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Competitive strategies in the motion picture industry: An ABM to study investment decisions
Abstract and Figures
We study a parsimonious competition setting whereby two studio
producers launch their movies simulta
neously. They compete deciding about
the positioning of their movies, as they can position close to or far
from the mainstream, and investing in advertising and in quality. We study our competitive setting with an analytical model and solve it using a standard game-theoretical technique. Next, we use an agent-based model
(ABM) to relax several assumptions of the analytical model and investigate more realistic market situations, such as symmetric as well as asymmetric positioning, competitions among big and/or small studios,
settings with more than two competitors, and studios that use weighted and evolving decision rules. Our results explain interesting dynamics behind the scenes of the competition. They indicate the drivers of studios' behaviors and shed light on some important aspects of their strategic competition. In this sense, our results offer relevant theoretical and practical implications.
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... The intensity of competition between businesses depends on whether each company intends to respect its competitors' turf or expand operations to encroach on it. Delre et al. [34] studied the competition strategy of distributors in the movie industry, examining their initial advertising costs and investment in films. In their model, viewers (who each have different preferences over movies) attend the theater during the launch and post-launch periods. ...
... Delre et al. [34] studied the effect of initial advertising campaigns for movies and calculated the effect of the advertisement by dividing the square root of the advertising cost by the difference between the film movie and viewer preference. The current study defines the effect of the investment made by retailer r to advertise to customer group k as in (1) ...
To survive in the ceaseless cycle of competition, businesses have developed strategies to become sustainable. These strategies include reusing products, which can lead not only to the creation of economic benefits but also to improvements in a corporation’s social and environmental responsibility. Product reuse can also increase the profit earned on new products by compensating customers who bring in old products to buy new ones, as the ensuing remanufacturing process allows for the reuse of materials and thus drives down costs. As businesses have come to recognize these values, the marketing competition to retrieve used products from customers has intensified. This research focuses on identifying effective compensation strategies to determine the appropriate advertising investment and trade-in value in a market where two homogeneous retailers compete. Retailers advertise to secure more customers to trade in their used products and to generate more trade-in sales than competitors do. A retailer’s results may vary according to its competitor’s investment strategy, which makes it useful to employ information on past competitor investment patterns to plan future investment strategies. However, as competitors using one another’s information may intensify the competition, better investment results could be obtained by ignoring competitor investment information. Therefore, this study suggests four competition strategies that determine the advertisement costs and trade-in allowance spent by retailers and discusses the difference in the profits obtained by the retailers under each of the four strategies.
... The past ABM literature on socio-economic phenomena provided evidence for the interdependence of peer behavior on individual decisions (e.g., voting choice and competitive strategies). Recently, the ABM has been used in the marketing literature [38,50,51] to study distinct market phenomena. Our model provides a unique amalgamation of consumer behavior and firm response. ...
Subscription decision in the telecom market is quite complex and cumbersome, invoking decision inertia in consumers and resulting in suboptimal choices. We implemented choice inertia and consumer interaction as an agent-based model to better understand the process. The model illustrates that with adequate peer interactions with active consumers, inactive consumers could overcome their inertia significantly and switch to a better alternative. Furthermore, the newly converted active consumers influenced their inert neighbors as a ripple effect. Active consumers contribute to firm profits and healthy market competition. Moreover, in environments with low neighborhood effects and a stronger inertia threshold, firms are able to maintain profits by retaining inert consumers. We show that apart from the attractiveness of market offerings, firms can benefit from understanding consumer inertia and devising means to reduce it.
... This method has been given a significant boost by the development of computerized decision support systems and intelligent computational programs (Macal et al. 2008). ABM has been applied in many social fields, such as land use (Haase et al. 2012), the film industry (Delre et al. 2017), financial markets (Mandes et al. 2016), risk management (Jenkins et al. 2017), and marketing (Giráldez-Cru et al. 2019). ABM has achieved remarkable research results and practical benefits. ...
Developing brand agricultural products (BAPs) has become a strategic choice for consumption upgrading and agricultural modernization in China. As a powerful marketing method, word-of-mouth (WOM) is rarely applied to BAPs. Based on the particularity of the agricultural environment and products in China, this paper focuses on the WOM behavior of consumers regarding BAPs. An agent-based simulation model was designed, including attitude and motivation functions. The former determines consumers’ attitudes toward BAPs, whereas the latter determines whether consumers will spread information by WOM. The model was validated, and some parameters were measured through a survey of Beijing consumers. Then, experiments were conducted to simulate the evolution process of consumers’ attitudes and willingness to engage in WOM and the influence of consumer heterogeneity on WOM spreading. Exploratory findings mainly show that (1) only when the strength of WOM marketing reaches a certain degree can it affect consumer attitudes toward BAPs, (2) in the early stage of WOM spreading, the greater the strength of economic stimulation to consumers, the greater the rate of WOM communication, and (3) the higher the education level of the target group of WOM marketing, the higher the efficiency of WOM communication.
