Paramount Pictures: the Transformers Dilemma
The dilemma faced by Paramount pictures was to decide what changes, if any, should be made to Transformers 3: Dark of the Moon’s release date, best promotion strategy, and anticipate the rival Warner Brothers’ move. Each competitor probably had three options to choose from for the respective release dates. Paramount could consider moving the release date two weeks ahead to June, stay with the original July 1st weekend tentative date, or move the date to fall season.
Similarly, Warner Brothers’ could choose to move Harry Potter and The Deathly Hallows Part 2’s date ahead to the July 1st weekend, stay with the original date or move the date to fall. As shown in Exhibit 1, we can see the comparison matrix for the implications on either studio’s decision to keep or change the date. But before we finalize on what Paramount should do just based on that comparison, we must ascertain each of the movie’s strengths and how that translates to correlate with the table.
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What we know of the changes in the release date in general is that if any studio decided to release the movie earlier, they would find it difficult to market the movie in a shorter period of time. While if the movie was pushed to the fall season then it could possibly imply that the movie was not good enough to compete with the other blockbuster releases. A justification would also be necessary, and there was a great chance that the audience might get disappointed or bored waiting.
Keeping the release date as originally planned would be consistent with the press release and expectations of the people. And pre-release marketing would be on track. While Transformers 3 was a highly awaited movie, The Deathly Hallows Part 2 was the last of the Harry Potter series and was definitely a really strong contender to steal the revenue share. There was a chance that WB would try to move the release to the July 1st weekend.
But that seems unlikely because it would force the theatres to choose which film to screen on their 3D and IMAX screens and The Deathly Hallows Part 2 was inferior to Transformers 3 in its 3D quality. Revenues of both the movies would be badly hurt in such a scenario, but Transformers 3 would do comparatively better in the 3D and IMAX market. That being said, when we look at any of the studio’s options to move the release date to fall, we see a grim picture. Although one could argue that the movie would face lesser competition and would have more time or pre-release marketing. The fizz from the anticipation of the movie’s release could be lost and could also result in anguish from the fans. So both the studios might avoid this path. Having ruled out the possibility of WB advancing the release date and WB or Paramount postponing the release dates, we’re left with the options of Paramount either sticking to the original date or advancing the release date. Paramount could advance the release date by a week or two and avoid a bigger clash with WB.
This would mean ramping up the pre-release marketing operations, but more time to earn revenues before sharing it with WB. But there’s one catch to it, we know that the theatres’ revenue model is pretty simple at taking 10% of ticket sales in the first weekend and increased this by 10% each week thereafter. So the earnings during the highly sought after long weekend would be shared with a greater percentage going to the theatres. Was this worth taking the risk of advancing the release date? Probably not.
Because, additionally later when The Deathly Hallows Part 2 would release, the theatres would give more preference to a newer movie over something that was release one month ago. Now we’re looking at the option of Paramount releasing Transformers 3 on the originally decided July 1st weekend. This move can be supported with the data we have from history when movies from the Harry Potter series were released twice, each in the summers of 2007 and 2009, two weeks after the release of Transformers 1 and 2.
In both the occasions, domestic gross as collected by Paramount was greater than that of WB at – $320M vs. $292M and $400M vs. $301M. Also, in the history of Harry Potter releases, the franchise had not fared too well in the summer releases as against fall releases which would give Paramount a little more confidence. Hence, the best strategic move for Paramount would be to stick with the original release date and work on customizing its pre-release marketing.
Paramount should invest in laying emphasis on the superiority of its 3D technology and invest in educating the customers to better identify high quality 3D movies from the low quality ones. It would also be wise for Paramount to relay the first two parts of the Transformers’ series either on television or in theatres just before or during the release week of Transformers 3. We should be ready to brace the fact that revenues will be split with WB, but we should try to maximize the gross openings’ earnings and try to lure theatres to give Paramount major share of 3D and IMAX screening space.