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

Arthur De Vany and W. Walls

Journal of Cultural Economics, 1999, vol. 23, issue 4, 285-318

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

Keywords: star power; Pareto law; motion picture industry (search for similar items in EconPapers)
Date: 1999
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