Move Over, Jeffrey Lyons: On-Line Movie Ratings Accurately Predict Box Office Success, Says New Study By MIT Sloan Professor

[June 04, 2004]

Move Over, Jeffrey Lyons: On-Line Movie Ratings Accurately Predict Box Office Success, Says New Study By MIT Sloan Professor

CAMBRIDGE, Mass. --(Business Wire)-- June 4, 2004 -- Movie executives anxious about the financial success of their new releases can get nearly instant answers by checking on-line movie sites such as Yahoo!Movies, according to an MIT Sloan professor who found that on-line ratings posted during the first week of a film's release "can form the basis for remarkably accurate forecasting of that movie's future box office revenues."

While word of mouth has always been a factor in a product's success, MIT Sloan Professor of Management Chrysanthos Dellarocas believes his study is the first "to provide positive evidence" that on-line movie reviews don't just influence a film's success, but that they actually can predict it. In fact, Dellarocas found, people sitting at their computers and posting on-line movie ratings may have a greater impact than established movie critics on predicting a film's box office success. "If a lot of lay people band together and express an opinion, you have information that is as good as and maybe better than that offered by a relatively few specialists," Dellarocas said.

Women who post on-line film ratings are an especially accurate predictor of commercial success, Dellarocas found. "If on-line ratings in general are a proxy for word of mouth, those by women are an even more precise proxy," he said.

For his study, Dellarocas a computer scientist by training, analyzed movie reviews posted on Yahoo!Movies and Amazon.com's Internet Movie Database. He and his fellow researchers, Neveen Awad and Michael Zhang, then compared those cyber reviews with ratings submitted for the same movies by people who do not post on-line reviews. The study found a "high correlation" between the two, meaning that "on-line ratings can be considered as a useful proxy for word-of-mouth about movies."

Technology enables such word of mouth to begin spreading instantly and widely. At the same time, it allows firms to tap into the spread of word-of-mouth in real-time and rapidly adjust their strategies. Teenagers can instant message each other about a new film from right inside a theater, for example. "This is really changing the dynamics and strategies of a lot of products, such as movies, whose diffusion depends upon word of mouth," said Dellarocas. So instead of gradually releasing films into theaters across the nation and then across the globe, Internet-driven word of mouth now causes movie companies to follow more of a big bang" approach, trying to get their films on as many screens as possible at once.

Dellarocas thinks studio executives could easily find other uses for this powerful tool of on-line film commentary. "Maybe they can release the film with different endings," he said. "They can collect information in real time about how different people like the different versions and then release the winner nationally. The Internet allows you to replace focus groups with the real thing, offering a much broader sampling at much lower cost and with even greater accuracy."

Dellarocas, who studies the growing role of information technology in reshaping established social institutions and practices, thinks his findings about the accuracy of on-line ratings in predicting commercial movie success have applications well beyond the film industry. "Even though we cannot claim generality, (our study's) finding supports the viewpoint that online forums are emerging as a valid alternative source of information to mainstream media, replacing our societies' traditional reliance on the 'wisdom of the specialist' by the 'knowledge of the many,'" Dellarocas wrote.

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