Modeling the Main Determinants of Movie Sales: An Econometric Study of Chinese Marketplace
DOI:
https://doi.org/10.6000/1929-7092.2016.05.17Keywords:
Box office revenue, market sales return, cultural discountAbstract
This paper investigates the financial performance of movies in China, a fast-growing commercial exhibition marketplace. Movie sales and Chinese market returns, movie characteristics and cultural contexts are operationalized in ordinary least squares (OLS) regression and quantile regression models to explain the highly varied acceptance across different products released since 2009. The samples comprise most of the widely released motion pictures in China. We posit that production budgets, sequels, audience ratings, cultural contexts and movie genres can significantly account for the variation in box office (BO) revenue and sales-revenue-to-cost (SRTC) within the Chinese market. Movies produced in countries with similar cultural contexts capture more audiences measured by box office proceeds, but it is noteworthy that SRTC falls at a decreasing rate as cultural differences increase. An increase in production budget generates more sales in China, but reduces the SRTC ratios with other factors controlled. Although aggregate cinema attendance may fluctuate with releasing date, this is not always true for an individual movie's financial success. Quantile regressions provide us with a richer characterization of the relationship, enabling us to analyze the entire distribution of box office proceeds and SRTC ratios, as well as their determinants at key quantiles.
References
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http://dx.doi.org/10.1016/j.jbusres.2007.07.030
Basuroy, S., Chatterjee, S. and Ravid, S. A. 2003. “How Critical are Critical Reviews? The Box Office Effects of Film Critics, Star Power, and Budgets.” Journal of Marketing 67: 103-117.
http://dx.doi.org/10.1509/jmkg.67.4.103.18692
Bi, G. and Giles, D. E. 2009. “Modelling the Financial Risk Associated with U.S. Movie Box Office Earnings.” Mathematics and Computers in Simulation 79(9): 2759-2766.
http://dx.doi.org/10.1016/j.matcom.2008.04.014
Brookey, R. A. 2011. The International Film Business: A Market Guide Beyond Hollywood, by Angus Finney.” International Journal on Media Management 13(4): 301-303.
http://dx.doi.org/10.1080/14241277.2011.616107
Bruce, N. I., Foutz, N. Z. and Kolsarici, C. 2012. “Dynamic Effectiveness of Advertising and Word of Mouth in Sequential Distribution of New Products.” Journal of Marketing Research 49(4): 469-486.
http://dx.doi.org/10.1509/jmr.07.0441
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Cartier, M. and Liarte, S. 2012. “Impact of Underlying Demand and Agglomeration of Supply on Seasonality: The Case of the Hollywood Film Industry.” International Jounral of Arts Management 14(2): 17-30.
Chang, B.-H. and Ki, E.-J. 2005. “Devising a Practical Model for Predicting Theatrical Movie Success Focusing on the Experience Good Property.” Journal of Media Economics 18(4): 247-269.
http://dx.doi.org/10.1207/s15327736me1804_2
Chintagunta, P. K., Gopinath, S. and Venkataraman, S. 2010. “The Effects of Online User Reviews on Movie Box Office Performance: Accounting for Sequential Rollout and Aggregation across Local Markets.” Marketing Science 29(5): 944-957.
http://dx.doi.org/10.1287/mksc.1100.0572
Craig, C. S., Greene, W. H. and Douglas, S. P. 2005. “Cultural Matters: Consumer Acceptance of U.S. Films in Foreign Markets.” Journal of International Marketing 13(4): 80-103.
http://dx.doi.org/10.1509/jimk.2005.13.4.80
Desai, K. K. and Basuroy, S. 2005. Interactive Influence of Genre Familiarity, Star Power, and Critics' Reviews in the Cultural Goods Industry: The Case of Motion Pictures.” Psychology and Marketing 22(3): 203-223.
http://dx.doi.org/10.1002/mar.20055
De Vany, A. S. 2004. Hollywood Economics: How Extreme Uncertai-nty Shapes the Film Industry. London; New York: Routledge.
