Do movie contents influence box-office revenues?

ABSTRACT

This article studies the determinants of box-office revenues in the motion picture industry. We first adopt an approach that takes into account quality signals (e.g. talent concentration, movie budget and Oscar awards, among others) to analyse the empirical relationship between category-specific parenthood ratings (R-ratings) and box-office revenues. Then, by matching movie contents with economic performance records, our original approach reveals that offensive contents like profanity or nudity may be a hindrance to achieve economic returns, while violent contents seems to enhance box-office revenues. Further research is needed to clarify the interaction in this regard between production budget and movie contents.

KEYWORDS:

• Motion picture industry
• box-office revenues
• offensive contents
• consumer preferences

JEL CLASSIFICATION:

• L10
• L82

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The usual classification defines R-rated films as Restricted, with no one under 17 admitted without an accompanying parent or guardian. This rating is given for strong and frequent language and violence, nudity for sexual purposes and the abuse of drugs.

² See also earlier studies by De Vany and Walls (1999), Ravid (1999), Chung and Cox (1998), Albert (1998), Prag and Cassavant (1994) and Wallace, Seigerman, and Holbrook (1993). The influence of the status of film director on revenues is examined by Litman and Kohl (1989) and Sochay (1994). The topic of superstars was broadly treated in the article by Rosen (1981).

³ To this aim, Elliot and Simmons (2008) build a vector comprising a set of qualitative variables: critical reviews and advertising, box-office records, production budget, award nominations, concentration of stars and high-profile directors. They argue that critical reviews affect film revenues both directly (‘word of mouth’ effect) and indirectly (advertising).

⁴ The idea that advertising acts as a signaling mechanism of quality was first argued by Nelson (1974). Then, Schmalensee (1978) developed a model in which advertising worked as a signal of product quality.

⁵ Different motivations lead the interests of other researchers. Collins, Hand, and Snell (2002), for instance, introduce threshold revenue values and apply an ordered logit model to explore how well films’ commercial performance is forecasted. Meloni, Paolini, and Tena (2014) estimate a hedonic model of U.S. movie revenues in foreign markets and argue that explanatory variables that fail to be exogenous for the U.S. market can generally be treated as exogenous in foreign markets.

⁶ Other sources of data include www.metacritic.com, www.rottentomatoes.com, www.filminteractive.com and www.boxoffice.es.

⁷ Farrar and Glauber (1967) states that ‘if a multivariable regression finds an insignificant coefficient of a particular explanator, yet a simple linear regression of the explained variable on this explanatory variable shows its coefficient to be significantly different from zero, this situation indicates multicollinearity in the multivariable regression’.