Hollywood iRule

Hollywood iRule
The iView ifrom iWall iStreet

STUDENT iID:……

COURSE iID:…….

SUBMITTED iTO:…

1
 Hollywood iRule

Summary:
The ilink ibetween iWall iStreet imanagement iand iHollywood iis ishown iin ithis iexample. iAs
ipart iof ihis iduties ias ia iproducer, iDave iGriffith isuggests ia ideal iwith iKim iMeyer, ia
iwell-known ihedge ifund imanager, ito igenerate imoney ifor ithis imovie. iThe iadvancement
iof ithe ieconomy ihas iled ito inew iinvestment iopportunities ilike iSlate iFinance
iArrangements i(SFA), iwhich ihave iimproved ion ithe iconventional imeans iof ifunding
imotion ipictures iand iother iforms iof ientertainment. iBig inames ilike iMorgan iStanley iand
iGoldman iSachs iwere ialso iinterested iin iinvesting iin ithe ilucrative ifilm iindustry. iBetween
i2005 iand i2007, i150 imovies ibrought iin inearly i$13 ibillion ifor ithe ifilm iindustry.
iInteresting ifindings iinclude ithe ifact ithat i1/3 iof ithe itotal ifunding ineeded icame ifrom
ihedge ifunds iand iother iconventional isources ithat ithe ibusiness iwas irelying ion. iGriffith
ihas icreated ia inew imodel ito iboost ithe ilikelihood iof isuccess iat ithe ibox ioffice isince ihe
iis icertain ithat ivarious ipreproduction iand ipostproduction iaspects icontribute ito ithe isuccess
iof ithe imovie. iDesigning ia imodel ithat icomes ias iclose ito isimulating ithe ioperation iof ia
igenuine imodel iof irevenue iestimates iis ithus ithe ichallenge iat ihand.

2
 Hollywood iRule

Question i1:
We icreate ia idata isheet ito iserve ias ithe ifoundation ifor icomputing ithe ilowest, iaverage,
iand imaximum ivalues iof ithe ivariables i(opening igross, itotal iU.S. igross, itotal inon-U.S.
igross, iand iopening itheatres) ifor ithe ifirst ireview iof ithe idata. iAccording ito iTable iQ1,
ithe ileast iopening igross ivalue ifor ithe imovie i"One iNight iwith ithe iKing" iwas
i$4,120,497, ithe iaverage iopening igross ivalue iwas i$17,468,465.57, iand ithe ihighest
iopening igross ivalue ifor ithe imovie i"Ice iAge: iThe iMeltdown" iin i2016 iwas i$68,033,544.
iThe imovie i"Happy iFeet" icreated ithe igreatest ivalue iof i$198,000,317 ifor ithe iwhole iU.S.
igross iin i2016, iwhile i"Flyboys" iproduced ithe ilowest ivalue iof i$13,090,630 ifor ithe itotal
iU.S. igross. iThe iaverage ifor ithe itotal iU.S. irevenue iis i$59,620,650.83. iAdditionally, i"Ice
iAge: iThe iMeltdown" icreated ithe imost ivalue iof i$456,235,122 ifor ithe itotal inon-U.S.
igross iin i2016, iwhile i"ATL" iproduced ithe ilowest ivalue iof i$0 ifor ithe itotal inon-U.S.
igross. iThe iaverage ivalue ifor ithe itotal inon-U.S. igross iis i$59,560,982.56. iAdditionally,
ithe iopening iweekend ifor ithe imovie i"Dream iGirls" ihad ithe ilowest ivalue iof i852
itheatres, ithe iaverage iopening iweekend ivalue iis i2,766, iand ithe iopening iweekend ifor ithe
imovie i"Ice iAge: iThe iMeltdown" ihad ia imaximum ivalue iof i3964 itheatres iin i2016. iAs ia
iresult, iwe ican isay ithat i"Ice iAge: iThe iMeltdown" iwas ithe ihighest-grossing imovie iof
i2016 iand idominated ithe iopening iweekend, iworldwide ibox ioffice, iand iopening itheatres.
iOn ithe iother ihand, i"Happy iFeet" itopped ithe ioverall iU.S. ibox ioffice. iThere iare i15 iR-
rated ifilms iand i23 icomedies, ifor ia icombined iratio iof i31% iand i20%, irespectively.

3
 Hollywood iRule

Question i2:
Return ion iinvestment, ior iROI, iis ia icrucial ifactor iin idetermining ithe istudio's ipast
iprofitability. iCalculating ithe iROI iof imovies iis ithe ifirst istep iin isupporting iMichael
iLondon's iassertion.

A.
The iformula iprovided iin ithe iquestion, iROI=(Total iU.S. iGross-budget)/budget, imay ibe
iused ito icalculate iROI iquickly iand ieasily. iThe ioutcome iis idisplayed iin iTable iQ2a iin
ithe iappendix.

