The Economics of Oscars

Screenplays and Directors, Not Actors, Drive Critical and Financial Success of Films according to Study by S. Abraham Ravid

George Clooney may be the most bankable star in Hollywood, but when it comes to financial and critical success, studios are generally better served by placing their bets on Woody Allen and Martin Scorsese.

Movie stars are not indicative of a film’s success, according to research by Prof. S. Abraham Ravid.

New research conducted by S. Abraham Ravid, Sy Syms professor of finance at Yeshiva University’s Sy Syms School of Business, shows that directors and screenplays are the real drivers of both financial value and critical success of movies, rather than the film stars or special effects.

“I’m not saying that having Brad Pitt or Julia Roberts as the star of a film is a losing proposition,” said Ravid. “But it isn’t necessarily a winning one either.”

In analyzing 40 years (1971-2010) of Academy Award winners and nominees, Ravid explained that the screenplays for all films that have won the Oscar for Best Picture were also nominated for Best Screenplay—with one exception, Titanic. In three-quarters of these cases, the screenwriter also won Best Screenplay.

The history for directors shows similar success. The directors of all Best Picture awardees, except one (Driving Miss Daisy), were nominated for Oscars, with 83 percent of them bringing home the golden statuette.

Conversely, the correlations between acting awards and best picture achievement are significantly lower. Best Actor nominees were in the Best Picture winner only two-thirds of the time. And the winners of the Oscar for Best Actor were in the Best Picture only one-third of the time. Interestingly, for actresses, the numbers are even lower.

“These numbers confirm my findings that what makes the best films are not the actors, but the writers and directors,” Ravid said. “Simply put, a star does not make a movie.”

Experienced directors, who have survived Hollywood because of their skills and success, have a large, measureable effect on the financial and critical success of every film they make—not just those worthy of an Oscar, according to Ravid, who noted that “they can increase the rate of return on movies by a huge margin and significantly increase the percentage of positive reviews as well.”

And as it pertains to screenplays, Ravid explained that studios tend to pay more for screenplays that result in more successful movies. “In other words,” he said, “the perceived quality of the screenplay is indeed verified.”

Ravid’s research is contained in a book chapter appearing this month and in two studies, one recently accepted for publication and available online and the second presented in various peer reviewed conferences and submitted for publication. The book chapter, “What makes movies tick: Ivory tower insights, studio views and research directions” appears in Economics of Creativity (Routledge, January 2013). The forthcoming paper, “The pricing of soft and hard information: Economic lessons from screenplay sales,” co-authored with Will Goetzmann of Yale University and Ron Sverdlove of New Jersey Institute of Technology, is available online at the Journal of Cultural Economics. The second study, “Performance and managerial turnover: Evidence from the career paths of film directors,” is co-authored with Kose John of New York University and Jayanthi Sunder of University of Arizona. It has been presented at the American Financial Association and other competitive meetings.

Ravid is currently studying the relationship of word-of-mouth advertising to movie profitability and the impact of movie advertising on film revenue. His earlier published studies have focused on the most important factors determining movie profitability, movies’ financing arrangements, critical reviews, the viability of violent movies, and the correlation of movie opening dates to stock market value.

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