An Economist on the Oscars
The “best” picture of 2012 was Argo.
At least that’s the film that won the Oscar for best picture. According to the Oscars, the decision to give this award to Argo was made by the nearly 6,000 voting members of the Academy of Motion Picture Arts and Sciences. As Oscars.org notes, “the Academy numbers among its members the most gifted and skilled artists and craftsmen in the motion picture world.”
In other words, this choice is made by the “experts.”
There is, though, another group that we could have listened to on Sunday night. That group would be the people who actually spend money to go to the movies. According to that group, Marvel’s the Avengers was the “best” picture in 2012. With domestic revenues in excess of $600 million, this filmed earned nearly $200 million more than any other picture. And when we look at world-wide revenues, this film brought in more than $1.5 billion.
Marvel’s the Avengers, though, wasn’t even nominated for an Oscar. Instead, the following nine films were chosen as the “best” films in 2012 (current world-wide revenues reported after each film).
- Life of Pi ($583 million)
- Les Miserables ($395 million)
- Django Unchained ($380 million)
- Lincoln ($245 million)
- Argo ($207 million)
- Silver Linings Playbook ($160 million)
- Zero Dark Thirty ($104 million)
- Amour ($18 million)
- Beast of the Southern Wild ($12 million)
After Life of Pi, the combined revenue of the remaining eight films – a list that includes the “best” picture Argo – is still not quite what Marvel’s the Avengers earned.
Despite what seems like a clear endorsement by the customers of this industry, the Avengers was ignored by the Oscars. Perhaps this is just because I am an economist, but this strikes me as odd.
Movies are not a product made just for the members the academy. These ventures are primarily made for the general public. And yet, when it comes time to decide which picture is “best,” the opinion of the general public seems to be ignored. Essentially the Oscars are an industry statement to their customers that says: “We don’t think our customers are smart enough to tell us which of our products are good. So we created a ceremony to correct our customers.”
The Oscars are hardly alone in the entertainment industry. We see something similar in the sports industry. The fans are not generally asked to choose the “best” player in each sport. Instead, experts (i.e. sports writers) often tell us who is the “Most Valuable Player,” who is an “All-Star,” or who is worthy of the Hall of Fame.
However, what if we asked the customers?
Consider the NBA (a league I often write about). The fans vote for the starters to the NBA All-Star game. And if we are to believe the fans, the “best” player in the NBA – or the player who received the most votes – was Kobe Bryant. Kobe is also currently the NBA’s highest paid player. So it looks like Kobe is the “best.”
Before we jump to this conclusion, we need to revisit the argument about “best” picture. This argument focused on the revenue the films generated. And although Kobe is clearly popular with fans and with the Lakers, it is not clear from this that he generates the most revenue.
A published study I conducted with Martin Schmidt and Stacey Brook indicated that the primary driver of gate revenue in the NBA is wins (not a player’s “star power” and not scoring totals). Given this research, if we want to identify the player who produces the most revenue we need to first look at wins.
TheNBAGeek, put together by Patrick Minton, reports each player’s Wins Produced (calculation details at the Wages of Wins Journal). As of the games played on Saturday night, here are the top 5 players with respect to Wins Produced in the NBA in 2012-13.
- Kevin Durant (Oklahoma City): 14.2 Wins Produced
- LeBron James (Miami): 13.2 Wins Produced
- Tyson Chandler (New York): 11.4 Wins Produced
- Chris Paul (LA Clippers): 10.9 Wins Produced
- James Harden (Houston): 9.8 Wins Produced
From this ranking, Durant seems worthy of an NBA Oscar. Before he makes his speech, though, we have to note that it appears wins are worth different amounts in different markets. So one could argue – since a win appears to be worth more in Miami than a win appears to be worth in Oklahoma City – that LeBron is “better” than Durant. In fact, since a win in New York and Los Angeles is worth more than both Miami and Oklahoma City, fans of the Knicks and Clippers could argue for Chandler or Paul.
It does not appear, though, that we can easily argue for Kobe. So far in 2012-13, Kobe – with only 5.8 Wins Produced – ranks 41st in the league. Yes, Kobe is above average. But he does not rank among the most productive players in the league (and if he did, the Lakers would not currently be trying to get into the playoffs).
Of course, one might want to move beyond gate revenue and talk about TV revenue or jersey sales. And when we take that step, maybe Kobe would come closer to being the “best” player. Unfortunately, the link between revenue and player performance in the NBA is difficult to pin down exactly (although my co-authors and I keep trying). So in basketball, one could still debate the “best” player in sports.
In the movies, though, we clearly have revenue data that is directly linked to each movie. So should we simply award the “best picture” to the highest grossing film? Such an approach might be pleasing to an economist. But if we took that approach, something would be lost. As noted, because a player’s impact on revenue is still debatable, we can still debate the identity of the “best” player (from the customer’s perspective).
But to the millions who spend time watching and debating the Oscars, the economist’s approach is probably less than appealing. If we look at just revenue, the identity of the “best” picture is not debatable. And consequently, the revenue generated by all the discussion the Oscars generate — and this goes beyond the event on Sunday to all the revenue generated by the media the past few weeks — would be lost. After all, if we are simply going to say the “best” is the film with the most revenue, would there be many people who would want to spend time watching the Oscars?
Since the debate itself generates value, we should be hesitant to just look at the numbers (an observation that explains some people’s hostility to measuring player producti
vity in sports).
That being said, one would hope the Academy would at least pay a bit more attention to the people paying the bills. Not only does it seem wrong (at least to this economist) to argue that movies many people like are simply not that good, focusing on the box office would seem to make good financial sense for the Oscars as well. A recent Slate article argued that the Oscars’ telecast tends to have higher ratings when more commercially successful films are nominated for best picture.
So in the future, maybe voters for the Oscars will pay a bit more attention to their customers. These customers may not be thought of as “movie experts.” But these are the people who pay the bills, and therefore, ultimately it is their opinion that should matter to this industry.