James Jianxin Gong

Management of Revenue Streams of Intellectual Properties in Sequential Markets

We study life cycle revenues of a particular category of intellectual property (IP), motion pictures, which sell in different formats in two sequential markets: the theatrical market and the home video market. We combine data collected from numerous public and proprietary sources and form a final sample of 654 motion pictures. Then we perform ordinary least square (OLS) analysis on the relationship between measures of the upstream market performance and downstream revenues. We document the positive impact of financial and nonfinancial measures of performance in the upstream theatrical market on subsequent revenues in the downstream home video market. We next examine the relevance of the nonfinancial measures in the managerial decisions regarding the product life in the upstream market. We find that the same set of performance measures influence the managerial decision regarding the motion picture’s theatrical life span. Finally, we study the relationship between the quality of managerial decisions and return on investment. We find that the quality of this decision is positively associated with total returns on investment in production and advertising of the motion picture. This study suggests that a set of financial and nonfinancial measures of performance in one market of IP can predict future performance in subsequent markets of the IP. These measures are also relevant in managerial decisions. This study differs from prior research in that it focuses on product level rather than firm level analysis.