Abstract
Everyone knows that the movie business is risky. But how risky is it? Do strategies exist that reduce risk? We investigate these questions using a sample of over 2000 motion pictures. We discover that box-office revenues are asymptotically Pareto-distributed and have infinite variance. The mean is dominated by rare blockbuster movies that are located in the far right tail. There is no typical movie because box-office revenue outcomes do not converge to an average: revenues diverge over all scales. The studio model of risk management lacks a foundation in theory or evidence, and revenue forecasts have zero precision. Movies are complex products and the cascade of information among film-goers during the course of a film's run can evolve along so many paths that it is impossible to attribute the success of a movie to individual causal factors. The audience makes a movie a hit and no amount of “star power” or marketing can alter that. The real star is the movie.
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De Vany, A., Walls, W.D. Uncertainty in the Movie Industry: Does Star Power Reduce the Terror of the Box Office?. Journal of Cultural Economics 23, 285–318 (1999). https://doi.org/10.1023/A:1007608125988
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DOI: https://doi.org/10.1023/A:1007608125988