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Researchers Claim Mathematical Formula Can Ensure Box Office Success by Making Movies Even More Formulaic

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NPR reports that B-school geniuses Jehoshua Eliashberg, Sam K. Hui, and John Zhang say their research study called "Green Lighting Movie Scripts: Revenue Forecasting and Risk Management" makes it "possible to predict a movie's eventual box-office success by simply applying their mathematical formula to the script."

Here's the paper's abstract:

"Major studios and independent production firms (Indies) often have to select or “green-light” a portfolio of scripts to turn into movies. Despite the huge financial risk at stake, there is currently no risk management tool they can use to aid their decisions, even though such a tool is sorely needed. In this paper, we developed a forecasting and risk management tool, based on movies scripts, to aid movie studios and production firms in their green-lighting decisions. The methodology developed can also assist outside investors if they have access to the scripts. Building upon and extending the previous literature, we extracted three levels of textual information (genre/content, bag-of-words, and semantics) from movie scripts. We then incorporate these textual variables as predictors, together with the contemplated production budget, into a BART-QL (Bayesian Additive Regression Tree for Quasi-Linear) model to obtain the posterior predictive distributions, rather than point forecasts, of the box office revenues for the corresponding movies. We demonstrate how the predictive distributions of box office revenues can potentially be used to help movie producers intelligently select their movie production portfolios based on their risk preferences, and we describe an illustrative analysis performed for an independent production firm."

And what did their Bayesian Additive Regression Tree for Quasi-Linear model find?

That the most important variables in predicting box-office performance are whether the film is in the action genre, how conflict builds, and whether the conflict is multidimensional, as well as concluding that, based on risk-adjusted return on capital, the movies with the best returns are in what they call the family-movie genre, followed by comedy. The worst risk-adjusted returns are on horror movies.

"Based on our interactions with industry executives, forecasting and risk management are the two capabilities that are sorely needed in the movie industry in order to transform it from an intuition and experience-based decision making into a more science-based decision making," Eliashberg, Hui, and Zhang wrote. "A science-based approach can pay off handsomely."

Boy, I just can't wait to check out the next blockbuster hit created by way of risk-assessment models. It almost makes you wonder how the movie business ever survived this long without it.
POSITION:  No positions in stocks mentioned.