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  • Thumbnail for Determinants of return on investment within Hollywood films
    Determinants of return on investment within Hollywood films by Shifman, Jake

    This study seeks to determine which attributes of a film affect a measure of its rate of return when using data for both foreign and domestic box office sales. The data from a previous study by Brewer, Kelley and Jozefowicz is used, with the dependent variable adjusted to rate of return and revenue is adjusted to include foreign sales. A regression analysis is performed in order to determine the significant factors for this dependent variable. It is found that, contrary to studies using revenue as the dependent variable, budget has a negative effect on a film's rate of return. Along with this, star power is relatively meaningless, while critical review, film nominations and word of mouth appeal are each quite significant. The implications of this study suggest that Hollywood can increase its profitability by diversifying its portfolio to include a number of smaller budgeted projects as opposed to a select few blockbusters.