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May 07, 2004
The economics of word of mouth
Time magazine's behind-the-scenes piece on the forthcoming movie "Troy" gets to the heart of this $225 million bet:
Moviegoers behave according to the principles of Bose-Einstein condensation — a fancy way of saying they are more likely to go to a movie if they receive an "authentic signal" that other people have enjoyed it. Before a movie opens, studios can generate inauthentic signals by securing a star and advertising heavily, creating the impression of a phenomenon. This puts butts in seats on opening weekend and gets the competition out of the way. "You can orchestrate an opening," says [economist Arthur] De Vany. "What you're doing is briefly dominating supply. That's not demand."The long-term demand necessary to sustain a blockbuster is still dependent on the authentic signal, word of mouth. Last year's "The Matrix: Reloaded" took in $91.7 million opening weekend; two weeks later it earned $15.6 million. Word of mouth can just as easily work to a movie's advantage, but not if there are tons of other movies right behind it jamming the signal.
In other words, you can advertise the hell out of a movie, or a product, and create artificial demand, but it's still word of mouth that drives long-term, profitable success.
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Just wanted to make sure you saw this great post from the Church of the Customer. It about the importance of word of mouth with movies.... [Read More]
Thanks for the informations
