Game theory for movie studios and entertainment industry

0
381
Source Fanpop

We have seen movies studios fighting for profit every now and then. Various studios come up with various marketing and advertising strategies to get maximum profits they can. Can game theory help them to earn profits without clashing with each other?

Game theory has been most talked topic since release of the movie “Beautiful Mind”. The movie is based on the book The Beautiful Mind published by Sylvia Nasar. In the movie, John nash explains the game theory in terms of selecting a girlfriend in group of girls by group of guys.

In this article, we explain how movie studios can apply game theory in deciding when to launch their big movies.

In US, there are four weekends which are crucial for movie releases – Memorial Day, the Fourth of July, Thanksgiving and Christmas. Most of the movies which have earned enormous profits in last 15 years have been released on these weekends. Assuming that every big studio releases 15 movies each year, they all end up fighting for these 4 weekends to release the movies. Every studio tries to spend more on advertising and marketing in order to attract more viewers. This strategy ends up confusing viewers and the gross profits gets divided into two fighting studios. In real life, more than 2 studios are fighting at any given time to release their movies on these four weekends.

So we came up with game theory structure to resolve this issue –

 

 

 

If studio 1 releases its movie on Long Weekend, it earns good payoff (8) as long as other movie is not released on long weekend. So, is studio 2 at loss? Studio 2 releases its movie on off-season weekend and makes close to the profit (6) which is not bad as compared to the profit numbers both of them will achieve by releasing their movie on same long weekend (4,4 or 3,3)

Studio 1 and studio 2 can decide to partner since difference in their profits when one releases on long weekend and one releases on off-season weekend is 2 (8-6). They can share the profits by 1 unit of payoff and arrive at nash equilibrium. In this situation, they will make more by 3 pay-off units as they decide not to fight for for same long weekend. (long weekend, no fight payoff – long weekend fight payoff)

Isn’t this a very simple analysis? Probable questions you have in your mind are –

  1. What data we used to come up with these pay-off numbers?
  2. What calculations we performed on the data to come up with pay-off matrix?
  3. What if you want to build similar analysis for your project?

Here are your answers –

What data we used to come up with these pay-offs?

These pay-offs are calculated using profit figures from IMDB using following movie data –

