Is Rotten Tomatoes killing the movie industry? A regression discontinuity approach

ABSTRACT

We study the effect of expert reviews on consumer choice, focusing on the movie industry. Specifically, we estimate the impact of a popular movie review aggregator – Rotten Tomatoes (RT) – on box office revenue, using a sample of 1,239 movies widely-released in the U.S. between 1999 and 2019. RT’s rating system allows us to use regression discontinuity, thus avoiding problems associated with omitted unobservable characteristics of movies (such as quality and commercial appeal). We do not find evidence that RT ratings affect box office performance.

KEYWORDS:

• Rotten Tomatoes
• expert reviews
• movie industry
• regression discontinuity
• films

JEL CLASSIFICATION:

• D8
• D9
• C21
• C39

Acknowledgments

We gratefully acknowledge the financial support for this project from the FAPESP, CAPES, and CNPq agencies.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ https://www.nytimes.com/2017/09/07/business/media/rotten-tomatoes-box-office.html?searchResultPosition=3.

² The literature also includes empirical papers that study how experts affect the market of other experience goods, such as books (Sorensen 2007; Berger, Sorensen, and Rasmussen 2010), wine (Dubois and Nauges 2010; Hilger, Rafert, and Villas-Boas 2011; Friberg and Grönqvist 2012; Chen and McCluskey 2018), restaurant meals (Fogarty 2012; Gergaud, Storchmann, and Verardi 2015), and music (Ginsburgh and Van Ours 2003).

³ We consider other kernels to weigh observations and non-linearities in Equation (1)(1) $Y_i=\alpha +\tau \cdot T_i+{\beta }_1\cdot \left(X_i-0.6\right)+\gamma \cdot T_i\cdot \left(X_i-0.6\right)+Z_i\theta \hspace{0.17em}+{\epsilon }_i$(1) – through polynomials up to order 4. Qualitatively, our key results remain the same.

Additional information

Funding

This work was supported by the National Council for Scientific and Technological Development - CNPq [Scholarship]; São Paulo Research Foundation - FAPESP [2018/02272-1]; Coordination for the Improvement of Higher Education Personnel - CAPES [Scholarship].