De Vany, A. S. and Walls, W. D. 2002. “Does Hollywood Make too Many R?rated Movies? Risk, Stochastic Dominance, and the Illusion of Expectation.” The Journal of Business 75(3): 425-451.
http://dx.doi.org/10.1086/339890
De Vany, A. S. and Walls, W. D. 2004. “Motion Picture Profit, the Stable Paretian Hypothesis, and the Curse of the Superstar. Journal of Economic Dynamics and Control” 28(6): 1035-1057.
http://dx.doi.org/10.1016/S0165-1889(03)00065-4
Einav, L. 2007. “Seasonality in the U.S. Motion Picture Industry.” The RAND Journal of Economics 38(1): 127-145.
http://dx.doi.org/10.1111/j.1756-2171.2007.tb00048.x
Elberse, A. and Eliashberg, J. 2003. “Demand and Supply Dynamics for Sequentially Released Products in International Markets: The Case of Motion Pictures.” Marketing Science 22(3): 329-354.
http://dx.doi.org/10.1287/mksc.22.3.329.17740
EntGroup. 2013a. “China Film Industry Report 2012-2013 (in brief).” Ent Report, 1-30.
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Erdem, T. 1998. “An Empirical Analysis of Umbrella Branding.” Journal of Marketing Research 35(3): 339-351.
http://dx.doi.org/10.2307/3152032
Fetscherin, M. 2010. The Main Determinants of Bollywood Movie Box Office Sales. Journal of Global Marketing 23(5): 461-476.
http://dx.doi.org/10.1080/08911762.2010.521117
Fu, W. W. and Lee, T. K. 2006. “Economic Determination of the Box Office Performances of Foreign Motion Pictures in the Singapore Cinema Market.” International Communication Association; 2006 Annual Meeting: 1-32.
Fu, W. W. and Lee, T. K. 2008. “Economics and Cultural Influences on the Theatrical Consumption of Foreign Films in Singapore.” Journal of Media Economics 21(1): 1-27.
http://dx.doi.org/10.1080/08997760701806769
Greene, W. H. 2012. Econometric Analysis (7 ed.). Boston: Pearson.
Hand, C. and Judge, G. 2011. “How Stable is the Seasonal Pattern in Cinema Admissions? Evidence from the UK.” Journal of Economics Letters 18: 81-85.
http://dx.doi.org/10.1080/13504850903425140
Hofstede, G. H. 2013. “National Cultural Dimensions.” Retrieved 04/06/2013, from http://geert-hofstede.com/national-culture.html
Kim, E.-m. 2004. “Market Competition and Cultural Tensions between Hollywood and the Korean Film Industry.” International Journal on Media Management 6(3-4): 207-216.
http://dx.doi.org/10.1080/14241277.2004.9669403
Kogut, B. and Singh, H. 1988. “The Effect of National Culture on the Choice of Entry Mode.” Journal of International Business Studies 19(3): 411-432.
http://dx.doi.org/10.1057/palgrave.jibs.8490394
Lee, F. L. F. 2006. “Cultural Discount and Cross-culture Predictability: Examining the Box Office Performance of American Movies in HongKong.” Journal of Media Economics 19(4): 259-278.
http://dx.doi.org/10.1207/s15327736me1904_3
Lee, F. L. F. 2008. “Hollywood Movies in East Asia: Examining Cultural Discount and Performance Predictability at the Box Office.” Asian Journal of Communication 18(2): 117-136.
http://dx.doi.org/10.1080/01292980802021855
Lee, F. L. F. 2009. “Cultural Discount of Cinematic Achievement: The Academy Awards and U.S. Movies’ East Asian Box Office.” Journal of Cultural Economics 33(4): 239-263.
http://dx.doi.org/10.1007/s10824-009-9101-7
Liebler, C. M., Jiang, W. and Chen, L. (2015). “Beauty, Binaries, and the Big Screen in China: Character Gender in Feature Films.” Asian Journal of Communication 25(6): 584-599.
http://dx.doi.org/10.1080/01292986.2015.1019525
Litman, B. R. 1998. The Motion Picture Mega-industry: Boston: Allyn and Bacon.
