Oscars Economics: Does Winning Mean a Windfall?

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Wharton's Jehoshua Eliashberg and S. Abraham Ravid discuss whether there's a measurable financial benefit to taking home an Academy Award.

The Academy Awards — or “Oscars” — is arguably one of the most important ceremonies in the movie industry. This year’s contenders include one of 2018’s blockbusters, Black Panther — a first for the Marvel franchise and an unusual pick for the Academy. It also includes another unusual entry: The Netflix film Roma — a black and white Spanish language movie by director Alfonso Cuaron — is the first film produced by the streaming service to be nominated for an Academy Award.

Winning an Oscar is a great honor for a film, actor, director or those working behind the camera. But is there a measurable financial benefit to taking home a gold statue, or even being nominated for the award? The Knowledge@Wharton radio show on Sirius XM invited two experts to discuss that question: Jehoshua (Josh) Eliashberg is a Wharton marketing professor, and S. Abraham (Avri) Ravid is a professor of finance and chairman of the finance department at Yeshiva University’s Syms School of Business.

According to Eliashberg, when measuring the financial benefit of the Oscars, “we need to distinguish between two time periods” — the period from the nomination up until the awards ceremony, and the time following the announcement of the winners. “According to the data, it is the nomination that drives the box office more than the actual winning of the movie,” he said.

“Certainly, there is a benefit to being nominated and winning the award,” Ravid noted. “It doesn’t mean it’s going to be a blockbuster … but it does give you a bump.” There are follow-on effects, too, according to Ravid: Studios do well in hiring award-winning writers and directors, but not so much award-winning actors. “There’s no evidence that [Oscar-winning actors] contribute” to a film’s bottom line. However, “if you do win an award as an actor, your salary goes up.”

An edited transcript of the conversation follows.

Knowledge@Wharton: Is there really a financial benefit for anyone who wins an Oscar?

Abraham Ravid: What we have found in the research that we’ve done over the last two decades is that Academy Award winners really do not move the financial needle in terms of success of movies. In other words, if you wait and see who is winning, and you hire them, there is really no statistical correlation between the success of the films that they participate in and these winnings. So, it really doesn’t pay to hire actors.

The other thing we have found is that what really determines success of movies is the director and the writer, to a much greater extent. If you look at the Academy Awards, it’s extremely rare that a movie would win without the director and/or the writer being nominated. And it’s quite possible that they win without actors being nominated. That really agrees with the gist of a lot of the research that we have done.

Jehoshua Eliashberg: I basically agree with Avri, but you have two different researchers. We looked at two different data sets and analyzed them somewhat differently. From the work that I’ve done, and from what I’ve seen others doing, it’s mainly the screenplay that predicts the Oscar winning. I don’t think I’ve seen enough evidence supporting the director, but I do agree on the writer or the screenplay.

In terms of the profitability of the movie, I think we have also to distinguish here between two time periods: The time that the movie is nominated to the Oscar, all the way to the Oscar event, and the time that the winners are announced. From the data that I’ve seen, it is the nomination that gives rise to the box office, more than the actual winning of the movie.

Knowledge@Wharton: Many of the nominated films were in theaters for some time before the announcement, so they’ve already built up a certain economic impact. After the awards, is there a benefit from the re-release or release to other formats?

Ravid: Certainly, there is a benefit to being nominated and winning the award. It doesn’t mean that it’s going to be a blockbuster. There are quite a few films that won the Academy Awards and never became blockbusters, but it does give you a bump. What I was saying earlier is that if you do win the award for being an actor, director or screenwriter, then the research shows that there is a different path. In other words, if you’re a studio, you’re much better off hiring the director or the writer, rather than the actors. The actors could be very good, but they could be very bad. There is no evidence to show that they contribute to the film. So, the winning does not make a big deal.

The only thing that I would say is that if you do win the Academy Award and you’re an actor, your salary goes up. It doesn’t mean that the film will succeed, but the salary goes up. Regarding the directing, we do have just-published research and ongoing research that shows that experienced directors make a huge difference in terms of the success of their films.

Let me just say one more thing about the director. There have been a lot of conversations about women, and we see that this year there are no women directors nominated. We have an ongoing research agenda dealing with this issue, trying to see if there is any discrimination in Hollywood. What was interesting so far — we haven’t done all the data analysis — is that the number of women who enter the profession is very low. That’s really a big, big problem that we see in that sense.

