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Are Movie Stars Worth It?

Another correlation doesn’t equate to causation bit: are big movie stars worth employing for a movie’s bottom line?There’s no doubt that the big stars make a ton, something studied in a field called “superstar economics” which was first coined by Sherman Rosen, a UChicago economist who argued that in a world that is increasingly dependent on technology, those who are mediocre workers are seeing their salaries go down while those who are exceptional and superb, or superstars, are seeing their salaries skyrocket. This New York Times article elaborates on the effect in the music industry:

In a study about ticket prices for concerts, the Princeton economist Alan B. Krueger found that between 1983 and 2003 . . . the share of concert revenue taken by the top 5 percent of artists increased to 84 percent, from 62 percent.

But, just because superstars make a lot more doesn’t mean its worth it to employ them — after all, is Brad Pitt really worth his asking price?

On average, movies that have big names starring in them make more money at the box office than movies that do not.

But is it really the stars’ presence that does this? Is it more that big-name stars just tend to be cast in movies that were already going to be big?

One study by Arthur S. De Vany found that, when controlling for factors like budget, rating, the number of theaters the film opened in, and whether a given movie is a sequel or not, that:

Looking across a sample of more than 2,000 movies exhibited between 1985 and 1996, they found that only seven actors and actresses — Tom Hanks, Michelle Pfeiffer, Sandra Bullock, Jodie Foster, Jim Carrey, Barbra Streisand and Robin Williams — had a positive impact on the box office, mostly in the first few weeks of a film’s release. In the same study, two directors, Steven Spielberg and Oliver Stone also pushed up a movie’s revenue. But Winona Ryder, Sharon Stone and Val Kilmer were associated with a smaller box-office revenue. No other star had any statistically significant impact at all.

Thus, turning the original causality relationship (that stars make a movie) on its head.

This begs the question: if the returns to hiring stars are so low, why bother? Why hasn’t capitalism figured this out? One suggestion by Jehoshua Eliashberg, a Wharton professor:

“Movie industry executives keep this perception that stardom is a formula for success, but they don’t measure it . . . They resist using analytical methods for all sorts of reasons, from being uncomfortable with numbers to the argument that this is a creative industry and not a business.”

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