B. i
The imean iof ithe ihistorical ireturn iis ithe iparameter iwe iare isearching ifor iin ithis isituation.
iThis iinformation iis iillustrative iof ithe iprojected ivalue iof ian iinvestment. iThe iROI iis
itested iusing ia ione-sample iT itest iwith ia itest ivalue iof i0.12. iThe i95% iconfidence ilevel
ihas ibeen iset. iBoth iH0: imean i= i0.012 iand iH1: imean i= i0.012 iare itrue iunder ithe inull
ihypothesis. iWe ican isee ifrom iTable iQ2b ithat ithe iROI ihas ia i95% iconfidence iinterval
ibetween i0.1348149 iand i0.4510486. iIn iother iwords, ithere iis ia i95% ichance ithat ithe iROI
iof ia iUS ifilm iwill ifall iwithin ithis irange.

d. iThis ione isample it-P-value itest iis i0.0325, iwhich iis iless ithan i0.05. iSince ithe isample
imean i(ROI) iis inot i0.12, iwe ican ireject ithe inull ihypothesis iat ithe i95% ilevel iof
isignificance. iThe icalculated imean iis i0.2929317, iwhich iis ifar ihigher ithan ithe i12 ipercent
ithat iLondon isaid.

4
 Hollywood iRule

Question i3:

A
To idetermine iif ithere iwas ia isignificant idifference iin ithe ioverall iUS ibox ioffice ireceipts
ifor icomedies iand inon-comedies, iwe iused ia itwo-tailed itest. iThe inull ihypotheses iare
iH0: icomedy iequals inon-comedy iand iH1: icomedy iexceeds inon-comedy. iWe ichose ia
itwo-sample iT-test ion ithe iassumption ithat ithe ivariances iof ithe itwo igroups iare inot
iidentical. iOur ianalysis iof itheir idescriptive istatistics ireveals ithat ithe ip-value iis
i0.176>0.05 iand ithe icritical ivalue iis it i= i1.3732.01174. iTherefore, ithe ioverall iU.S. ibox
ioffice ireceipts ifor icomedies iand inon-comedies iare istatistically iequal.

B
(1) iThe iquestion iis ihow ito ifind ithe iconnection ibetween irevenue i(total iU.S. igross
idomestic iproduct) iand iinvestments i(budget). iWe imay iutilise ithe icorrelation itool iin
iExcel's idata ianalysis.

We itherefore ihave ir i= i0.496.

This isuggests ithat irevenue iand iinvestments ihave ia ifavorable irelationship.

(2)

To ianswer ithis, iwe imust ifirst idetermine ieach ifilm's ireturn ion iinvestment i(ROI), iusing
ithe ifollowing iformula:

ROI i= iNet iincome i/ iCost iof iinvestment ix i100

We iused itwo-tailed ihypothesis itesting ito iexamine ithe ivariance idifference. iWe ichose iH0:
icomedy i= inon-comedy, iH1: icomedy inon-comedy, iand iBy iusing iEXCEL ito ianalyse ithe
idata, iwe iwere iable ito iget ithe it-statistic i= i2.047 i>2.023 i(critical ivalue) iand ithe ip-value
i= i0.047 i0.05, iindicating ithat ithe inull ihypothesis iwas irejected iand ithat ithe ivariance iwas
idifferent. iFigure iQ3b

As ia iresult, iwe imay idraw ithe iconclusion ithat icomedies iand iother ifilms ihave iquite
idifferent iU.S. iROIs.

5
 Hollywood iRule

Question i4:
We ineed ito iknow ithe isize iof ithe iUS igross idifferential ibetween iR-rated ifilms iand iother
ifilms iin iorder ito idetermine iif iR-rated ifilms ioutperform iother ifilms. iFirstly, iWe ichose
ito ibuild ia iregression imodel iusing ibasic ileast isquares. iWe ithus iestablished ian
iassessment ithat ithe iaverage iUS ibox ioffice irevenue ifor iR-rated ifilms iis iequal ito ithat iof
iUS ibox ioffice irevenue ifor iother ifilms. iThe idifference iis iequal ito iaverage i(R-rated
ifilms) i/ iaverage i(other ifilms). iH0: iThe idifference iequals izero. iIn iH1, ithere iis ino
idifference. iThe iT-test iis ithen iused ias ia ihypothesis itest. iBased ion ithe itable iwe
iobtained iusing iSTATA, ithe idegree iof iconfidence iis i95%. i(Table iQ4 iin ithe iAppendix).
iSince ithe ichart igave ius it i= i-0.6738, ithe iabsolute ivalue iof it iis iless ithan i1.96 i(at ia
i95% iconfidence ilevel). iTherefore, iwe iagree ithat ithe itwo imeans iare iequal, iwhich iis ithe
inull ihypothesis. iFrom ithe ianalysis iabove, iwe iinfer ithat ithe itwo imovie icategories i(R-
rated iand iothers) ihave ino iimpact ion ithe ioverall iUS ibox ioffice.

6
 Hollywood iRule

Question i5:

A
In ithis ipart, iwe ideveloped ia iregression imodel ito iforecast ithe ientire iUS ibox ioffice itake
iof iupcoming ifilms ibefore ithey iare iproduced.