... When financing decisions are made, the attached production team (Ebbers & Wijnberg, 2012) and expected appeal to cinema operators (Leung et al., 2020) become important in guiding the ultimate budget, as does the genre (Hsu et al., 2012;Shamsie et al., 2009) and anticipated competitive environment (Delre et al., 2017;. Strategic product placement is a well-known strategy for subsidizing production costs (Karniouchina et al., 2011;Patil & Bisoyi, 2012;Wiles & Danielova, 2009), but this is not without risk if consumers are put off by the practice . ...
Twenty years ago, there were all but a handful of scholarly studies published about the economics of the motion picture industry. Over the first decade of the new millennium, this changed dramatically and many studies began to appear in economics journals and those of cognate disciplines. The following, and most recent, decade has seen this trend continue and the literature on the “economics of movies” has well and truly matured. While economics and marketing disciplines still generate the most output, newer data‐orientated disciplines have increasingly turned their attention towards the industry and its abundance of rich and relatively accessible data. This survey endeavors to concisely but comprehensively review recent literature related to this eternally fascinating industry.
The movie industry is a highly differentiated context where production studios compete in non-price product attributes, which influences the box office results of a motion picture. Because of the short life cycle and the constant entrance of new competitive products, temporal decisions play a crucial role. Time series of the number of movies on release and the sum of the box office results of the ten top motion pictures (ranked by box office result for that week) present a counterphased seasonality in the US movie market. We suggest that a possible reason is a risk sensitivity adaptation in the behaviour of the movie’s distributors. This paper provides a model supporting this hypothesis. We developed an agent-based model of a movie market, and we simulated it for 15 years. A comparable global behaviour exists when producers schedule the movies according to given risk-sensitive strategies. This research improves the knowledge of the US motion picture market, analyzing a real-world scenario and providing insight into the behaviour of existing firms in a complex environment.
Purpose: Problems identified in the motion picture production include quality aspect, industry networking, marketing and promotion, and domestic focus of creative development work.
Design/methodology/approach: This article aims to develop a structured project management strategy to improve the Malaysian motion picture production.
Findings/results: Through the combination of a questionnaire survey and an interview survey, this research determined current barriers related to 10 knowledge areas of Project Management Body of Knowledge (PMBOK) in motion picture production projects.
Practical implications: This research developed a working model using the 10 knowledge areas in PMBOK for both the production and marketing projects in the motion picture industry in this fasting developing economy.
Originality/value: The 10 knowledge areas in PMBOK are consistent and valuable in making the film making processes sufficient. The motion picture production project management model developed in this study is experimental yet gives a fundamental understanding on strategy to focus and to conduct a proper film making or motion picture production.
We show how genetic algorithms can be used to evolve strategies in oligopolistic markets characterized by asymmetric competition. The approach is illustrated using scanner tracking data of brand actions in a real market. An asymmetric market-share model and a category-volume model are combined to represent market response to the actions of brand managers. The actions available to each artificial brand manager are constrained to four typical marketing actions of each from the historical data. Each brand's strategies evolve through simulations of repeated interactions in a virtual market, using the estimated weekly profits of each brand as measures of its fitness for the genetic algorithm. The artificial agents bred in this environment outperform the historical actions of brand managers in the real market. The implications of these findings for the study of marketing strategy are discussed.
The extremely short life cycle and the rapid decay in revenues after opening coupled with the rapid and frequent introduction of new competitive products makes the timing of new product introductions in the motion picture industry critical, particularly during the high-revenue Christmas and summer seasons. Each studio wants to capture as much of the season as possible by opening early in the season. At the same time, each wants to avoid head-to-head competition. The authors model competition between two motion pictures in a share attraction framework and conduct an equilibrium analysis of the product introduction timing game in a finite season. The following three different equilibrium configurations emerge: (1) a single equilibrium with both movies opening simultaneously at the beginning of the season, (2) a single equilibrium with one movie opening at the beginning of the season and one delaying, and (3) dual equilibria, with either movie delaying opening. A key factor is the product life cycle, which can be captured well with a two-parameter exponential decline. The authors relate the life-cycle parameters to these possibilities with the general result that the weaker movie may be forced to delay opening. These results are related to case studies of the opening of recently released movies. A statistical analysis of the 1990 summer season in North America provides support for the conclusions and suggests that current release timing decisions can be improved. The authors discuss the rationale of "avoiding the competition" in the general context of product introduction timing.
