By Michael Smith, Peter Boatwright and Patrick Choi
Everyone knows that movies that are popular in theaters are also popular at home. But no one knows whether increased theater viewing actually causes increased home viewing. Scientifically speaking, this is the difference between correlation and causation. In this instance, it’s difficult to test causation because a movie’s intrinsic appeal affects both measures. To do so accurately, we need an event that changes the number of people who see the movie in theaters, but does so in a way that is completely unrelated to specific movie characteristics.
In our recent paper, we show how snowstorms can provide just such a “perfect” measurement event. When a snowstorm occurs on a movie’s opening weekend in a particular city, fewer people go to see that movie in that city for reasons completely unrelated to the movie itself. In other words, for the purposes of this experiment, snowstorms are essentially random events: Whether it snows in Buffalo versus Minneapolis on the second weekend of November has nothing to do with the characteristics of the movies opening that weekend.
Using this information and examining box office and home video sales data, our results allow us to ask “when fewer people attend a movie’s opening weekend in a particular city, does that change the number of DVD and Blu-ray sales for that movie in that city when DVDs and Blu-ray Disks are released a few months later?”
Our results show that theatrical demand actually causes increases in DVD/Blu-ray demand. Specifically, a 10 percent increase (decline) in theatrical attendance causes an 8 percent increase (decline) in DVD/Blu-ray demand. This result suggests that there is significant differentiation between these two products, meaning that theatrical sales complement DVD/Blu-ray demand, which is an important thing to consider in this rapidly evolving media marketplace.
Michael D. Smith is a Senior Adjunct Fellow at Technology Policy Institute. He is also a Professor of Information Systems and Marketing and the Co-Director of IDEA, the Initiative for Digital Entertainment Analytics at Carnegie Mellon University. He holds academic appointments at Carnegie Mellon University’s School of Information Systems and Management and the Tepper School of Business. Smith has received several notable awards including the National Science Foundation’s prestigious CAREER Research Award, and he was recently selected as one of the top 100 “emerging engineering leaders in the United States” by the National Academy of Engineering. Smith received a Bachelors of Science in Electrical Engineering (summa cum laude) and a Masters of Science in Telecommunications Science from the University of Maryland, and received a Ph.D. in Management Science from the Sloan School of Management at MIT.
