Determining the optimal release time of movies: A study of movie and market characteristics

Abstract

The over-the-top (OTT) industry has witnessed remarkable growth in recent years with a sharp increase in the number of subscribers, leading to increased competition among OTT platforms to acquire movie rights. Consequently, the gap between the theatrical and OTT releases has been diminishing over the last few years. An early release of a movie on an OTT platform fetches a higher distribution fee for a movie distributor (MD), however, it reduces the MD’s revenue from the theatrical release. Therefore, it becomes critical for the MD to determine the optimal release time and distribution fee combination. In this paper, we analytically solve the MD’s decision problem and provide a detailed analysis of how the optimal release time varies with changes in platform characteristics such as the proportion of ad revenue and the platform’s risk profile, movie characteristics such as success factor and suitability for OTT, and market characteristics such as broadband penetration, piracy rate and customers’ preferences for viewing channels. We compare our results with the actual release times of 243 movies released during 2015–2022. We find that the optimal release time increases with ad revenue proportion, broadband penetration, and piracy rate, whereas the optimal fee reduces non-linearly with release time and depends on OTT’s risk profile. Our findings also indicate that the optimal release time reduces for movies that do not provide any additional utility for theater goers, and as customers’ preference towards OTT increases. Our work provides much-needed guidelines for professionals dealing with movie releases on OTTs.