‘Batman v. Superman’ investors won’t be happy
Wednesday, February 10, 2016

With its $200 million budget, Batman v. Superman: Dawn of Justice will be one of the most expensive movies ever made when it’s released next month, and Warner Bros. has a lot riding on its success.

So, studio heads might be a little nervous to know that researchers at the University of Iowa have developed an analytical system that suggests the movie has only a 32 percent probability of turning a profit.

The system was developed by Kang Zhao, a professor of management sciences in the Henry B. Tippie College of Business, and Michael Lash, a doctoral student, to predict the probability of a movie’s profitability at the box office. Their research has found dozens of elements that factor into a movie’s success, including the people involved in making the film (mostly the stars and director), the plot and genre (horror, rom-com, shoot-'em-up), and when the film was released (summer, when movies draw larger crowds, or late spring, when theaters are at their emptiest).

Zhao_Kang BUS.jpg
Kang Zhao

The system then uses a machine-learning, data-based algorithm to analyze those factors and determine the probability of a film earning a profit of at least $7.3 million, which the researchers considered to a reasonable profit on an investment (a modified version determines the probability of a film earning 11 percent return on investment). They ran the numbers from every film released in the U.S. between 2000 and 2010 through their “who, what, and when” formula to fine-tune which elements played a greater role.

The entertainment industry has spent years looking for a tool that will predict with at least some accuracy whether a movie will hit or miss. The tool is especially important for investors who have no real method to help them decide whether to support a movie, such that film financing is still a high-risk venture more than 100 years after the rise of the commercial movie industry.

Formulas have been developed using all kinds of factors, such as a movie’s rating, run time, genre, or whether or not it’s a sequel, but none has proven reliable.

The authors stress that their study looks only at box-office profitability and not tickets sold or revenue generated from video, streaming, or other secondary sources. It also takes into account only those factors that are known prior to the production of the movie.

Michael Lash
Michael Lash

In their study, Zhao and Lash analyzed 2,506 movies released between 2000 and 2010 to discern the factors that seem the most important to a movie’s profitability. The study found that only 36 percent of those movies actually made money, and that box office receipts surprisingly had little correlation to profitability.

 “Movies that sell better at the box office may also need bigger investments and thus do not necessarily provide satisfactory returns for investors,” says Lash.

A possible example is Masterminds, a bank heist comedy set for release later this year with an all-star cast that includes Zach Galifanakis, Kristen Wiig, and Jim Carrey. Zhao and Lash say that though the film’s cast likely will sell a lot of tickets, those stars cost so much money to hire that it reduces the likelihood the movie will be profitable. As a result, their algorithm concludes it has only a 39 percent probability of turning a $7.3 million profit.

“It’s easier to predict the box office receipts if you have star power, but that doesn’t help in predicting profitability because the actors charge such a hefty fee upfront that it reduces the profit,” says Zhao.

The study found these factors had the strongest correlation for a movie to turn a profit: 

  • Director–cast partnership, if the cast and director have a history of making profitable movies together
  • The average gross of a director’s previous movies
  • Winter release
  • A cast of actors who have a history of making profitable movies
  • Annual profit percentage by genre

The factors that had the weakest correlation for a profitable movie are:

  • R-rating
  • Drama
  • War or spy films
  • Plot is about music
  • Foreign films

Zhao and Lash are testing the algorithm using movies of various genres that will be released in 2016. Among those movies (the probabilities listed are all of turning at least a $7.3 million profit):

  • Nice Guys, a big-budget summer release starring A-listers Ryan Gosling and Russell Crowe, has a 39 percent probability.
  • Zootopia, an animated movie from the producers of Frozen, has a 55 percent profitability probability and is also the only film in their list to be released this year that has a better-than-50-percent chance of making a profit.
  • The Boss, a comedy starring Melissa McCarthy and Kristen Bell, has a 25 percent probability.
  • Before I Wake, a horror film about a boy whose nasty dreams come to life, has a 13 percent probability.
  • Warcraft, based on the popular World of Warcraft game, has a 39 percent probability.
  • Miles Ahead, a biopic of jazz legend Miles Davis starring Oscar-winner Don Cheadle, has a 16 percent probability.

An early version of their paper, “Early Predictions of Movie Success: The Who, What, and When of Profitability,” was recently published in the proceedings of the Eighth International Conference on Social Computing, Behavioral-Cultural Modeling, and Prediction.