Paid and Earned Media, Consumer Interest and Motion Picture Revenue

This study examines how consumers’ interest in a new movie develops around paid and earned media in pre-launch periods, how this interest impacts opening-week revenue, and how postlaunch revenue of a movie is influenced by advertising and various earned media. The prelaunch, opening-week and post-launch worlds are structurally different and we therefore develop three separate models, two multiple-time series models and one cross-sectional equation. These models are applied to a panel data set of movies consisting of movie descriptors, weekly advertising, blog postings, search volume, user reviews and revenue. We find, first, that consumer interest evolves in the pre-launch periods, as evidenced by non-stationary weekly blogging and searching activity. While commercial advertising plays a role in stimulating consumer information search, blogging by movie buffs is more influential. Managerially, this underscores the value of designing ads that create strong viral effects. Second, we demonstrate the value of pre-launch consumer search as a leading indicator of movie revenue, as it improves the studios’ ability to predict opening-week revenue. Finally, the effects of blog postings change drastically after movie launch. In these post-launch periods, advertising and user review volume have significant effects on movie revenue, while blog postings lose their influence. The paper concludes with a description of several managerial implications of our findings.