Optimal Inter-Release Time between Sequentially Released Products

Marketers routinely use timing as a segmentation device through sequential product releases. While there has been much theoretical research on the optimal introduction strategy of sequential releases, there is little empirical research on this problem. This paper develops an econometric model to empirically solve the inter-release timing problem: it involves (1) developing and estimating a structural model of consumers’ choice for sequentially released products and (2) using the estimates of the structural model to solve for the optimal inter-release time. The empirical application focuses on the movie industry, where we specifically address the issue of the inter-release time between a theatrical movie and its DVD version. We find that consumers are indeed forward looking; a shrinking movie-DVD release window does negatively impact box office revenues, but there is a tradeoff in that there is greater residual buzz from the movie marketing that supports the sales of DVD due to the shorter time window. This leads to an inverted U shaped relationship between movie-DVD release window and revenues, and the theater-DVD window that maximizes industry revenue for the average movie during the data period is 2.5 months.