Speaker: Prof. Yong Liu, Department of Marketing, University of Arizona
Title: Effects of International Release Gap on U.S. and Foreign Movies: Evidence from China
Abstract: International market has become an increasingly important revenue source for movie studios. This paper examines the effects of a critical factor that influences the overseas box office sales of U.S. movies, the gap between a movie’s U.S. release and foreign release. In recent years the release gap has shrunk from months to weeks or even days, presumably due to the desire to combat piracy in foreign markets. Yet, we know little about how the release gap can actually affect demand. The empirical context of our study is the sales of U.S. movies in China, which has quickly grown to be the second largest theatrical markets in the World. We argue that the effect of release gap on foreign sales manifest in three different ways: to influence the attractiveness of the movie (delay effect), to influence movie word-of-mouth from the U.S. market (WOM effect), and to influence seasonality of the Chinese release (seasonality effect). While the delay effect should be negative, the WOM effect and the seasonality effect can be positive. Our empirical analysis is built upon the discrete choice model of demand for movies proposed by Einav (2007). We employ a two-stage estimation process to decompose the releasing gap effect, followed by a series of counterfactuals to examine the relative impacts of the three effects. Our data include all U.S. movies released in China from 2008 to 2015. Among other results, we find that, on average, U.S. movies suffered from the release gap—their box office would have increased by 15% (6 billion RMB) if there were no release gap. The loss was due to “pure” delay and worse local seasonality, mitigated by pre-release WOM benefit. In terms of magnitudes, the delay effect was greater than the WOM effect, followed by the seasonality effect. We also find that the effects of these three factors are even greater on Chinese domestic movies than on U.S movies.
Bio: Yong Liu is Professor of Marketing and Eller Professor at the Eller College of Management, University of Arizona. His research focuses on quantitative analysis of innovation and business models, social interactions and influence, media and entertainment markets (especially the movie industry), and managing product-harm crisis. His research has been published in journals such as Marketing Science, Management Science, Journal of Marketing, and Quantitative Marketing and Economics. He was named a Marketing Science Institute (MSI) Young Scholar. He currently serves on the Editorial Review Board of Journal of Marketing and Marketing Science, and is an Associate Editor for Journal of Retailing and Decision Sciences. He teaches innovation, marketing strategy and marketing research in undergraduate, graduate and executive programs. He has won several teaching awards including Executive MBA Award for Outstanding Module and Dean’s Course Innovation Award. He received his Ph.D. in Marketing from the University of British Columbia, Vancouver, Canada.