The Power Of Stars In Creative Industries: Do Stars Drive The Success Of Movies?

Is the involvement of “star” creative workers critical to the success of creative products? That belief is particularly apparent in the motion picture industry, where studios regularly pay multimillion-dollar fees to star actors. I shed light on the returns on this investment using an event study that considers the impact of over 1,200 casting announcements on trading behavior in a simulated and real stock market setting. I find evidence that the involvement of stars impacts movies’ expected theatrical revenues, and I provide insight into the magnitude of that effect. In a cross-sectional analysis grounded in the literature on group dynamics, I also examine the determinants of the magnitude of stars’ impact on expected revenues: among other things, I show that the stronger a cast already is, the greater is the impact of a newly recruited star with a track record of box office successes or with a strong artistic reputation. Finally, in an extension to the study, I do not find that the involvement of stars in movies increases the valuation of film companies that release those movies, thus providing insufficient grounds to conclude that stars add more value than they capture. I discuss implications for managers in the motion picture and other creative industries.