Sales through sequential distribution channels: An application to movies and videos

This article focuses on the sale of a product across channels that are ente red sequentially. Using a two-channel model, the authors derive the optimal time to enter the second channel and then obtain a specific parametric sol ution for movie distributors regarding theater attendance and subsequent sa les to video stores. Using data from 35 movies, the authors estimate expone ntial sales curves for both theater attendance and video rentals and demons trate how knowledge of the sales parameters in the first channel (theaters) helps predict sales in the second channel (video rentals). Finally, from t he movie distributor's perspective, the authors calculate optimal release t imes based on the model and its estimated parameters. The results suggest t hat profits would increase if movies were released to video sooner than is the current practice.