9781118041581

Estimating Movie

Demand

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CHAPTER 4 Estimating and Forecasting Demand

CHAPTER 4 Estimating and Forecasting Demand

To count is a modern practice, the ancient method was to guess; and when

numbers are guessed, they are always magnified.

SAMUELJOHNSON

If today were half as good as tomorrow is supposed to be, it would probably be

twice as good as yesterday was.

NORMANAUGUSTINE, AUGUSTINE’SLAW S

Making movies is a risky business. Even if you find the most promising screenplay, assemble the

best actors, finish the film on time and on budget, and mount a substantial marketing campaign,

your film may still bomb. Yet studios continue to produce movies and theaters continue to book

them, and the profit of each depends directly on the demand that materializes in the first few weeks

of play.

Studios and theaters must forecast a film’s potential box-office revenue. Indeed, forecasting

the likely demand for new film releases has evolved from a subjective “art” to a hard-nosed, statis-

tical “science.” Numerous variables—the film’s genre, the quality of its cast and director, the tim-

ing of its release (time of year and number of competing films released at the same time), the

breadth of its release (limited release in selected theaters or mass release nationwide), the magni-

tude of the advertising and promotional campaign, reviews and “word of mouth”—together influ-

ence the film’s expected gross receipts earned per screen and per week.

Given this risky forecasting environment, how can film producers and exhibitors derive sound

quantitative predictions of a new film’s likely box-office revenues?

In previous chapters, we used demand equations, but we did not explain where

they came from. Here, we discuss various techniques for collecting data and

using it to estimate and forecast demand.

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