Liu Y. 2006. “Word of Mouth for Movies: Its Dynamics and Impact on Box Office Revenue.” Journal of Marketing 70(3): 74-89.
http://dx.doi.org/10.1509/jmkg.70.3.74
McFadyen, S., Hoskins, C. and Finn, A. 2004. “The Effect of Program Type on the Cultural Discount in the Price of Exported U.S. Television Programs.” Paper presented at the Applied Econometrics Association International Conference on Econometrics of Cultural Goods, Padua, Italy.
McKenzie, J. 2012. “The Economics of Movies: A Literature Survey.” Journal of Economic Surveys 26(1): 42-70.
http://dx.doi.org/10.1111/j.1467-6419.2010.00626.x
Moon, S., Bergey, P. K. and Iacobucci, D. 2010. “Dynamic Effects among Movie Ratings, Movie Revenues, and Viewer Satisfaction.” American Marketing Association 74: 108-121.
Nation Bureau of Statistics of China. 2012. China Statistical Yearbook. Retrieved 01/06/2013, from http://www.stats.gov.cn/tjsj/ndsj/2012/indexch.htm
Palia, D., Ravid, S. A. and Reisel, N. 2008. “Choosing to Cofinance: Analysis of Project-specific Alliances in the Movie Industry.” Review of Financial Studies 21(2): 483-511.
http://dx.doi.org/10.1093/rfs/hhm064
Poupard, L. V. 2008. “How the Current Financial Crisis will Hurt the Movie Industry for a Long Time?” Retrieved 29/10/2013, from http://voices.yahoo.com/how-current-financial-crisis-will-hurt-movie-2216030.html
Ravid, S. A. 1999. “Information, Blockbusters, and Stars: A Study of the Film Industry.” The Journal of Business 72(4): 463-492.
http://dx.doi.org/10.1086/209624
Redondo, I. and Holbrook, M. B. 2010. “Modeling the Appeal of Movie Features to Demographic Segments of Theatrical Demand.” Journal of Cultural Economics 34(4): 299-315.
http://dx.doi.org/10.1007/s10824-010-9127-x
Reinstein, D. A. and Snyder, C. M. 2005. “The Influence of Expert Reviews on Consumer Demand for Experience Goods: A Case Study of Movie Critics.” Journal of Industrial Economics 53(1): 27-51.
http://dx.doi.org/10.1111/j.0022-1821.2005.00244.x
Schiller, H. I. 1992. Mass Communications and American Empire. Boulder: Westview Press.
Su, Y. 2010. “Chinese Box Office Grow 43% to Hit $908m in 2009.” Retrieved 16/01/2013, from http://www.chinadaily.com.cn/ bizchina/2010-01/09/content_9293353.htm
Tomlinson, J. 1991. Cultural Imperialism: A Critical Introduction. London: Pinter Publishers.
Walls, W. D. 2005a. “Modeling Movie Success When ‘Nobody Knows Anything’: Conditional Stable-distribution Analysis of Film Returns.” Journal of Cultural Economics 29(3): 177-190.
http://dx.doi.org/10.1007/s10824-005-1156-5
Walls, W. D. 2005b. “Modelling Heavy Tails and Skewness in Film Returns.” Applied Financial Economics 15(17): 1181-1188.
http://dx.doi.org/10.1080/0960310050391040
Walls, W. D. and McKenzie, J. 2012. “The Changing Role of Hollywood in the Global Movie Market.” Journal of Media Economics 25(4): 198-219.
http://dx.doi.org/10.1080/08997764.2012.729544
Yeh, E. Y.-y. 2009. “Pitfalls of Cross-cultural Analysis: Chinese Wenyi Film and Melodrama.” Asian Journal of Communication 19(4): 438-452.
