Researcher Examines Film Studios’ Marketing Strategies and Box Office Performance

Published study from David Eccles School of Business researcher explores how social media and studio advertising affect movie industry box office performance across U.S. markets

May 8, 2013 – According to research led by a marketing professor at the University of Utah’s David Eccles School of Business, film studios might be better served with more targeted advertising that takes into account the movie-going habits of different communities, as well as how those communities respond to paid advertising and movie-review blogs.

Shyam Gopinath, an assistant professor at the David Eccles School of Business, worked with the University of Chicago’s Pradeep Chintagunta and the University of North Carolina’s Sriram Venkataraman on the study – “Blogs, advertising and local-market box-office performance” – which was recently accepted for publication in Management Science.

The research team looked at the box-office performance of 75 films—the top-grossing movies of 2004, representing more than 90 percent of the revenues generated by all movies that year—across 208 U.S. markets, measuring: the effects of pre- and post-release blog posts about the films; how many blogs were posted about a given film and whether those blog posts were positive or negative in tone; and the advertising amount allocated to promote those films.

The study’s noteworthy findings include:

  • Different Responses across Demographics Young consumers, Asians and Hispanics were the demographics most affected by blogs in their decision-making on whether or not to see a film, while Caucasians were most affected by advertising.
  • Most Responsive Markets Markets can be classified based on whether they respond more to blogs or paid advertising, and larger markets like Los Angeles, Chicago and Denver are highly responsive to blogs while having low responsiveness to advertising. Conversely, medium-sized markets like Salt Lake City and New Orleans respond more strongly to advertising than to blog volume.
  • Key Drivers of Box Office Performance – Opening day box office returns are affected by how many blogs are written about a film, as well as advertising. Thirty days later, what the blogs say about a film—rather than the number of blog posts—and advertising are the key drivers of box office performance.
  • Inefficient Marketing by Studios – Studios can take better advantage of the markets’ demographics and attendance habits; the study found that on opening day, studios only released in 53 percent of the markets most responsive to paid advertising, and only 44 percent of the markets most responsive to blogs.

Film studios advertise their movies the same way from coast to coast, in cities large and small, hoping to draw huge audiences for opening day; 90 percent of a movie’s revenue is generated on opening day and the following month.

“The results of this study show that studios are limiting the potential of their films’ box office success,” said Gopinath. “The inefficient, blanket approach in place at many studios fails to take into account the diverging media consumption preferences and diversity of audiences across the country. With a more targeted approach that tailors marketing and social media efforts to specific markets, studios can see greater return on investment from their nationwide outreach.”

About the David Eccles School of Business

From its beginnings in 1896 as part of the Economics and Sociology Department, what is now the David Eccles School of Business (http://www.business.utah.edu) educates nearly 3,500 students a year, and boasts more than 31,000 alumni. Students manage a university venture fund of $18.3 million, the largest of its kind in the nation. In January 2012, the school opened its new, $72 million Spencer F. Eccles Building, offering students a cutting-edge learning environment packed with state-of-the-art technology.

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