Pay-offs on Memorial day (1982-2016) Source – IMDB

Row Title (click to view) Studio Opening Gross % of Total Total Gross Date
1 X-Men: Apocalypse Fox $79,810,133 51.30% $155,442,489 5/27/2016
2 Alice Through the Looking Glass BV $33,507,621 43.50% $77,041,381 5/27/2016
3 Tomorrowland BV $42,679,200 45.70% $93,436,322 5/22/2015
4 Poltergeist (2015) Fox $26,341,432 55.50% $47,425,125 5/22/2015
5 Far from the Madding Crowd FoxS $2,992,810 24.50% $12,236,500 5/22/2015
6 X-Men: Days of Future Past Fox $110,576,604 47.30% $233,921,534 5/23/2014
7 Blended WB $17,735,205 38.30% $46,294,610 5/23/2014
8 Fast & Furious 6 Uni. $117,036,995 49.00% $238,679,850 5/24/2013
9 Epic Fox $42,820,971 39.80% $107,518,682 5/24/2013
10 The Hangover Part III WB $50,262,366 44.80% $112,200,072 5/23/2013
11 MIB 3 Sony $69,254,717 38.70% $179,020,854 5/25/2012
12 Chernobyl Diaries WB $9,355,124 51.60% $18,119,640 5/25/2012
13 The Best Exotic Marigold Hotel FoxS $8,360,743 18.00% $46,412,041 5/25/2012
14 The Hangover Part II WB $103,426,875 40.60% $254,464,305 5/26/2011
15 Kung Fu Panda 2 P/DW $60,871,175 36.80% $165,249,063 5/26/2011
16 Prince of Persia: The Sands of Time BV $37,813,075 41.70% $90,759,676 5/28/2010
17 Sex and the City 2 WB (NL) $36,835,353 38.60% $95,347,692 5/27/2010
18 Night at the Museum: Battle of the Smithsonian Fox $70,052,004 39.50% $177,243,721 5/22/2009
19 Dance Flick Par. $12,622,450 49.20% $25,662,155 5/22/2009
20 Terminator Salvation WB $51,943,726 41.40% $125,322,469 5/21/2009
21 Indiana Jones and the Kingdom of the Crystal Skull Par. $126,917,373 40.00% $317,101,119 5/22/2008
22 Pirates of the Caribbean: At World’s End BV $139,802,190 45.20% $309,420,425 5/25/2007
23 Bug LGF $4,015,846 57.20% $7,025,810 5/25/2007
24 X-Men: The Last Stand Fox $122,861,157 52.40% $234,362,462 5/26/2006
25 Madagascar DW $61,012,130 31.50% $193,595,521 5/27/2005
26 The Longest Yard Par. $58,613,245 37.10% $158,119,460 5/27/2005
27 The Day After Tomorrow Fox $85,807,341 45.90% $186,740,799 5/28/2004
28 Raising Helen BV $14,239,252 38.00% $37,486,512 5/28/2004
29 Soul Plane MGM $7,008,711 49.40% $14,190,750 5/28/2004
30 Bruce Almighty Uni. $85,734,045 35.30% $242,829,261 5/23/2003
31 The In-Laws WB $9,222,334 45.10% $20,453,431 5/23/2003
32 Insomnia WB $26,068,419 38.70% $67,355,513 5/24/2002
33 Spirit: Stallion of the Cimarron DW $23,213,736 31.70% $73,280,117 5/24/2002
34 Enough Sony $17,213,137 43.00% $40,007,742 5/24/2002
35 Pearl Harbor BV $75,177,654 37.90% $198,542,554 5/25/2001
36 Shanghai Noon BV $19,647,065 34.50% $56,937,502 5/26/2000
37 Mission: Impossible II Par. $70,816,215 32.90% $215,409,889 5/24/2000
38 Notting Hill Uni. $27,689,760 23.90% $116,089,678 5/28/1999
39 The Thirteenth Floor Sony $4,278,452 35.90% $11,916,661 5/28/1999
40 Bulworth Fox $10,515,839 39.60% $26,528,185 5/22/1998
41 Fear and Loathing in Las Vegas Uni. $4,335,095 40.60% $10,680,275 5/22/1998
42 Godzilla Sony $55,726,951 40.90% $136,314,294 5/20/1998
43 The Lost World: Jurassic Park Uni. $90,161,880 39.40% $229,086,679 5/23/1997
44 Addicted to Love WB $11,446,098 33.00% $34,673,095 5/23/1997
45 Spy Hard BV $10,448,420 38.80% $26,960,191 5/24/1996
46 Mission: Impossible Par. $56,811,602 31.40% $180,981,856 5/22/1996
47 Casper Uni. $22,091,975 22.00% $100,328,194 5/26/1995
48 Johnny Mnemonic Sony $7,420,808 38.90% $19,075,720 5/26/1995
49 Mad Love BV $6,820,171 44.10% $15,453,274 5/26/1995
50 Tales from the Hood Sav. $3,898,983 32.90% $11,837,928 5/26/1995
51 Braveheart Par. $12,908,202 17.10% $75,609,945 5/24/1995
52 The Flintstones Uni. $37,182,745 28.50% $130,531,208 5/27/1994
53 Beverly Hills Cop III Par. $15,276,224 35.80% $42,614,912 5/25/1994
54 Cliffhanger TriS $20,458,022 24.30% $84,049,211 5/28/1993
55 Made in America WB $11,821,326 26.30% $44,942,695 5/28/1993
56 Super Mario Bros. BV $8,532,623 40.80% $20,915,465 5/28/1993
57 Happily Ever After 1NF $1,756,050 53.20% $3,299,382 5/28/1993
58 Alien 3 Fox $23,141,188 41.70% $55,473,545 5/22/1992
59 Far and Away Uni. $12,948,940 22.00% $58,883,840 5/22/1992
60 Encino Man BV $9,866,120 24.20% $40,693,477 5/22/1992
61 Backdraft Uni. $15,723,480 20.20% $77,868,585 5/24/1991
62 Hudson Hawk TriS $7,082,820 41.10% $17,218,080 5/24/1991
63 Thelma and Louise MGM $6,101,297 13.50% $45,360,915 5/24/1991
64 Only the Lonely Fox $5,997,993 27.50% $21,830,957 5/24/1991
65 Drop Dead Fred NL $3,625,648 26.10% $13,878,334 5/24/1991
66 Wild Hearts Can’t Be Broken BV $2,710,416 37.20% $7,294,835 5/24/1991
67 Madonna: Truth or Dare Mira. $2,521,171 16.80% $15,012,935 5/24/1991
68 Back to the Future Part III Uni. $23,703,060 27.00% $87,727,583 5/25/1990
69 Fire Birds BV $6,358,761 43.10% $14,760,451 5/25/1990
70 Pink Cadillac WB $4,408,593 36.30% $12,143,484 5/26/1989
71 Indiana Jones and the Last Crusade Par. $37,031,573 18.80% $197,171,806 5/24/1989
72 Crocodile Dundee II Par. $24,462,976 22.40% $109,306,210 5/25/1988
73 Rambo III TriS $16,745,418 31.20% $53,715,611 5/25/1988
74 Ernest Goes to Camp BV $6,171,957 26.30% $23,509,382 5/22/1987
75 The Chipmunk Adventure Gold. $2,584,720 38.00% $6,804,312 5/22/1987
76 Beverly Hills Cop II Par. $33,014,153 21.50% $153,665,036 5/20/1987
77 Cobra WB $15,652,147 31.90% $49,042,224 5/23/1986
78 Poltergeist II: The Other Side MGM $12,357,190 30.10% $40,996,665 5/23/1986
79 A View to a Kill MGM $13,294,435 26.40% $50,327,960 5/24/1985
80 Rambo: First Blood Part II TriS $25,169,330 16.70% $150,415,432 5/22/1985
81 Brewster’s Millions Uni. $9,858,905 24.10% $40,833,132 5/22/1985
82 Indiana Jones and the Temple of Doom Par. $33,936,113 18.90% $179,870,271 5/23/1984
83 Return of the Jedi Fox $30,490,619 12.10% $252,583,617 5/25/1983
84 Rocky III UA $16,015,408 12.90% $124,146,897 5/28/1982
85 Visiting Hours Fox $5,250,157 39.60% $13,258,670 5/28/1982

