Does 3D Make Sense for Hollywood? The Economic Implications of Adding a Third Dimension to Hedonic Media Products

Abstract

This article examines the economic effect of the 3D feature on movie success by using secondary data from all movies released in digital 3D between 2004 and 2011, and a 2D control sample. Using propensity score matching, the authors provide evidence for a sample selection bias that leads to an overestimation of the 3D effect if not accounted for. Matching results show that 3D movies are, on average, not economically advantageous when compared with 2D “twins.” However, subsequent weighted least squares regression analyses find that the impact of 3D on movie success varies in a non-linear, inverted U-shaped way with a “trend” variable that measures the point in time of a movie release and with a number of movie genres. A post-hoc analysis shows that a consumer's decision to attend a 3D screening of a 3D movie (instead of a 2D screening) is influenced by several factors, including whether the film is originally shot in 3D or the 3D element is added during postproduction.

ACKNOWLEDGMENTS

We thank the participants of the 2012 UCLA/Bruce Mallen Scholars and Practitioners Workshop in Motion Pictures Industry Studies and the 2013 Annual AMS conference for their constructive criticism on previous versions of this manuscript. We also thank Fabian Feldhaus, Rune Hertrich, Jörn Höggemeier, and Arne Neumann for their help in collecting the extensive amount of data.

Notes

¹ Daniel R. Fellman, formerly a leading manager at Warner Bros. Pictures and former president of the American Theatre Management Corporation.

² Please note that actual industry ROI values would be significantly higher, as revenue sources other than theatrical US box office sales also contribute substantially to the return on investment.

³ We also added the main effect of TREND because this is methodologically required (please note that all monetary variables are adjusted for inflation).

⁴ The first tercile covered the 24 movies in 3D released from January 2004 to June 24, 2010, the second tercile covered the 24 movies in 3D released from June 25, 2010, to May 2, 2011, and the third tercile covered the 25 movies in 3D released from May 3, 2011, to December 2011. Detailed results of this test are available from the authors upon request.

Additional information

Notes on contributors

Ann-Kristin Knapp

Ann-Kristin Knapp is with the Marketing Center Muenster, University of Muenster, Muenster, Germany.

Thorsten Hennig-Thurau

Thorsten Hennig-Thurau is with the Marketing Center Muenster, University of Muenster, Muenster, Germany.