http://dx.doi.org/10.1080/01292980903293379
Zhou, X. 2001. “‘From behind the Wall’ The Representation of Gender and Sexuality in Modern Chinese Film.” Asian Journal of Communication 11(2): 1-17.
http://dx.doi.org/10.1080/01292980109364801
http://dx.doi.org/10.1023/A:1007579421768
Basuroy, S. and Chatterjee, S. 2008. “Fast and Frequent: Investigating Box Office Revenues of Motion Picture Sequels.” Journal of Business Research 61(7): 798-803.
http://dx.doi.org/10.1016/j.jbusres.2007.07.030
Basuroy, S., Chatterjee, S. and Ravid, S. A. 2003. “How Critical are Critical Reviews? The Box Office Effects of Film Critics, Star Power, and Budgets.” Journal of Marketing 67: 103-117.
http://dx.doi.org/10.1509/jmkg.67.4.103.18692
Bi, G. and Giles, D. E. 2009. “Modelling the Financial Risk Associated with U.S. Movie Box Office Earnings.” Mathematics and Computers in Simulation 79(9): 2759-2766.
http://dx.doi.org/10.1016/j.matcom.2008.04.014
Brookey, R. A. 2011. The International Film Business: A Market Guide Beyond Hollywood, by Angus Finney.” International Journal on Media Management 13(4): 301-303.
http://dx.doi.org/10.1080/14241277.2011.616107
Bruce, N. I., Foutz, N. Z. and Kolsarici, C. 2012. “Dynamic Effectiveness of Advertising and Word of Mouth in Sequential Distribution of New Products.” Journal of Marketing Research 49(4): 469-486.
http://dx.doi.org/10.1509/jmr.07.0441
Brzeski, P. and Tsui, C. 2013. “China Box Office up 36 Percent to $1.79 Billion in First Half of 2013.” Retrieved 29/10/2013, from http://www.hollywoodreporter.com/news/china-box-office-up-36-583085
Cartier, M. and Liarte, S. 2012. “Impact of Underlying Demand and Agglomeration of Supply on Seasonality: The Case of the Hollywood Film Industry.” International Jounral of Arts Management 14(2): 17-30.
Chang, B.-H. and Ki, E.-J. 2005. “Devising a Practical Model for Predicting Theatrical Movie Success Focusing on the Experience Good Property.” Journal of Media Economics 18(4): 247-269.
http://dx.doi.org/10.1207/s15327736me1804_2
Chintagunta, P. K., Gopinath, S. and Venkataraman, S. 2010. “The Effects of Online User Reviews on Movie Box Office Performance: Accounting for Sequential Rollout and Aggregation across Local Markets.” Marketing Science 29(5): 944-957.
http://dx.doi.org/10.1287/mksc.1100.0572
Craig, C. S., Greene, W. H. and Douglas, S. P. 2005. “Cultural Matters: Consumer Acceptance of U.S. Films in Foreign Markets.” Journal of International Marketing 13(4): 80-103.
http://dx.doi.org/10.1509/jimk.2005.13.4.80
Desai, K. K. and Basuroy, S. 2005. Interactive Influence of Genre Familiarity, Star Power, and Critics' Reviews in the Cultural Goods Industry: The Case of Motion Pictures.” Psychology and Marketing 22(3): 203-223.
http://dx.doi.org/10.1002/mar.20055
De Vany, A. S. 2004. Hollywood Economics: How Extreme Uncertai-nty Shapes the Film Industry. London; New York: Routledge.
