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

Authors: De Vany A.¹; Walls W.D.²

Source: Journal of Cultural Economics, Volume 23, Number 4, November 1999 , pp. 285-318(34)

Publisher: Springer

Buy & download fulltext article:

Price: $47.00 plus tax (Refund Policy)

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.

Keywords: star power; Pareto law; motion picture industry

Language: English

Document Type: Regular paper

Affiliations: 1: Department of Economics, Institute for Mathematical Behavioral Sciences, University of California, Irvine, CA 92697, U.S.A. 2: School of Economics and Finance, The University of Hong Kong, Pokfulam Road, Hong Kong

Publication date: 1999-11-01