Our imodel's iregression iis iY=0+1 iX i1+2 iD2+3 iD3+4 iD4+5 iD5+i. iX1 iis ithe iconstant
ivariable i(budget), iin ithis icase. iD2 ithrough iD5 iare idummy ivariables ithat irepresent ithe
iknown itale, isequel, igenre, iand iMPAA, irespectively. iDue ito ithe ifact ithat iour imodel iis
ia ilinear iregression, iwe itested ifor iheteroscedasticity, iwhich iis ishown iin iTable iQ5. i2.
iThe ip-value ifinding iallows ius ito idetermine ithe ipresence iof iheteroscedasticity i(0.000).
iWe icarried iout ia imodification ito imake isure iour iregression iwas itrustworthy iand istable.
iRegression ianalysis ihas ibeen iused ito icompare ithe ilogarithm iof ithe iUS ibox ioffice
ireceipts iof iall iupcoming ifilms ito itheir ibudgets, igenres, iMPAA iratings, isequels, iand
iknown iplots. iTable iQ5 ipresents ithe ifindings. i3. iThe iregression's iintercept iis i16.88,
imeaning ithat ithe isum iof iall iUS ibox ioffice ireceipts ifor ifilms ibefore iproduction iwould
ibe

16.88 iunits iin ithe iabsence iof iany iother ifactors. iThe islope ifor ibudget iis i1.41, iwhich
imeans ithat ian iincrease iin ibudget iwill ihave ia i1.41 iunit iimpact ion ithe itotal iUS ibox
ioffice irevenue iof imovies ibefore ithey iare iproduced.

B
All ivariables iin ithe iregression ithat ifailed ito ireach ithe i10% ithreshold iof isignificance
iwere iremoved. iWe imay iinfer ifrom ithe iindependent ivariable iof ibudget's ip-value iof
i0.000 ithat iit iis isignificant iat ia i90% ilevel iof iconfidence. iAdditionally, isequel iand igenre
ihave iindependent ivariable ip-values iof i0.001 iand i0.022, irespectively, iwhich iare iall
ibelow ithe isignificance ithreshold iof i0.10 iand itherefore istatistically isignificant. iIt iis inot
istatistically isignificant ifor ithose iindependent ivariables iwith ip-values igreater ithan ithe
isignificant ithreshold iof i0.10. iAs ia iresult, iwe idisregard ithe iknown inarrative iand iMPAA
irating ifactors iwhose ip-values iare ihigher ithan ithe isignificant ithreshold iof i0.10. iOur
imodel's ifinal iregression iis iE(Y) i= i0 i+ i1 iX i1 i+ iB2 iD2 i+ i3 iD3 i+ iI ior iE(Y) i= i16.84
i+ i1.41 iX i1 i+ i0.57 iD2 i+ i0.33 iD3. iWhereas iD2 ipresents ithe isequel, iX1 ipresents ithe
ibudget, iand iD3 ipresents ithe igenre,

7
 Hollywood iRule

C
Since ithe isequel icoefficient iis ipositive i(0.5699), ia isequel imovie iwill ihave ia ipositive
iimpact ion ithe ioverall iUS ibox ioffice itake. iAs ia iresult, iwhen icompared ito inon-sequel
ifilms, ithe isequel ifilm iwill ihave ihigher ioverall iUS irevenue.

References:
 Mckenna, iT. i(2015). iIn iTime: iThe iFirst iHollywood iMovie iof ithe iOccupy iWall
iStreet iEra. iIn iArt, iLiterature iand iCulture ifrom ia iMarxist iPerspective i(pp. i23-
32). iPalgrave iMacmillan, iLondon.

8
 Hollywood iRule

 Cohen, iP. i(2011). iCowboys idie ihard: iReal imen iand ibusinessmen iin ithe iReagan-
era iblockbuster. iFilm i& iHistory: iAn iInterdisciplinary iJournal, i41(1), i71-81.
 Ribstein, iL. iE. i(2012). iWall iStreet iand iVine: iHollywood's iview iof ibusiness.
iManagerial iand iDecision iEconomics, i33(4), i211-248.
 Inkmann, iJ. iFrom iHollywood ito iWall iStreet: iThe ivalue iof ilife-cycle iportfolio
ichoice.
 Lenz, iG. iHollywood, iWall iStreet, iand iMistrusting iIndividual iInvestors. iAvailable
iat iSSRN i4001285.
 Connaughton, iJ. i(2012). iThe ipayoff: iwhy iWall iStreet ialways iwins. iEaston iStudio
iPress, iLLC.
 Cissel, iM. i(2012). iMedia iFraming: ia icomparative icontent ianalysis ion imainstream
iand ialternative inews icoverage iof iOccupy iWall iStreet. iThe iElon iJournal iof
iUndergraduate iResearch iin iCommunications, i3(1), i67-77.

Appendix:
Table iQ1

9
 Hollywood iRule

Table iQ2a

10
 Hollywood iRule

Table iQ2b

11
 Hollywood iRule

Table iQ3a

Q3b i(1)

12
 Hollywood iRule

Table iQ3b i(2)

Table iQ4

Table iQ5.1

13
 Hollywood iRule

Table iQ5.2

Table iQ5.3

14
 Hollywood iRule

15