The importance of reciprocal spillover effects for the valuation of bestseller brands: introducing and testing a contingency model

The valuation of extension rights is critical for entertainment brands such as bestseller books. Building on brand extension research, we argue that accounting for the reciprocal spillover effect (i.e., the influence of an extension product on a parent brand) is important for determining the value of extension rights. We develop a contingency model of the reciprocal spillover effect for category extensions of entertainment products that are characterized by short life cycles and satiation effects. In the discussion of moderating factors, we pay particular attention to the new concept of backward integration, which accounts for the reaction of a parent to the introduction of an extension. Using data from all 446 literature adaptations produced for the big screen and theatrically released in North American theaters between 1998 and 2006, we provide evidence that extension success and marketing support impact the sales of the parent book and for several postulated moderating effects, including those of backward integration. Through simulation analyses, we demonstrate how considering the reciprocal effect in the managerial decision-making process can help entertainment managers to avoid biased estimations of category extension rights.