharing a significant amount of data and insight. Many movie distributors have aided me in the development a comprehensive understanding of the current market situation; Annemiek de Jong, Rick Hartman, Anne Vierhout, Carlo Dias, Klaas de Jager, Edgar Daarnhouwer and many more. Thank you all very much. Finally, I must express my profound gratitude to my sweet parents, sister and brother whose support has been fantastic in every aspect. Through babysitting our 1.5-year-old daughter or through proofreading my thesis or by helping us move into a new house, they all have played their part in completing this master thesis for which I’m very grateful. Finally, I must thank my loving boyfriend Tijl who’s support was just amazing. Thank you. Merel Six 3 Contents ABSTRACT ........................................................................................................................................................ 2 ACKNOWLEDGEMENTS..................................................................................................................................... 3 1. INTRODUCTION ........................................................................................................................................ 8 2. REVENUE-OPTIMIZING RELEASE STRATEGIES ......................................................................................... 12 2.1. RELEASE STRATEGY: THE OPTIMAL COORDINATION OF CHANNEL & TIMING ............................................................ 12 2.2. THE SEQUENTIAL RELEASE STRATEGY .............................................................................................................. 13 2.3. THE DAY-AND-DATE RELEASE STRATEGY .......................................................................................................... 15 2.4. MOVIE-SPECIFIC INFLUENCERS OF RELEASE STRATEGIES ..................................................................................... 17 2.5. HYPOTHESIS: A DAY-AND-DATE RELEASE STRATEGY INCREASES TOTAL PRODUCER REVENUE IN COMPARISON TO A SEQUENTIAL RELEASE STRATEGY ................................................................................................................................. 19 3. ARTHOUSE VERSUS MAINSTREAM ......................................................................................................... 20 3.1. DEFINITIONS OF ARTHOUSE AND MAINSTREAM MOVIES ..................................................................................... 20 3.2. CONSUMER PREFERENCES ............................................................................................................................ 21 3.3. DEMAND DECAY ........................................................................................................................................ 23 3.4. HYPOTHESIS: A DAY-AND-DATE RELEASE STRATEGY OF ARTHOUSE MOVIES INCREASES TOTAL PRODUCER REVENUE MORE THAN DAY-AND-DATE RELEASE STRATEGY OF MAINSTREAM MOVIES................................................................................... 26 4. THEORY .................................................................................................................................................. 28 4.1. THEORETICAL FRAMEWORK .......................................................................................................................... 28 4.2. CONCEPTUAL MODEL .................................................................................................................................. 28 4.3. MULTI-STUDY RESEARCH DESIGN .................................................................................................................. 29 4.3.1. Study 1: Online experiment measuring Purchase Intentions ....................................................... 30 4.3.2. Study 2: Database study measuring Availability on Sequential Home Video Channels ............... 31 4.3.3. Study 3: Database study measuring Demand Decay ................................................................... 33 5. FIRST STUDY: THE EFFECT OF A DAY-AND-DATE RELEASE ON PURCHASE INTENTIONS ........................... 34 5.1. RESEARCH DESIGN ...................................................................................................................................... 34 5.1.1. Choice of method ......................................................................................................................... 34 5.1.2. Survey design ............................................................................................................................... 35 5.1.3. Sampling and data ....................................................................................................................... 36 5.1.4. Variables ...................................................................................................................................... 37 5.2. RESULTS................................................................................................................................................... 39 5.2.1. Description of Purchase Intentions .............................................................................................. 39 5.2.2. Analysis of Purchase Intentions .................................................................................................... 40 5.2.3. Analysis of Purchase Intentions in the first time frame ................................................................ 41 5.2.4. Description of Channel Preferences ............................................................................................. 42 5.2.5. Analysis of Consumer Preferences ............................................................................................... 44 4 5.3. CONCLUSIONS ........................................................................................................................................... 47 5.4. LIMITATIONS ............................................................................................................................................. 49 6. SECOND STUDY: THE AVAILABILITY OF ARTHOUSE MOVIES IN SEQUENTIAL CHANNELS ........................ 51 6.1. RESEARCH DESIGN .....................................................................................................................................