MBS 93-37
Innovation Tournaments: An Analysis of Rank, Diffusion and Survival
in Motion Pictures
Arthur De Vany, W. David Walls
This is a study of competition in the motion picture theatrical market.
Because each film is an innovation and success is driven by the rankings
of film-goers, we find that the motion picture market resembles a tournament
in which Schumpeterian creative destruction operates with a vengeance.
We study the births, deaths and box office revenue distributions of a large
sample of motion pictures. Our findings are: product lives are brief; many
films last just a week and only the rare film runs 20 weeks or more. the
hazard function is peaked at critical points and increasing with the length
of the theatrical run. The box office revenue distribution has a tournament
shape - most of its mass is concentrated on ranks 1 through 4 and 20 percent
of the films earn 80 percent of the total box office revenue. The tournament
is not a renewal process: positive and negative information transmission
among film-goers links a film's rank over the weeks of its run. A few films
show strong information effects - they open moderately and build audience
over time. Coordinating the play of untested and new products through the
market is a complex process of discovery and adaptation which is mediated
by sophisticated contracts and industry institutions whose features we
analyze in the context of our results.