The Changing Importance of Ratings for Sales: Evidence from the Film Industry

Abstract: This thesis analyses the influencing effect that ratings have on revenue using a fixed effects framework. A panel data set of up to 2,025 movies running in US and Canadian cinemas with daily frequency is constructed. The period spans from 2010 to 2018. Critic ratings have a statistically and economically significant effect on sales, but clear evidence lacks for anonymous internet users to have a positive effect. More reviews by critics per se are also positive for sales. The effect of ratings is more important later in a movie's lifecycle but the analysis fails to detect a significant trend for ratings to generally strengthen over time. Furthermore, movies produced by the seven largest film studios in the US are more sensitive to average ratings than their smaller counterparts are. The revenue of drama movies are not more prone to ratings than that of other genres.