Why A Few Box Office Hits Generate More Revenue Than Ever

The Wall Street Journal reports today on some interesting trends in the movie business.   According to this article by Ben Fritz, a small number of blockbuster hits accounts for a higher fraction of total box office receipts than in past years.   This year, the hits have included movies such as Finding Dory and Zootopia.  Fritz writes, "Increasingly, success in the movie business requires being one of the handful of most popular movies that draw a disproportionate amount of attention on social media and in the cultural zeitgeist. This year’s five most popular films account for 30% of the total domestic box office. At the end of last year that figure was 22%, a record at the time. The inevitable result is a smaller pool of moviegoers left to see everything else."  

Why the shift toward a larger share of revenue from the top movies of the year?   Fritz wrote an earlier column that may offer some clues.  In that piece, he noted that viewers tend to be getting their information from different sources these days.  In the past, people watched Siskel and Ebert (and others like them), and those experts shaped their movie-going decisions.  Today, people pay much more attention to what other viewers think.   What is the movie's Rotten Tomatoes score?  A bad score can doom a movie.   

Is this shift an example of the power of the wisdom of crowds?  Is it necessarily a good thing that we are using the crowd's wisdom to guide our movie-going decisions?   Interestingly, some research points to the pitfalls of the wisdom of crowds.  Jan Lorenz, Heiko Rauhut, Frank Schweitzer, and 

Dirk Helbing have studied this issue through experimental research.  They summarize their findings in the excerpt below:  

This wisdom of crowd effect was recently supported by examples from stock markets, political elections, and quiz shows [Surowiecki J (2004)The Wisdom of Crowds]. In contrast, we demonstrate by experimental evidence (N = 144) that even mild social influence can undermine the wisdom of crowd effect in simple estimation tasks. In the experiment, subjects could reconsider their response to factual questions after having received average or full information of the responses of other subjects. We compare subjects’ convergence of estimates and improvements in accuracy over five consecutive estimation periods with a control condition, in which no information about others’ responses was provided. Although groups are initially “wise,” knowledge about estimates of others narrows the diversity of opinions to such an extent that it undermines the wisdom of crowd effect in three different ways.

Interestingly, one other shift seems to be occurring in Hollywood from the production standpoint. More than ever, studios appear to be relying on franchises, sequels, and reboots.   Why is that happening?   One could argue that the studios are trying to enhance the probability of achieving a strong box office by bringing familiar characters to the screen.  That may be true to some extent, but there may be a limit to this positive impact.  At some point, they may saturate theaters with reboots and sequels, and customers may desire more originality.   

A New Kind of Disney Princess

The Wall Street Journal reports today on Disney's development of a new type of princess for young girls.  Sofia the First is one of the new additions to Disney's family of characters.  She's "confident, resourceful and focused on being a good person. She should not be valued most of all for her beauty. Her royal family should include exactly zero evil stepmothers."    Nancy Kanter, a senior executive at Disney, explains: "We knew we didn't want it to be a young woman looking for a man."    The Sophia the First series debuted on Disney Junior on January 11th.   It has become the year's top-rated show among pre-school children.  Disney aimed to create a princess that would appeal to young girls, but that would provide an image and identity more acceptable to parents than some of the company's traditional princesses.   It appears that they have succeeded.

To me, this case provides another interesting development at Disney, besides the unique way that they are trying to reposition a key type of character.   Here we have a case of a key new animated character debuting on Disney's cable networks, rather than in an animated feature film.   The firm has begun to leverage the character in the theme parks and through its consumer products and retail divisions.  Historically, Disney launched key characters through animated feature films, and then leveraged them to other areas.  With Johnny Depp's Pirates of the Caribbean movies, we saw Disney take a theme park ride and build a popular series of feature films.  Now we have a character debuting on cable and then moving to the theme parks.  Could an animated feature film be next for Sophia the First?   Disney's ability to find different ways to originate content may be a key driver of growth for the future.  Relying only on feature films to launch a new franchise can be expensive and risky.  Having other ways of originating and leveraging characters could be key to the company's future... as important as some of the recent acquisitions have been in terms of adding to the stable of characters in the Disney family.