For most large firms, more than half of revenues are generated outside their home country. In this flattening world, formulating the right strategies about when and how to release a new product in multiple countries can have a significant impact on success. Firms follow one of two strategies: waterfall (a cascade of releases) and sprinkler (simultaneous release) across multiple markets.
To study international market entry strategies, Reo Song, marketing doctoral candidate and Venkatesh Shankar, Coleman Chair Professor in Marketing examined the Hollywood motion picture industry, identifying which factors influence success on a global playing field. Their findings are valid for many types of products beyond movies.
The researchers used data from the motion picture industry to test their hypotheses for important reasons: unlike other industries, each movie is a unique product, and movie marketing and performance data are closely tracked.
In deciding the time window between launch in the home country and in a foreign market, time is money, says Shankar. If you wait too long to enter a market, you may miss a vital window of opportunity created by strong advertising. However, if you enter too soon, you may not benefit from the spread of positive word-of-mouth (WOM). This is especially true in the film industry, as movies have short life cycles and carry huge investments. Appropriately timed releases can transform a so-so movie into a hit and a good movie into a super hit in theaters.
Analyzing more than 200 films released in the U.S. and abroad, Shankar and Song have created a model that accounts for several variables and offers strategic insights that could improve a new movie’s revenues in each country.
As the film cascades to other countries, Shankar says marketers should plan on a strategy that involves releasing first to countries where there is a high demand for entertainment and a close cultural fit with the themes of the movie. In those environments, it will be easier for the film to succeed, boosting the WOM.
Traditionally, waterfall U.S. film releases go like this: domestic, U.K., other European countries, Asia, the rest of the world. Shankar says this is not always the best strategy. If a movie has a closer culture fit to another country, it should launch there sooner. For example, the film Dirty Dancing: Havana Nights, which was about Latin dance. After its U.S. release, it became a big hit in large Latin American markets such as Argentina and Brazil, where it generated enough positive WOM to be successful in other markets around the world.
Piracy may also be a factor in the country sequence decision. It’s a double-edged sword, says Shankar. On the one hand, releasing early in countries such as China and Russia means bootlegged copies of the film will be available for consumers immediatelyâ€”which may diminish box office sales. On the other hand, pirated copies can provide fast WOM and improve box office revenues.
Movies that are not likely to generate much additional positive WOM should consider the sprinkler method, which involves greater pre-launch advertising. Much anticipated sequels, such as Iron Man 2, do better with a sprinkler release, as the demand for them is already high and is less likely to be helped by new WOM. However, if another strong film is opening at the same time in a foreign country, then it may hurt the Hollywood movie’s ticket sales in that market.
While the model is complex, one thing is clear, says Shankar: many in Hollywood are ignoring these factorsâ€”and missing out on millions of dollars.
For more information, contact Reo Song or Venkatesh Shankar. Song is a fourth-year PhD candidate. The research on this topic is part of Song’s dissertation and has resulted in two working papers, with plans for several more.
Categories: Research Notes