Eliashberg: If you look at the nominees, the movie Bohemian Rhapsody has made quite a bit of money, I believe around $200 million. A Star Is Born also made quite a bit of money, also around $200 million. I’m not sure how much of a gain they will have as a result of winning the Oscar. But if you look at a movie such as Green Book that has not made that much money, this is the one that is likely to benefit most if it wins the Oscar.

Knowledge@Wharton: Avri, do you agree that a film like Green Book can get a boost after an Oscar win?

Ravid: I think that Josh is right, that movies that have made a lot of money cannot make a lot more money. But again, it’s not clear that a movie that hasn’t made a lot of money and doesn’t have a lot of audience will get a lot more after winning the Academy Award. I don’t think it changes the trajectory dramatically, but it could make a difference.

Knowledge@Wharton: Black Panther has made more than $1 billion globally and is part of the very successful Marvel Comics franchise. It’s nominated for a number of awards, including best picture. What more will it gain if it wins?

Eliashberg: Well, I don’t think it will gain in terms of financial benefit, in terms of adding more to the box office. It is also quite unusual, I think, that a movie based on a franchise is making it to the Oscar nominees. Based on data that we have and historical behavior, I don’t think it has a very high chance of winning the Oscar. I don’t think franchise-based movies have a high probability of winning the Oscar.

Ravid: It will be a surprise if it wins. First of all, blockbusters haven’t won, and that’s why the Academy tried this ill-fated “popular” award, which they canceled very quickly. There is actually only one really big blockbuster that won, which was Titanic. The other thing is, in Black Panther, neither the director nor the writer is nominated. So, it will be a big surprise.

Knowledge@Wharton: Netflix and Amazon have had a huge impact on the movie industry, Can you talk a little bit about that in the context of the Oscars?

Ravid: Roma is a very interesting case. We don’t know how much money it made — probably not that much in theaters. They just put it out in theaters so it would qualify for the Academy Awards. It’s nominated for best film and best foreign film. I think Netflix wants to become a studio, like all the other studios. I think the big effect of Netflix and organizations like that is the release windows have been much shortened. The whole idea of release windows, which used to be part of the industry for many years, has practically disappeared as movies are being released internationally and in the U.S. at the same time, and sometimes streaming at the same time. So, they are changing the business model in many ways.

Eliashberg: Netflix is also doing a hell of a job finding local producers in different countries and providing them with financial support to develop stories that are locally appealing and at the same time have some global appeal. They have offices in Spain, they have offices in Japan, they have offices in other countries in Asia. Their philosophy and strategy is to identify local storytellers that will enhance their portfolio of movies. I think that’s another big change in the way that movies used to be produced in the past.

Knowledge@Wharton: Does this signal a change in how films could be nominated in the future, that perhaps they will never have to be released in theaters to be considered for an Oscar?

Eliashberg: That’s quite possible. It’s quite possible that in the future, movies will be more and more nominated either without showing it in the theater or, as Avri mentioned, when they are shown simultaneously in the theater as well as on the Netflix network.

Ravid: Yes, I completely agree. I think there are several ways in which the Academy is sticking to tradition, and they might want to change. There is also a lot of talk about shortening the Academy Award telecast and putting some of these awards of less interest — for example, the ones for shorts and other types of behind-the-camera awards — out of the telecast. But there’s a lot of resistance, and the Academy seems to be very traditional in the way it does things.

But I agree with Josh in what they could include in addition to movies that are theatrically released. As we know, the change hasn’t started today. If we look even 20 years ago, the U.S. theatrical release was the minority — less money in terms of the revenues. Now, it’s still the same way. So, the Academy might want to reconsider how they define a feature film that could be nominated.

Knowledge@Wharton: Because of the uncertainty of the film’s success, will it be important to watch what happens if Roma takes the Oscar?

Ravid: I’m sure it will do reasonably well. The other problem is that Netflix doesn’t release information, which is not very good for us as researchers. My first paper 20 years ago in this industry showed that sequels and franchises were the best way to go. The Academy, on the other hand, is trying to encourage original works. That’s why there has been a disconnect between Oscar-winning movies and popular movies. The nomination of Black Panther is a unique nomination. I think it would be really interesting to see, going back to what Josh said about the data, whether they can actually produce original films that will also be popular, rather than going with the endless franchises and sequels, which unfortunately are the most lucrative types of films.

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