De Vany, A. S. and Walls, W. D. 2002. “Does Hollywood Make too Many R?rated Movies? Risk, Stochastic Dominance, and the Illusion of Expectation.” The Journal of Business 75(3): 425-451.
http://dx.doi.org/10.1086/339890
De Vany, A. S. and Walls, W. D. 2004. “Motion Picture Profit, the Stable Paretian Hypothesis, and the Curse of the Superstar. Journal of Economic Dynamics and Control” 28(6): 1035-1057.
http://dx.doi.org/10.1016/S0165-1889(03)00065-4
Einav, L. 2007. “Seasonality in the U.S. Motion Picture Industry.” The RAND Journal of Economics 38(1): 127-145.
http://dx.doi.org/10.1111/j.1756-2171.2007.tb00048.x
Elberse, A. and Eliashberg, J. 2003. “Demand and Supply Dynamics for Sequentially Released Products in International Markets: The Case of Motion Pictures.” Marketing Science 22(3): 329-354.
http://dx.doi.org/10.1287/mksc.22.3.329.17740
EntGroup. 2013a. “China Film Industry Report 2012-2013 (in brief).” Ent Report, 1-30.
EntGroup. 2013b. “China moviegoer survey report 2012-2013.” Ent Report
Erdem, T. 1998. “An Empirical Analysis of Umbrella Branding.” Journal of Marketing Research 35(3): 339-351.
http://dx.doi.org/10.2307/3152032
Fetscherin, M. 2010. The Main Determinants of Bollywood Movie Box Office Sales. Journal of Global Marketing 23(5): 461-476.
http://dx.doi.org/10.1080/08911762.2010.521117
Fu, W. W. and Lee, T. K. 2006. “Economic Determination of the Box Office Performances of Foreign Motion Pictures in the Singapore Cinema Market.” International Communication Association; 2006 Annual Meeting: 1-32.
Fu, W. W. and Lee, T. K. 2008. “Economics and Cultural Influences on the Theatrical Consumption of Foreign Films in Singapore.” Journal of Media Economics 21(1): 1-27.
http://dx.doi.org/10.1080/08997760701806769
Greene, W. H. 2012. Econometric Analysis (7 ed.). Boston: Pearson.
Hand, C. and Judge, G. 2011. “How Stable is the Seasonal Pattern in Cinema Admissions? Evidence from the UK.” Journal of Economics Letters 18: 81-85.
http://dx.doi.org/10.1080/13504850903425140
Hofstede, G. H. 2013. “National Cultural Dimensions.” Retrieved 04/06/2013, from http://geert-hofstede.com/national-culture.html
Kim, E.-m. 2004. “Market Competition and Cultural Tensions between Hollywood and the Korean Film Industry.” International Journal on Media Management 6(3-4): 207-216.
http://dx.doi.org/10.1080/14241277.2004.9669403
Kogut, B. and Singh, H. 1988. “The Effect of National Culture on the Choice of Entry Mode.” Journal of International Business Studies 19(3): 411-432.
http://dx.doi.org/10.1057/palgrave.jibs.8490394
Lee, F. L. F. 2006. “Cultural Discount and Cross-culture Predictability: Examining the Box Office Performance of American Movies in HongKong.” Journal of Media Economics 19(4): 259-278.
http://dx.doi.org/10.1207/s15327736me1904_3
Lee, F. L. F. 2008. “Hollywood Movies in East Asia: Examining Cultural Discount and Performance Predictability at the Box Office.” Asian Journal of Communication 18(2): 117-136.
http://dx.doi.org/10.1080/01292980802021855
Lee, F. L. F. 2009. “Cultural Discount of Cinematic Achievement: The Academy Awards and U.S. Movies’ East Asian Box Office.” Journal of Cultural Economics 33(4): 239-263.
http://dx.doi.org/10.1007/s10824-009-9101-7
Liebler, C. M., Jiang, W. and Chen, L. (2015). “Beauty, Binaries, and the Big Screen in China: Character Gender in Feature Films.” Asian Journal of Communication 25(6): 584-599.
http://dx.doi.org/10.1080/01292986.2015.1019525
Litman, B. R. 1998. The Motion Picture Mega-industry: Boston: Allyn and Bacon.
Liu Y. 2006. “Word of Mouth for Movies: Its Dynamics and Impact on Box Office Revenue.” Journal of Marketing 70(3): 74-89.
http://dx.doi.org/10.1509/jmkg.70.3.74
McFadyen, S., Hoskins, C. and Finn, A. 2004. “The Effect of Program Type on the Cultural Discount in the Price of Exported U.S. Television Programs.” Paper presented at the Applied Econometrics Association International Conference on Econometrics of Cultural Goods, Padua, Italy.
