An Ingredient Branding Approach to Determine the Financial Value of Stars: The Case of Motion Pictures
55 Pages Posted: 20 Feb 2011 Last revised: 26 Apr 2013
Date Written: April 10, 2013
Stars earn massive salaries for participating in movies and other media products. However, the successes of some movies that do not feature major stars have led practitioners and researchers to question the reasonableness of such investments. This research determines star value by interpreting stars as ingredient brands and accounting for (1) the sample selection bias that results from the differences between movies with stars and those without; (2) the existence of contingency factors (e.g., star or movie characteristics); and (3) the potential risk-reducing function of stars. The authors determine percentage estimates for the effect of stars that are positive for both the North American box office and global revenues but differ substantially with several contingency factors. They show that not accounting for sample selection bias exaggerates the effect of stars and that stars reduce the financial risk of movies. Managers can use the findings to estimate project-specific star value measures.
Keywords: Star Power, Motion Pictures, Propensity Score Matching, Financial Value
JEL Classification: M31, L82
Suggested Citation: Suggested Citation