Do Oscars Wins Pay Off?
The Academy of Motion Picture Arts and Sciences will present the 97th annual Academy Awards on March 2. We asked Prof. Abraham Ravid, who studies the economics of the film business, to break down the financial stakes of Hollywood’s biggest night.
The presentation of the Best Picture Oscar for Oppenheimer during the 96th Annual Academy Awards on March 10, 2024.
How does an Academy Award nomination or win affect a film’s profitability? Are studios right to spend heavily to get them?
Studios do spend heavily, investing millions of dollars and sometimes tens of millions of dollars, in Oscar campaigns promoting their films, going back to the notorious (for other reasons) Harvey Weinstein and Miramax. It is not just about the immediate effect of winning on the movie or actor or director; a win may put a small studio on the map or improve the fortunes of a studio which has not done very well so they can better attract future projects and talent.
Nominations can certainly lift the profile of a film or an actor. In an era when a movie can be watched by every person with an internet connection anywhere and delivered costlessly to any theater around the world (if you prefer the theatrical experience) there should be unprecedented opportunities for artists who create a successful movie. Instead, an outdated system of release windows and a streaming model that shuts out customers with a willingness to pay can actually make it more difficult to see Oscar-nominated films. As the New York Times said in an article about the Oscar-nominated film The Brutalist earlier this year, “If you don’t live in Los Angeles or New York, your chances of seeing the film before [the wide release in late January] are, well, brutal.” Hopefully as the economic models of streaming improve, artists can better capture the full value of their work.
Your research has cast doubt on the importance of star actors in the success of movies. Does winning an Oscar make actors too expensive to be worth hiring?
My research shows that hiring an Academy Award–winning actor does not, on average, affect the profitability of a film. This means that whereas some films with decorated actors do well, others do not, making predictions difficult.
There are factors that are correlated with the financial success of films. Family films and sequels or franchises (but not remakes) do better, everything else equal. In fact, franchises and sequels are the “holy grail” of movie making, providing high returns and low risk compared to original movies. That is why we are flooded with movies with a numeral in the title. All of the 10 highest-grossing films of 2024 are sequels or franchises. Incidentally, this is what makes the Jame Bond franchise, which the Broccoli family had held for decades and just sold to MGM this week, so valuable.
We do not have good data on actors’ salaries. However, we are collecting some data on compensation for new work with authors at Cambridge and other universities, and we know that success or failure of their films can affect actors’ salaries rather dramatically.
What do you pay attention to when you watch the Oscars?
Our research, published and in progress, shows that the value drivers in films are screenwriters and directors rather than actors.
A published paper with William Goetzmann at Yale SOM and others shows that screenplays’ prices predict the success of ensuing films. Other published and ongoing work with colleagues at NYU Northwestern and other universities shows that experienced directors increase the rate of return on films. Not surprisingly, the best predictor of whether or not a director will direct again is the rate of return on her previous films. Consistent with these scientific findings, for decades, there have been no films that won the Best Picture award in the Oscars without receiving nominations either for the director or for the writer, and in many cases for both. The correlation of the acting award with the best picture award is much lower. Therefore, this year it will be surprising if Dune: Part Two or Wicked, which have no writing or directing nominations, win Best Picture.
I will be rooting for Coralie Fargeat, the only woman nominated for directing this year. Our work (with a colleague at Syms) shows that only about 10% of each cohort of first-time feature film directors are women. So far, in the 96-year history of the Oscars, only three women have received a directing Oscar. Interestingly, Fargeat directed her first feature at the age of 40—exactly the average age for a first feature in our sample. I will also be rooting for Jacques Audiard, who at 72 is the oldest nominated director this year. Our sample also shows age bias in the market for film directors.