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Our Marquee Appraisal System

Even in today’s speed-of-lightning information age, content executives and filmmakers still spend many crucial hours of their professional lives weighing the advantages of this over that prospective motion picture package (the combination of producer, story, director and stars).  Yet how does a sensible decision-maker decide which movie stars to seek, which package to “greenlight” or which finished film to acquire without losing sight of the financial bottom line?

Big Hollywood studio-distributors, of course, frequently retain outside consultants to test the demographic appeal of major films and their movie stars with “panel” audiences just prior to theatrical release.  This process permits last-minute editorial adjustments as well as minimizes head-on collisions with films targeted to the identical demographic.  Some outside consultants have even become fairly good at using the panel results to predict the opening weekend gross.

Armed with these predictions, studio executives can apply in-house statistical averages to prognosticate total revenues from all sources before a film’s first playdate (i.e. that the domestic closing gross will equal roughly 2 ½ times the opening gross, that the United Kingdom closing gross in pounds sterling will equal roughly 10% of the Anglo-American domestic closing gross in US dollars, etc.).  When necessary, net present values - the MBA gold standard for investment decisions - may be calculated and determinations can be made about how best to deploy the studio’s very capital-intensive marketing funds.  This process continues over the opening weekend to fine-tune the subsequent rollout by checking each night’s box office against the predictions, and the panel demographics against exit polls.

This quantitative milling process is also how Big Hollywood recognizes star power.  Talent lists are tabulated as a by-product.  The method has worked well for many years … at least for those initial days of a theatrical campaign.

But what about that very capital-intensive 4-24 months in advance of a picture’s release when talent-related commitments are finalized for production and acquisition?  What about the smaller pictures and the smaller distributors who cannot afford such extensive market testing?  Yes, and what about audience appeal overseas?

Conventional wisdom, despite the high-roller stakes of the Hollywood game, regards such questions as near imponderables, like a Zen koan…

In response, Marquee Stars developed the online Package Appraisal Calculator. We began with a multilinear regression analysis of our initial 1,250-picture database. We then derived a predictive model for using the past successes of key on-camera and off-camera marquee personas to explain their impact on domestic and overseas box office performance.  This predictive model provides the foundation for our proprietary Package Appraisal Calculator.

The calculator remains dynamic since we periodically rerun the regression to keep the calculated relationship between the persona variables in line with prevailing trends.  In particular, one trend that emerged from our research left us thunderstruck:  The inescapable statistical conclusion that on-camera personas had somewhat less effect, and off-camera personas had somewhat more effect, on both the opening and closing grosses than is popularly presumed.  In other words, the movie stars are not everything; and the directors, the producers and the screenwriters are not nothing … as has been clearly borne out by recent box office blowouts starring lesser-knowns such as Slumdog Millionaire with Dev Patel and Freida Pinto or The Hangover with Bradley Cooper, Ed Helms and Zach Galifianakis.

The Package Appraisal Calculator, therefore, proffers a new paradigm for spreading marquee power across both on-camera and off-camera elements.  No film project should ever depend solely on one celebrity movie star.  We know, of course, that our conclusions cannot change the industry’s century of addiction to glitter without considerable review, testing, re-review and re-testing.  But for those interested only in comparing the package strength of movie stars, the calculator will accommodate.  For those beginning to build a package with just writers, directors and producers, the calculator will accommodate.  And for those concerned about the combined package strength of on-camera and off-camera personas, the calculator will accommodate.

A few strong words of caution, however:   The Appraisal Guide and its Package Calculator anticipate the relative box office strength of marquee personas and combinations of personas based on multi-dimensional moving averages.  Nothing more.  They do not predict actual revenue performance.  When tested, our underlying predictive model has succeeded in accounting for approximately 70% of opening and closing box office grosses within an acceptable margin of error.  But neither statistical averages nor the package calculator can predict a new film’s distributor strength, breadth of audience appeal, genre, audience satisfaction, maturity rating, seasonal release date, competition, economic climate or other variable market factors.

Moreover, film revenue outcomes follow a fractal distribution, with amorphous patterns emerging weekly, monthly and annually.  According to “Murphy’s Law” - named after Variety’s veteran box office watcher A.D. Murphy - the top 20% of films will earn 80% of the revenue at the domestic box office.  Better known to statisticians as the Pareto principle (for the 19^th century Italian economist Vilfredo Pareto), this 80-20 rule underscores the distortion that arises when building a Pareto distribution predictive model from moving averages that assume a standard deviation distribution.  Mathematically, for every film that earns 4 units of currency, approximately four others will split 1 unit of currency (80% units/20% films + 20% units/80% films = 4 units/1 film + 1 unit/4 films).  Yet the predictive moving average will periodically come in somewhere around 1.5 units (4 + 0.25 + 0.25 / 3 = 1.5), a goofy outcome that’s too high for the lackluster result (0.25 units) and too low for the spectacular result (4 units).

The standard solution has been to generate a probability distribution for each likely outcome.  But that would frustrate our goal of providing a clear comparison between the relative strengths of different motion picture package combinations.

Instead Marquee Stars eliminated much of the statistical distortion by concentrating on key personas in bellwether films, and by segregating mainstream from specialty and niche.  Provided your assumptions about the breadth of audience appeal and the number of opening screens are correct, the Package Calculator should forecast revenue results within a reasonable margin of error maybe 70% of the time, but yield goofy results roughly 30% of the time.  Hence our marquee appraisals and package calculator should be regarded as a proximal guide and should not be solely determinative for any investment decision.

Nevertheless, even the Package Calculator’s goofy outcomes are goofy along a consistent pattern … making our calculator an appropriate resource for comparing the relative strength of different package combinations.  Moviegoer polling and middlemen surveys still provide insightful tools for their intended tasks.  The former will highlight which stars to emphasize in an immediate-term ad campaign and the latter will suggest which stars are most sought-after at the wholesale level.  For those chores, we simply offer a corroborative alternative with a different set of strengths and shortcomings.

But for that all-important moment of irreversible capital commitment, in terms of anticipating the relative domestic and international strength of a specific package of on-camera and off-camera elements, our Marquee Stars appraisal system may be the best tool in the toolbox.