 

Movies released on different long-weekends from 2006 – 2009 –

Memorial Day - 

2006
20th Century Fox: X-Men: The Last Stand (Action)
2007
Disney: Pirates of the Caribbean: At World’s End (Adventure)
2008
Paramount: Indiana Jones and the Kingdom of the Crystal Skull (Adventure)
2009
Warner Brothers: Terminator Salvation: The Future Begins (Action)
20th Century Fox: Night at the Museum: Battle of the Smithsonian (Comedy)
Paramount Pictures: Dance Flick (Comedy)
2010
No Major hits
Independance Day
2006
Warner Brothers: Superman Returns (Adventure)
20th Century Fox: The Devil Wears Prada (Comedy)
2007
Paramount Pictures: The Transformers (Action)
Warner Brothers: License to Wed (Comedy)
2008
Sony Pictures: Hancock (Action)
2009
20th Century Fox: Ice Age: Dawn of the Dinosaurs (Adventure)
Universal: Public Enemies (Drama)
2010
paramount Pictures: The Last Airbender (Action)
Universal Pictures: Despicable Me (Animation)
20th Century: Predators (Action)
Thanksgiving
2006
Disney: Déjà Vu (Thriller/Suspense)
20th Century Fox: Deck the Halls (Comedy)
Warner Brothers: The Fountain (Drama)
2007
20th Century Fox: Hitman (Action)
Disney: Enchanted (Romantic Comedy)
Warner Brothers: August Rush (Drama)
2008
Warner Brothers: Four Christmases (Comedy)
20th Century Fox: Australia (Drama)
transporter series
2009
Warner Brothers: Ninja Assassin (Action)
Disney: The Princess and the Frog (Adventure)
Disney: Old Dogs (Comedy)
2010
Warner Brothers: Harry Potter (Adventure)
Sony Pictures: Burlesque (Musical)
CBS Films: Faster (Action)
Christmas
2006
Universal: The Good Shepherd (Drama)
Warner Brothers: We are Marshall (Drama)
20th Century Fox: Night at the Museum (Comedy)
2007
Disney: National Treasure: The Book of Secrets (Adventure)
Universal: Charlie Wilson’s War (Drama)
Warner Brothers: P.S., I Love You (Drama)
Paramount Pictures: Sweeney Todd: The Demon Barber of Fleet Street (Musical)
Sony Pictures: Walk Hard: The Dewey Cox Story (Comedy)
2008
20th Century Fox: Marley & Me (Comedy)
Disney: Bedtime Stories (Comedy)
Paramount Pictures: The Curious Case of Benjamin Button (Drama)
Although no action films by the big studios, Lionsgate put out The Spirit
2009
Warner Brothers: Sherlock Holmes (Adventure)
20th Century Fox: Alvin and the Chipmunks: The Squeakquel (Comedy)
Universal: It’s Complicated (Romantic Comedy)
2010
Fox Pictures: Black Swan (Drama)
Sony Pictures: The Tourist (Action)
20th Century Fox: The Chronicles of Narnia (Animation)

How did we calculate the pay-offs –

This Calculation is taken from UCSB slides of economics lecture. We are arriving at probability of payoff through running bayesian analysis on the data.

What if you want to build similar analysis for your project?

You can email us at mathmi3o@mathminers.com and we can help you for the same. We do not charge any fees for any educational work or corporate work as well. 🙂

 

NO COMMENTS

LEAVE A REPLY