Predicting box office with and without markets: Do internet users know anything?

• Published in: Information economics and policy Vol. 25; no. 2; pp. 70 - 80
• Main Author: McKenzie, Jordi
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01-06-2013; Elsevier Sequoia S.A
• Subjects: Comparative studies; Earnings forecasting; Estimation bias; Forecasting; Information aggregation; Motion pictures; Online entertainment; Prediction markets; Prediction mechanisms; Revenue; Ticket sales; Information aggregation; D8; Prediction mechanisms; Motion pictures; C93; L8; Forecasting; Prediction markets
• ISSN: 0167-6245; 1873-5975
• DOI: 10.1016/j.infoecopol.2013.05.001

•HSX and Derby game generate reliable estimates of opening weekend box office.•Participants over predict low-earning films but under predict high-earning films.•Prediction bias is greater in the Derby (non-market) mechanism.•Higher budget films, sequels and films featuring stars are more accurately predicted.
This study investigates and compares predictions of opening weekend box office revenue from an online prediction game, the Derby, and an online prediction market, the Hollywood Stock Exchange (HSX), using a sample of 141 films released in 2007. Overall, both mechanisms provide accurate predictions of box office outcomes but tend to over-predict small-earning films and under-predict large-earning films. This bias is present across a number of sub-samples disaggregated by film-specific variables. The bias is consistently greater in the Derby game, suggesting that the market mechanism is superior to the non-market mechanism. There is also evidence that larger budget films, sequels and films featuring stars are predicted more accurately in both settings, and that individual-level predictions improve as films spend more time at the box office and as players gain experience.