Factors Affecting the Financial Success of Motion Pictures: What is the Role of Star Power?

In the mid-1940s, American film industry was on its way up to its golden era as studios started mass-producing iconic feature films. The escalating increase in popularity of Hollywood stars was actively suggested for its direct links to box office success by academics. Using data collected in 2007, this paper carries out an empirical investigation on how different factors, including star power, affect the revenue of ‘home-run’ movies in Hollywood. Due to the subjective nature of star power, two different approaches were used: (1) number of nominations and wins of Academy Awards by the key players, and (2) average lifetime gross revenue of films involving the key players preceding the sample year. It is found that number of Academy awards nominations and wins was not statistically significant in generating box office revenue, whereas star power based on the second approach was statistically significant. Other significant factors were critics’ reviews, screen coverage and top distributor, while number of Academy awards, MPAA-rating, seasonality, being a sequel and popular genre were not statistically significant.

Strong Hysteresis due to Age Effects

Strong hysteresis in the labour market (see Cross, 1995) requires workers to be heterogeneous in terms of the cost of hiring and firing. We show how such heterogeneity arises naturally in labour markets due to differences in workers’ age by showing that both the hiring and the firing thresholds for productivity are age dependent. The presence of strong hysteresis does not for this reason depend on ad-hoc differences in the cost of hiring and firing workers.