Using Online Reviews as a Proxy of Word-of-Mouth for Motion Picture Revenue Forecasting

34 Pages Posted: 18 Nov 2004  

Chrysanthos Dellarocas

Boston University, Questrom School of Business - Department of Information Systems

Neveen Awad

Stephen M. Ross School of Business at the University of Michigan

Xiaoquan (Michael) Zhang

Hong Kong University of Science & Technology (HKUST); Massachusetts Institute of Technology (MIT) - Center for Digital Business

Date Written: May 10, 2004

Abstract

Despite the widespread popularity of online opinion forums among consumers, the business value that such systems bring to organizations has, so far, remained an unanswered question. This paper addresses this question by studying the value of online movie ratings in forecasting motion picture revenues. First, we conduct a survey where a nationally representative sample of subjects who do not rate movies online is asked to rate a number of recent movies. Their ratings exhibit high correlation with online ratings for the same movies. We, thus, provide evidence for the claim that online ratings can be considered as a useful proxy for word-of-mouth about movies. Inspired by the Bass model of product diffusion, we then develop a motion picture revenue-forecasting model that incorporates the impact of both publicity and word of mouth on a movie's revenue trajectory. Using our model, we derive notably accurate predictions of a movie's total revenues from statistics of user reviews posted on Yahoo! Movies during the first week of a new movie's release. The results of our work provide encouraging evidence for the value of publicly available online forum information to firms for real-time forecasting and competitive analysis.

Keywords: Online reviews, motion pictures, revenue forecasting, diffusion models

JEL Classification: L82, M31

Suggested Citation

Dellarocas, Chrysanthos and Awad, Neveen and Zhang, Xiaoquan (Michael), Using Online Reviews as a Proxy of Word-of-Mouth for Motion Picture Revenue Forecasting (May 10, 2004). Available at SSRN: https://ssrn.com/abstract=620821 or http://dx.doi.org/10.2139/ssrn.620821

Chrysanthos N. Dellarocas (Contact Author)

Boston University, Questrom School of Business - Department of Information Systems ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Neveen Awad

Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-647-9600 (Phone)

Xiaoquan (Michael) Zhang

Hong Kong University of Science & Technology (HKUST) ( email )

Department of ISOM
Clearwater Bay, Kowloon
Clear Water Bay, Kowloon, Hong Kong
Hong Kong
+852-6081-2330 (Phone)

HOME PAGE: http://mikezhang.com

Massachusetts Institute of Technology (MIT) - Center for Digital Business ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

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