Box‐Office Demand: The Importance of Being #1

Abstract

We propose a theoretical framework to understand the effect on a movie's eventual theatrical success of leading the box office during the opening weekend. We consider two possible channels: a positive shock to the utility from watching the movie and a greater awareness of the movie's existence. We derive a series of testable predictions, which we test on U.S. box office data. The results suggest that being #1 in sales during the opening weekend has an economically and statistically significant effect on the movie's total demand; and that the primary channel for this effect is through the greater awareness induced by being #1.

We’re Number 1: Price Wars for Market Share Leadership

“…Consistent with this view, recent research suggests that demand responds to ordinal rankings in the case of music (Sorensen, 2007), iPhone apps (Carare, 2012) and movies (Cabral and Natividad, 2013). 19 I now extend the model to consider the possibility that consumers benefit from purchasing from the market leader.…”

Some economics of the movie industry

“…Cabral and Natividad () propose a theoretical framework to understand the relation between opening weekend rankings (in particular, being #1 at the box office) and the film’s subsequent economic success. The paper considers two possible channels.…”

“…Moreover, the date of a movie’s release is likely to be endogenous. Lacking any natural experiment to work with, Cabral and Natividad () propose two different approaches: one is to include as many controls as possible in the regression analysis (e.g. consumer reviews, movie characteristics and time‐specific effects).…”

“…Cabral and Natividad () derive theoretical results that allow the identification of these effects. One test checks that being #1 increases the slope of the regression of box office revenue on movie quality.…”

“…Cabral and Natividad () contributes to a variety of economics and marketing research debates. One such debate refers to the informative vs persuasive nature of advertising expenditures.…”