Many marketing models use variants of the relationship: Market share equals marketing effort divided by total marketing effort. Replacing marketing effort with its resulting “attraction,” the relationship is derived from the assumptions: (1) attraction is nonnegative, (2) equal attractions imply equal shares, and (3) a seller's share is affected the same if the attraction of any other seller increases a fixed amount.
The authors attempt to assess what has been learned from econometric models about the effect of advertising on sales. Short-term and long-term advertising response as well as model fit are analyzed for 128 econometric models involving the impact of advertising on sales. The approach, a form of meta-analysis called “replication analysis,” treats the studies as imperfect experimental replications and uses ANOVA to identify sources of systematic variation. For short-term advertising elasticities, systematic variability is found related to model specification, estimation, measurement, product type, and setting of study. For advertising carryover and model goodness of fit, the “quasi-experimental design” is so imperfect that a high degree of sharing of explained variance among explanatory factors makes it difficult to identify the impact of a particular factor. Because the studies mostly address mature products in the U.S., suggestions are made for research needs crucial to better understanding of how advertising affects sales.
Managers are often advised, “beat your competitors,” which sometimes contrasts with the advice, “do the best for your firm.” This may lead managers to focus on comparative measures such as market share. Drawing on game theory, the authors hypothesize that managers are competitor oriented under certain conditions, in particular, when they are provided with information about competitors’ performance. Empirical studies lead to the additional hypothesis that a competitor orientation is detrimental to performance. To examine these hypotheses, the authors conduct two studies. The first is a laboratory study in which 1016 subjects made pricing decisions. When information about the competitor's profits was provided, over 40% of the subjects were willing to sacrifice part of their company's profits to beat or harm the competitor. Such competitor-oriented behavior occurred across a variety of treatments. The second is a field study used to examine the performance over a half-century of 20 large U.S. firms with differing objectives. Firms with competitor-oriented (market share) objectives were less profitable and less likely to survive than those whose objectives were directly oriented to profits.
Despite extensive academic research on how to identify competitors objectively, marketers know relatively little about how managers identify competitors in practice. The authors bring together diffuse literature in this area and propose a cognitive framework for managerial identification of competitors. They report the results of two studies that examine the attributes managers use in deciding who their competitors are.
Game theory, the formalized study of strategy, began in the 1940s by asking how emotionless geniuses should play games, but ignored until recently how average people with emotions and limited foresight actually play games. This book marks the first substantial and authoritative effort to close this gap. Colin Camerer, one of the field's leading figures, uses psychological principles and hundreds of experiments to develop mathematical theories of reciprocity, limited strategizing, and learning, which help predict what real people and companies do in strategic situations. Unifying a wealth of information from ongoing studies in strategic behavior, he takes the experimental science of behavioral economics a major step forward. He does so in lucid, friendly prose. Behavioral game theory has three ingredients that come clearly into focus in this book: mathematical theories of how moral obligation and vengeance affect the way people bargain and trust each other; a theory of how limits in the brain constrain the number of steps of "I think he thinks . . ." reasoning people naturally do; and a theory of how people learn from experience to make better strategic decisions. Strategic interactions that can be explained by behavioral game theory include bargaining, games of bluffing as in sports and poker, strikes, how conventions help coordinate a joint activity, price competition and patent races, and building up reputations for trustworthiness or ruthlessness in business or life.
A new model approach is developed to evaluate the market performance of new film releases as a function of advertising. The proposed model sequentially links planned advertising expenditures for a new film introduction to awareness, intention to see the film, as well as projected ticket sales at the box office. This paper illustrates how the model may be used by a movie studio to evaluate alternative film introduction strategies based on proposed allocations of advertising expenditures as well as theater distribution intensities over a film's life cycle.
This paper examines the role of consumer preferences, costs, and price competition in determining the competitive product strategy of a firm. In the model studied here, there are two identical firms competing on product quality and price. They face consumers who prefer a higher quality product to a lower quality product, but differ in how much they are willing to pay for quality. The consumers can also choose a substitute if they don't like the product-price offerings of the two firms. For the firms, a higher quality product costs more to produce than a lower quality product. The paper shows that the equilibrium strategy for each firm should be to differentiate its product from its competitor, with the firm choosing the higher quality choosing the higher margin as well. This differentiation, however, is not efficient—that is, it is possible to choose two other products and offer them at prices that cover their marginal cost, and still satisfy consumers' “needs” better in the aggregate. A monopolist, by contrast, would differentiate his product line efficiently. This suggests that cannibalization has different effects on product strategy than competition. The paper also shows that if one firm enters the market first, then it can defend itself from later entrants, and gain a first-mover advantage, by preempting the most desirable product position.