McKenzie, J. 2012. “The Economics of Movies: A Literature Survey.” Journal of Economic Surveys 26(1): 42-70.
http://dx.doi.org/10.1111/j.1467-6419.2010.00626.x
Moon, S., Bergey, P. K. and Iacobucci, D. 2010. “Dynamic Effects among Movie Ratings, Movie Revenues, and Viewer Satisfaction.” American Marketing Association 74: 108-121.
Nation Bureau of Statistics of China. 2012. China Statistical Yearbook. Retrieved 01/06/2013, from http://www.stats.gov.cn/tjsj/ndsj/2012/indexch.htm
Palia, D., Ravid, S. A. and Reisel, N. 2008. “Choosing to Cofinance: Analysis of Project-specific Alliances in the Movie Industry.” Review of Financial Studies 21(2): 483-511.
http://dx.doi.org/10.1093/rfs/hhm064
Poupard, L. V. 2008. “How the Current Financial Crisis will Hurt the Movie Industry for a Long Time?” Retrieved 29/10/2013, from http://voices.yahoo.com/how-current-financial-crisis-will-hurt-movie-2216030.html
Ravid, S. A. 1999. “Information, Blockbusters, and Stars: A Study of the Film Industry.” The Journal of Business 72(4): 463-492.
http://dx.doi.org/10.1086/209624
Redondo, I. and Holbrook, M. B. 2010. “Modeling the Appeal of Movie Features to Demographic Segments of Theatrical Demand.” Journal of Cultural Economics 34(4): 299-315.
http://dx.doi.org/10.1007/s10824-010-9127-x
Reinstein, D. A. and Snyder, C. M. 2005. “The Influence of Expert Reviews on Consumer Demand for Experience Goods: A Case Study of Movie Critics.” Journal of Industrial Economics 53(1): 27-51.
http://dx.doi.org/10.1111/j.0022-1821.2005.00244.x
Schiller, H. I. 1992. Mass Communications and American Empire. Boulder: Westview Press.
Su, Y. 2010. “Chinese Box Office Grow 43% to Hit $908m in 2009.” Retrieved 16/01/2013, from http://www.chinadaily.com.cn/ bizchina/2010-01/09/content_9293353.htm
Tomlinson, J. 1991. Cultural Imperialism: A Critical Introduction. London: Pinter Publishers.
Walls, W. D. 2005a. “Modeling Movie Success When ‘Nobody Knows Anything’: Conditional Stable-distribution Analysis of Film Returns.” Journal of Cultural Economics 29(3): 177-190.
http://dx.doi.org/10.1007/s10824-005-1156-5
Walls, W. D. 2005b. “Modelling Heavy Tails and Skewness in Film Returns.” Applied Financial Economics 15(17): 1181-1188.
http://dx.doi.org/10.1080/0960310050391040
Walls, W. D. and McKenzie, J. 2012. “The Changing Role of Hollywood in the Global Movie Market.” Journal of Media Economics 25(4): 198-219.
http://dx.doi.org/10.1080/08997764.2012.729544
Yeh, E. Y.-y. 2009. “Pitfalls of Cross-cultural Analysis: Chinese Wenyi Film and Melodrama.” Asian Journal of Communication 19(4): 438-452.
http://dx.doi.org/10.1080/01292980903293379
Zhou, X. 2001. “‘From behind the Wall’ The Representation of Gender and Sexuality in Modern Chinese Film.” Asian Journal of Communication 11(2): 1-17.
http://dx.doi.org/10.1080/01292980109364801
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Published
2016-06-01
How to Cite
Feng, F., & Sharma, R. (2016). Modeling the Main Determinants of Movie Sales: An Econometric Study of Chinese Marketplace. Journal of Reviews on Global Economics, 5, 190–209. https://doi.org/10.6000/1929-7092.2016.05.17
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