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Uncertainty in the Movie Industry: Does Star Power Reduce the Terror of the Box Office?

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Author Info
Arthur De Vany
W. Walls

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Abstract

Everyone knows that the movie business is risky. But how risky is it? Do strategies exist that reduce risk? We investigate these questions using a sample of over 2000 motion pictures. We discover that box-office revenues are asymptotically Pareto-distributed and have infinite variance. The mean is dominated by rare blockbuster movies that are located in the far right tail. There is no typical movie because box-office revenue outcomes do not converge to an average: revenues diverge over all scales. The studio model of risk management lacks a foundation in theory or evidence, and revenue forecasts have zero precision. Movies are complex products and the cascade of information among film-goers during the course of a film's run can evolve along so many paths that it is impossible to attribute the success of a movie to individual causal factors. The audience makes a movie a hit and no amount of “star power” or marketing can alter that. The real star is the movie. Copyright Kluwer Academic Publishers 1999

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File URL: http://hdl.handle.net/10.1023/A:1007608125988
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Publisher Info
Article provided by Springer in its journal Journal of Cultural Economics.

Volume (Year): 23 (1999)
Issue (Month): 4 (November)
Pages: 285-318
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Handle: RePEc:kap:jculte:v:23:y:1999:i:4:p:285-318

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Related research
Keywords: star power; Pareto law; motion picture industry;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. De Vany, A., 1997. "Complexity in the Movies," Papers 97-98-06, California Irvine - School of Social Sciences.
  2. Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," Journal of Business, University of Chicago Press, vol. 36, pages 394. [Downloadable!]
  3. Ijiri, Yuji & Simon, Herbert A, 1971. "Effects of Mergers and Acquisitions on Business Firm Concentration," Journal of Political Economy, University of Chicago Press, vol. 79(2), pages 314-22, March-Apr. [Downloadable!] (restricted)
  4. Steven Albert, 1998. "Movie Stars and the Distribution of Financially Successful Films in the Motion Picture Industry," Journal of Cultural Economics, Springer, vol. 22(4), pages 249-270, December. [Downloadable!] (restricted)
  5. Walls, W David, 1998. "Product Survival at the Cinema: Evidence from Hong Kong," Applied Economics Letters, Taylor and Francis Journals, vol. 5(4), pages 215-19, April. [Downloadable!] (restricted)
  6. Blumenthal, Marsha A, 1988. "Auctions with Constrained Information: Blind Bidding for Motion Pictures," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 191-98, May. [Downloadable!] (restricted)
  7. De Vany, Arthur S & Walls, W David, 1997. "The Market for Motion Pictures: Rank, Revenue, and Survival," Economic Inquiry, Oxford University Press, vol. 35(4), pages 783-97, October.
  8. Walls, W David, 1997. "Increasing Returns to Information: Evidence from the Hong Kong Movie Market," Applied Economics Letters, Taylor and Francis Journals, vol. 4(5), pages 287-90, May. [Downloadable!] (restricted)
  9. De Vany, Arthur & Walls, W David, 1996. "Bose-Einstein Dynamics and Adaptive Contracting in the Motion Picture Industry," Economic Journal, Royal Economic Society, vol. 106(439), pages 1493-1514, November. [Downloadable!] (restricted)
  10. Kenney, Roy W & Klein, Benjamin, 1983. "The Economics of Block Booking," Journal of Law & Economics, University of Chicago Press, vol. 26(3), pages 497-540, October.
  11. Chisholm, Darlene C, 1996. "Continuous Degrees of Residual Claimancy: Some Contractual Evidence," Applied Economics Letters, Taylor and Francis Journals, vol. 3(11), pages 739-41, November. [Downloadable!] (restricted)
  12. Chung, Kee H & Cox, Raymond A K, 1994. "A Stochastic Model of Superstardom: An Application of the Yule Distribution," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 771-75, November. [Downloadable!] (restricted)
  13. Eugene F. Fama, 1963. "Mandelbrot and the Stable Paretian Hypothesis," Journal of Business, University of Chicago Press, vol. 36, pages 420. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Keith Acheson & Christopher J. Maule, 2000. "The Proprietary Rights Initiatives in Canadian Film Distribution Policy," Carleton Economic Papers 00-03, Carleton University, Department of Economics. [Downloadable!]
