Revenue and creativity : Disentangling demand creating attributes in movies

Sammanfattning: This paper’s aim is to outline a general model of the indicators of box office revenue for the top performing movies in history. The experience industry is different from most other in that the consumer good consist to a large extent of an emotion arousal. It thus lacks many of the features of normal consumption goods and the consumption experience is entirely based on previous experiences of similar kind. Demand for experiences has two important influencers: income and leisure time. An increase in any of the two will increase demand for movie tickets. Production of experiences is based on a combination of an available set of attributes that are combined into goods in a monopolistic competition setting. It is assumed that quality is a function of educated labour. These attributes were measured using hedonic price theory. This allows pricing of every unique attribute of movies individually, based on what the willingness to pay was in previous movies. Fifteen possible variables were tested in two models and the most important were shown to be actor, length, sequel, visual effects, age of actor, MPAA-rating and category (animations and dramas). All variables carried expected signs except the actor variables. It is concluded that production companies are not entirely meeting the quality demands of the audience. Consumers are trying to reduce risk in consumption by referring to previous consumption experiences, and consumers have, according to the results, particularly strong positive experiences of movies with the kind of features that are significant in the test.