The Effects of Online User Reviews on Movie Box-Office Performance: Accounting for Sequential Rollout and Aggregation Across Local Markets

TLDR

The study measures how national online user review characteristics—valence, volume, and variance—affect local DMA box‑office performance. Using daily ticket sales for 148 U.S.

Abstract

Our objective in this paper is to measure the impact of national online user reviews (valence, volume and variance) on Designated Market Area (DMA) level local geographic box-office performance of movies. We account for three complications with analyses that use national level aggregate box-office data – (i) aggregation across heterogeneous markets ("spatial aggregation"); (ii) serial correlation due to sequential release of movies ("endogenous rollout"); and (iii) serial correlation due to other unobserved components that could affect inferences regarding the impact of user reviews. We use daily box-office ticket sales data for 148 movies released in the U.S. during a 16-month period (out of the 874 movies released) along with user review data from the Yahoo! Movies website. The analysis also controls for other possible box-office drivers. Our identification strategy rests on our ability to identify plausible instruments for user ratings by exploiting the sequential release of movies across markets – since user reviews can only come from markets where the movie has previously been released in, exogenous variables from previous markets would be appropriate instruments in subsequent markets.