Movies are watched the world over. This multi-billion-dollar business is dominated by the American industry based in Hollywood. Indeed, the term âHollywood â is used by many cinema-goers as a generic brand name to represent the entire industry. Yet, there are other vibrant and culturally important and, in some instances, profitable film industries in Europe, Africa, Asia, Australia and Latin America. Globally, movie-making directly employs millions of people and produces spin-off work for many millions more. It involves many different organisations, some engaged in production, some in distribution, some in exhibition and others in the provision of related services such as costumes, sets, marketing and public relations, quality assessment and the representation of talent.
While being classed as an art form and core contributor to the cultural ethos of the societies in which it exists and operates, movie-making runs on money and is therefore ultimately a commercial business (Moul, 2005; Vogel, 2004). Movie production requires specialist skills, equipment and facilities, and all these things cost money (Wasko, 2003). Over time, these costs have escalated. Furthermore, technological advances have transformed the entertainment media and provided new platforms for audiences to enjoy movies, in turn changing business models. Despite its popularity and fan bases around the world, it is a business characterised by considerable uncertainty (McDonald & Wasko, 2007; Smits, 2016).
No one knows in advance whether a new movie will deliver a return on investment for its producers and investors. Movie-makers take decisions about new movies that are informed as much by intuition as by market analysis and research. Because each new movie is a distinct product, it is difficult to know whether it will sell. In other product categories, historical consumption data about a product type can provide indications of the most effective ways to persuade people to buy it again in the future. With movies, this is not so readily the case. Each movie is a new and distinct creation. Movie producers can look to the performance of other similar movies and movies with the same star actors as well as reactions of audiences and professional critics for a steer about a new movieâs box office potential (Gray, 2010). As we will see, the creation of movie sequels or series can pull in audiences, but this is not always the case. Furthermore, the hiring of star actors can also trigger greater interest in a movie both among movie-goers and investors. However, stars cannot provide cast-iron guarantees of a movieâs success, and, in any case, the cost of hiring some big names in the business can eat significantly into profit margins generated by a movie. Uncertainties about whether movies will deliver profits have been exacerbated by the increased volume of production, especially at the low-budget end, and by the gradual erosion of theatrical showings in terms of their relative contribution to revenues (Smits, 2016).
It remains important for the industry to learn as much as possible by observing which movies have been the most successful in financial terms and then relate financial performance back to the specific qualities that characterise each movie (Anast, 1967; Austin, 1984; Litman, 1998). Of course, much of this know-how relates to moviesâ performance at the box office even though this has become less significant over time as other revenue streams have grown. Nonetheless, theatrical performances can still contribute indirectly to revenues from new distribution platforms such as online streaming, Blu-ray, and on-demand TV services by generating valuable promotion and public interest (Hayes & Bing, 2004; Smits, 2016).
Contributory factors to a movieâs success, as we will see, are many. With the big movie studios, profits are increasingly underpinned by deals they can strike to generate revenues from video rentals and sales and television licensing (Epstein, 2005). Movies can also generate significant revenues from product placement, spin-off merchandising and other exhibition settings such as airlines and hotels. Movie producers, big and small, also choose filming locations to take advantage of government grants and tax concessions (Epstein, 2011).
Is Box Office Still Relevant?
Technological developments have radically altered media business models. The movie industry has not escaped the effects of these developments. Some analyses have shown that traditional forms of movie distribution, exhibition and consumption are no longer as important as they used to be. While movie theatres continue to contribute income to the movie industry, there are many new platforms available to movie-makers for showing their products. Movies were made available through video and television in the pre-digital era, but today these other channels have grown massively in size and type and offer new media consumption models along with which new consumer expectations have emerged. The âbox officeâ now represents just one aspect of a more diverse range of revenue streams for the movie industry (Balio, 2013; McDonald & Smith-Rowsey, 2016; Tryon, 2013; Ulin, 2012; Wasko, 2005; Wolk, 2015).
The theatrical performance window remains important not just because it can still deliver profits, but also because success at cinemas can drive performance on secondary platforms. Even television and video streaming services can benefit if a movie they are licensed to distribute performs well first at the box office (Smits, 2016).
For good reason therefore, the study of the âbox officeâ still has relevance. It can deliver important direct and drive further indirect revenue streams for movie-makers. It continues to have significant cultural resonance, not least through its creation of âstarsâ with celebrity capital that can serve as social role models and champions of good causes (Gunter, 2014). Theatrical exhibition is where most movies start out. If a movie can make it big at the box office, not only does this still comprise an important slice of its total earnings in most cases, but this success may translate into longer-term interest in it on other platforms where it continues to be shown perhaps for many years after it was originally released.
Understanding Drivers of Movie Success
The historical research literature has devoted much attention to understanding the specific effects of and interplay between a variety of production, distribution and promotional factors in relation to a movieâs attraction of cinema audiences. This work has investigated whether box office performance of movies can be predicted by budget size, type of studio, genre , script factors, being part of a franchise or sequel , star actors and directors , winning awards, critics reviews and so on (Albert, 1999; Adler, 1985; Baker & Faulkner, 1991; Brewer, Kelley, & Jozefowicz, 2009; Elliott & Simmons, 2008; Gray, 2010; Litman, 1998; Simonoff & Sparrow, 2000; Smith & Smith, 1986; Sochay, 1994).
The movie industry has been reshaped by globalisation and technology developments. Technology has established many new distribution platforms and revenue streams. In addition, industry globalisation means that movies must seek to appeal to many different markets around the world. This is especially true of the Hollywood movie industry that can no longer rely solely on A...