# Re: [dvd-discuss] 2001 Best year ever for movies


Hmmm...De Vany is at UC Irvine and consults with the Motion Picture
industry and he has a paper showing that the Sherman AntiTrust act
doesn't apply to movies or shouldn't have 50 yrs ago My skeptics
meter jumped a couple of points. Can't say I've read any of the
papers just glanced at them. I'll agree that it isn't a Gaussian
world (and even Galton never claimed so. He merely stated that the
Gaussian 1 or 2 sigma fit a large number of situations). the problem
has been with the tail and I'll agree with De Vany on that Now
fitting the tail of distribution from statistical data is pretty
difficult but Im skeptical of accepting the conclusions for such a
fit... More sophisticated mathematics than P&L but the same problem-
make the assumptions so the model can be made to do something but
that something doesn't really justify applying the conclusions as
"scientifically proven" It's interesting that.He speaks a lot
in one paper that
"The audience makes a movie a hit and no amount of \star power" or
marketing can alter that. The real star is the movie. "

Harry Cohn (founder and president of Columbia) may have had the best
approach - If he didn't twitch in the seat while watching a movie he
know
it was going to be a hit.

To:             	dvd-discuss@eon.law.harvard.edu
Subject:        	Re: [dvd-discuss] 2001 Best year ever for movies
Date sent:      	Mon, 11 Mar 2002 02:56:15 -0500
From:           	"Peter D. Junger" <junger@samsara.law.cwru.edu>

> Scott A Crosby writes:
>
> : On Wed, 6 Mar 2002, mickey wrote:
> :
> : >
> : >
> : > http://www.foxnews.com/story/0,2933,47200,00.html
> : >
> : > How many films did the major film studios make in 2001? By the "two out
> : > of ten" guide,  around 100?
> :
> : Both sets of numbers are completely believable. Most films flop.  Only a
> : few films actually make money, but those that do, make it BIG. Same thing
> : with large-scale commercial music. Most bands lose money, but those ones
> : are funded by the ones that make money.
> :
> : So, if we have 10 movies. All cost $10M to make. 2 make$50M, the rest
> : make \$3M, then it is perfectly true that we can have a great year,
> : making a profit of 24%, yet, have 80% of our movies make barely a third of
> : their money back. :)
> :
> : So, Valenti is complaining about the risks of the movie business. But in a
> : self-serving fashion in front of congress, cause its ALWAYS been that way.
>
> The economics of the motion picture industry is wierd:
>
> See <http://hypatia.ss.uci.edu/econ/personnel/devany/BESummary.html>
>
> \begin{quotation}
> Motion pictures are fragile products whose lives are unpredictable
> and brief. Less than one out of six films lasts more than two weeks
> on theater screens and only one in twenty lasts longer than fifteen
> weeks. More than 80 per cent of revenues earned by 300 films were
> earned by just four films. Stars and big budgets guarantee only
> that a film's run will begin on many screens; from there on a
> film's run is like a parachute jump---if the film doesn't open, it
>
> This paper quantifies the stark uncertainty of motion picture
> revenues and shows how the industry is organized to deal with it.
> The industry is geared to adapt the number of engagements and the
> prices charged to theater operators to the information revealed in
> weekly revenue reports. There is no other way to discover how good
> a film is than to put it on screens and let the audience decide.
> As audiences discover their preferences and spread information,
> they produce complex revenue dynamics. Information cascades can
> carry a film to explosive growth or to swift failure. This dynamic
> demand discovery requires adaptive supply and pricing and the
> industry's contracts and licensing terms are designed to support
>
> The statistical model reveals that the distribution of revenues
> among competing films follows a dynamic path so complex and variable
> that the only model capable of accounting for them is the
> Bose-Einstein distribution of statistical physics. Audiences tend to
> behave over the course of a film's run like the particles falling
> into urns in a statistical physics model. In the Bose-Einstein
> process it is equally likely that the particles (audience) will fall
> into a few urns (movies) as it is for them to be distributed in any
> other way.
>
> Ultimately, the probability that a new viewer will go a particular
> film depends positively on the number who have already seen it and on
> the distribution of viewers over all the other films it is competing
> with. These dynamics let films leverage early successes (in revenue
> terms) into greater success in later trials. The Bose-Einstein
> process leads to extreme inequality in the final distribution of total
> motion picture revenues, resulting in a so-called power law also known
> to economists as the Pareto distribution.
>
> These results show that conventional thinking about the revenue
> "normal" or bell curves; the revenue distribution has no
> characteristic scale, so it is wrong to speak of an average or
> expected revenue. Big stars and budgets affect the number of
> opening engagements and shift the revenue distribution to the right.
> After the opening though, a film must make it on its own and a large
> number of engagements can as easily lead to rapid death as great
> success. Genre has no predictive value. Present antitrust policy
> regarding motion pictures is challenged by this work. Antitrust
> analyses based on market share averages and industry concentration
> measures are an unsuitable basis for policy because they are unstable,
> reflect only the recent past, and have no predictive value. It is