Movie Manipulation

Today, public perceptions about which new movies will be how popular is formed in a complex jumble of explicit advertising, word of mouth rumor, independent media evaluation, and paid ads masquerading as independent media.  This process is little like neutral analysis; it is packed full of vigorous attempts to manipulate our perceptions.

Two firms propose to augment this system with speculative markets forecasting movie sales. And the movie industry is horrified; this might let someone purposely influence perceptions of movie popularity!:

A growing coalition of entertainment industry workers, creators, independent producers and distributors, business organizations and theater owners today announced opposition to two proposals to establish online wagering services based on speculation over box office receipts for motion pictures. … The groups said that the proposal by MDEX and a separate plan by Cantor Futures Exchange, L.P. “are based on faulty understanding of the film industry and create a risk of rampant speculation and financial irresponsibility. … Now is not the time to open up new and highly speculative marketplaces that could end up costing jobs and harming legitimate businesses … We will address whether any exchange infrastructure is capable of surveying the box office marketplace to detect and address potential market manipulation.

My research suggests that speculative markets are remarkably robust to manipulation attempts; the more folks try to manipulate, the more accurate market estimates get on average!  But with limited funding, I’ve only done a limited number of experiments; I can’t prove no one will ever use a speculative market to purposely influence movie perceptions.  And alas this mere possibility of manipulation may seem intolerable.

An enormous double standard favors existing ads and mass media over proposed speculative markets.  No one has to run experiments showing that manipulation is impossible with existing institutions; in fact, we all know such manipulation is rampant.  But many will call it irresponsibly risky to let speculative markets permit further manipulation, even if the ratio of error to solid info is far lower there.

Robust movie markets would in fact give the public more reliable estimates of movie popularity, estimates more resistant to movie industry manipulation.  Could it be that what the movie industry fears most is not more manipulation, but less?

Hat tip Trey Kollmer.

Added 1Apr: Some say that a model based on Twitter can predict movies better than the HSX prediction market.  Let’s set aside the level confusion here (HSX could do better if its traders had access to this model).  Does anyone doubt that, if this model’s predictions were taken seriously, Twitter could be used to manipulate movie perceptions?  Does anyone expect the movie industry to therefore request regulators to ban movie tweets?   Still can’t see the double standard?

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  • Joe

    The comments at your link suggest that the real concern might be that the studios will be subject to scrutiny of their accounting methods when reported earnings don’t match predictions (presumably based on independent publicly-available data). The MPAA brief questions whether there is any authority which can force disclosure, lending some credibility to this theory. Of course there probably isn’t such an authority, but if the movie speculation becomes large and popular, it is reasonable to speculate that such an authority would appear.

    • mikem

      I noticed that as well. Specifically they are concerned that: “MDEX’s rules will require ‘the studio/distributor to provide evidence to support its public box office number when it falls outside the standard deviation level.'”

      I’m curious as to how this box office number metric works. Are box office numbers normally distributed? Even controlling for budget, I imagine box office numbers could vary wildly. Compare Avatar and Waterworld.

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  • chad

    Barn door closes, roams free.

  • I don’t think the opposition to speculative markets is entirely unreasonable or based on a double standard.

    Existing manipulation methods do not have a single, publically available, numerical result that is being directly manipulated. A speculative market would have such a result and, like real stock markets, that creates the risk of this number becoming subject to speculation completely divorced from the underlying asset.

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    No one has to run experiments showing that manipulation is impossible with existing institutions; in fact, we all know such manipulation is rampant.

    New forms of manipulation would benefit or disadvantage different groups of people, altering the balance of power within Holywood. I would expect the beneficaries of the current system to be unhappy about this.

  • I just added to this post.

  • Greg Conen

    Does the movie industry really fear manipulation? Or does it fear accurate data, reducing the effectiveness of the hype machine?

    The can’t very well object to the later, even if it is their real concern.

  • I am not sure why consumers would care about box office receipts – when they could get a rating from a group like Netflix, who is aware of their preferences.

    • John Forsberg

      1) Those ratings tend to be manipulated near the launch of a movie. Eg, Max Payne rated near a 9 on imdb near release and is now rated 5.4. Also, ratings geared to your specific preferences requires both awareness and some work that puts them outside of the grasp of most of the audiences.

      2) I’d be willing to bet that a large part of the movie going audience want to see movies that many other people also see.

      3) A speculative market with plenty of insider trading would be more likely to quickly reveal the movies that are plain awful and possibly hurt the sales of those movies. It’s much easier to predict what movies are terrible than it is to predict mega-hits like Titanic.

  • Tom West

    It could make film-making more difficult, in that losing the confidence of the market (rather than just a single crucial executive) at any time during the film-making process could result in shuttering production.

    Right now, maintaining on-set discipline is hard, but barring disaster, as long as you control news near a film’s release, you aren’t likely to have your funding pulled because of a minor rumor somewhere. However, I can easily imagine (as can the film-makers) that having a minor rumor early in production could cause a drastic short-term drop in price (when things are still very tentative) which could in turn cause the funding to be canceled.

    The problem is that this is not an industry driven by logic. The naturally bumpy nature of the markets could easily spell the end of the otherwise promising features or even careers simply because the funders are incapable of processing the market information correctly.

    At least *that* is what I imagine the film-makers are afraid of. Whether they’re justified or not is a matter for debate.

  • Bill Benzon

    Check out Hollywood Economics by Robert De Vany. He’s analyzed 10 years of box office receipts (from back in the 1990s) and shows that ticket sales are chaotic, with outliers dominating the distribution. About 4 to 6 weeks after release a movie will be on one of two trajectories: 1) most movies will be on a trajectory of diminishing sales leading to no profit (in theatrical release) but 2) a few will be on a trajectory of increasing sales and profitability. Among the latter, a very few will be blockbuster hits. At the time of initial release there’s no way to predict which trajectory a given title will follow.

  • What De Vany’s research suggests (see comment above) is that existing attempts to manipulate perceptions about movies are largely ineffectual. What drives ticket sales is word of mouth. People tell their friends about movies and those friends trust the judgments of people they know who have actually seen the film.

    There’s no good way of assessing a film’s viability short of actually releasing it to market. It’s about the “fit” between the “information” content of the film and the “information” needs of the market place. We’ve yet to find a decent proxy for such huge amounts of information. So, you have to make the film and release it. Then you’ll know.

    I doubt that speculative markets will change things all that much.

  • Joanna

    how can you know if the movie industry is really manipulating the public at all.