  2. W. Walls, 2009. "Screen wars, star wars, and sequels," Empirical Economics, Springer, vol. 37(2), pages 447-461, October. [Downloadable!] (restricted)
  3. Alexis Dantec & Florence Levy, 2005. "Stars et box office : un état des approches théoriques et empiriques," Documents de Travail de l'OFCE 2005-13, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
  4. Eva Deuchert & Kossi Adjamah & Florian Pauly, 2005. "For Oscar Glory Or Oscar Money?," Journal of Cultural Economics, Springer, vol. 29(3), pages 159-176, August. [Downloadable!] (restricted)
  5. Thorsten Hennig-Thurau & Mark Houston & Shrihari Sridhar, 2006. "Can good marketing carry a bad product? Evidence from the motion picture industry," Marketing Letters, Springer, vol. 17(3), pages 205-219, July. [Downloadable!] (restricted)
  6. James Jozefowicz & Jason Kelley & Stephanie Brewer, 2008. "New Release: An Empirical Analysis of VHS/DVD Rental Success," Atlantic Economic Journal, International Atlantic Economic Society, vol. 36(2), pages 139-151, June. [Downloadable!] (restricted)
  7. Louis Lévy-Garboua & Claude Montmarquette, 2002. "The Demand for the Arts," CIRANO Working Papers 2002s-10, CIRANO. [Downloadable!]
  8. Morris Holbrook & Michela Addis, 2008. "Art versus commerce in the movie industry: a Two-Path Model of Motion-Picture Success," Journal of Cultural Economics, Springer, vol. 32(2), pages 87-107, June. [Downloadable!] (restricted)
  9. W David Walls, 2004. "Modeling movie success when "nobody knows anything": Conditional stable distribution analysis of film returns," Econometric Society 2004 Far Eastern Meetings 409, Econometric Society. [Downloadable!]
    Other versions:
  10. Michael Pokorny & John Sedgwick, 2001. "Stardom and the Profitability of Film Making: Warner Bros. in the 1930s," Journal of Cultural Economics, Springer, vol. 25(3), pages 157-184, August. [Downloadable!] (restricted)
  11. Ralf Dewenter & Michael Westermann, 2005. "Cinema Demand In Germany," Journal of Cultural Economics, Springer, vol. 29(3), pages 213-231, August. [Downloadable!] (restricted)
  12. S. Ravid, 2005. "The Big Picture: The New Logic Of Money And Power In Hollywood," Journal of Cultural Economics, Springer, vol. 29(3), pages 239-242, August. [Downloadable!] (restricted)
  13. Giovanni B. Ramello, 2004. "Intellectual property and the markets of ideas," LIUC Papers in Economics 161, Cattaneo University (LIUC). [Downloadable!]
    Other versions:
  14. Gerda Gemser & Martine Oostrum & Mark Leenders, 2007. "The impact of film reviews on the box office performance of art house versus mainstream motion pictures," Journal of Cultural Economics, Springer, vol. 31(1), pages 43-63, March. [Downloadable!] (restricted)
  15. Edoardo Gaffeo & Antonello E. Scorci & Laura Vici, 2008. "Demand Distribution Dynamics in Creative Industries: the Market for Books in Italy," Department of Economics Working Papers 0804, Department of Economics, University of Trento, Italia. [Downloadable!]
  16. W. D. Walls, 2008. "Screen Wars, Star Wars, and Sequels: Nonparametric Reanalysis of Movie Profitability," Working Papers 2008-28, Department of Economics, University of Calgary, revised 24 Jan 2008. [Downloadable!]
  17. Darlene Chisholm, 2004. "Two-Part Share Contracts, Risk, and the Life Cycle of Stars: Some Empirical Results from Motion Picture Contracts," Journal of Cultural Economics, Springer, vol. 28(1), pages 37-56, February. [Downloadable!] (restricted)
  18. Arthur Vany & W. Walls, 2007. "Estimating the Effects of Movie Piracy on Box-office Revenue," Review of Industrial Organization, Springer, vol. 30(4), pages 291-301, June. [Downloadable!] (restricted)
  19. Chris Hand, 2002. "The Distribution and Predictability of Cinema Admissions," Journal of Cultural Economics, Springer, vol. 26(1), pages 53-64, February. [Downloadable!] (restricted)
  20. de Vany, Arthur & Kim, Cassey Lee Hong, 2003. "Stochastic Market Structure: Concentration Measures and Motion Picture Antitrust," Centre on Regulation and Competition (CRC) Working papers 30701, University of Manchester, Institute for Development Policy and Management (IDPM). [Downloadable!]
  21. W. Walls, 2003. "John Sedgwick: 2001, Popular Filmgoing in 1930s Britain: A Choice of Pleasures," Journal of Cultural Economics, Springer, vol. 27(3), pages 298-301, November. [Downloadable!] (restricted)
  22. E. Gaffeo & A. E. Scorcu & L. Vici, 2008. "Demand Distribution Dynamics in Creative Industries: the Market for Books in Italy," Working Papers 630, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
    Other versions:
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