“Counterfactual decomposition of movie star effects with star selection”

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Author Information : Tridib Mazumdar (Whitman School of Management, Syracuse University)
Angela (Xia) Liu (School of Economics and Management, Tsinghua University)
Bo Li (School of Economics and Management, Tsinghua University)

Year of Publication : Management Science (2014)

Summary of Findings : The presence of a star acts as a signal for risk-averse distributors who allocate greater numbers of screens for star movies than non-star movies, which in turn raises box office revenues for star movies.

Research Questions : 1. How much of the positive outcome of a movie with a star can actually be attributed to the star’s reputation and talent?

2. How much of the positive outcome of a movie is attributed to the preferential selection and favorable characteristics that a star is able to secure?

3. What would a film’s outcome be if an unknown actor/actress had the lead role, given that individual possessed the same influence on the film’s production characteristics (e.g., script, budget, distribution, genre, etc.) of a well-known actor/actress?

What we know : Stars are present in a variety of industries and some observers believe they improve the performance of the organization or team they represent.


In the motion picture industry, stars earn more and use their clout to influence movie production. What do they offer in return?

Novel Findings : Stars seek out movies with reputable directors, producers and production houses, as well as certain genres.

Stars avoid movies with demanding shooting locations and scripts likely to earn an “R” rating.

The presence of a star acts as a signal for risk-averse distributors who allocate greater numbers of screens for star movies than non-star movies.

Stars have influence and ability to secure the “right” characteristics of the movies in which they participate, which indirectly increases box office returns.

Novel Methodology : Uses a counterfactual decomposition methodology borrowed from labor economics, which allows researchers to statistically separate out the effects caused by a movie star and those caused by the movie characteristics that stars can preferentially secure for the movies in which they take part.

Implications for Practice : Producers or production houses will be better able to analyze the trade-offs between employing a movie star and paying hefty salaries and improving the production quality.

Distributors can extract better distribution contracts by pointing out that it is the wider distribution and not necessarily the stars that help revenue.

Producers/directors can use these findings to ensure the “right” film characteristics to attract stars.

Implications for Society: Society needs to be mindful of the risks of paying exorbitant compensations that star actors/actresses or athletes extract but do not always deliver.

Implications on Research: The counterfactual decomposition methodology can be used in marketing and other business disciplines where highly compensated individuals also are able to direct the resources need to succeed in their favor.

Full Citations : “Counterfactual decomposition of movie star effects with star selection” (with Liu, A. & Li, B.), Management Science, 2014.

http://pubsonline.informs.org/doi/pdf/10.1287/mnsc.2014.1923

Abstract : The paper, titled, "Counterfactual Decomposition of Movie Star Effects with Star Selection," examines the effects casting has on the financial success of a film. Specifically, the study asks, what would a film’s outcome be if an unknown actor/actress had the lead role, given that individual possessed the same influence on the film’s production characteristics (e.g., script, budget, distribution, genre, etc.) of a well-known actor/actress, or vice versa?

According to the researchers, “The counterfactual analysis shows that the presence of a star does ensure wider release of the movie. However, the movie’s box office revenue is determined almost entirely by the movie characteristics, and stars have no direct residual effect on revenue. The stars’ effect on revenue is therefore indirect, and it comes from the wider release of the movie and the stars’ judicial choices of movie characteristics.”

The presence of a star acts as a signal for risk-averse distributors who allocate greater numbers of screens for star movies than non-star movies.

Tridib Mazumdar

Tridib Mazumdar

Professor Mazumdar is the Howard R. Gendal Professor of Marketing and director of the Earl V. Snyder Innovation Management center. His research interests are in the areas of pricing, price promotions, new products, and determinants and effects of star power.
Tridib Mazumdar
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