Oscarnomics: the economics of Oscars

Atanu Biswas | Updated on: Apr 07, 2022
Will Smith and Jada Pinkett Smith

Will Smith and Jada Pinkett Smith | Photo Credit: MIKE BLAKE

The Oscars’ ecosystem sustains many businesses and livelihoods but it is difficult to quantify the benefits

While the 94th Academy Award ceremony would long be remembered for a ‘wrong’ reason, the Oscars are like the entertainment industry’s Super Bowl. And it’s likely to have a big impact on a film, actor, director or those working behind the camera. At least, it can be perceived to be so. Tom Hanks certainly became a Hollywood mega-star after winning back-to-back Best Actor Oscars for ‘Philadelphia’ in 1993 and ‘Forrest Gump’ in 1994. Well, the economic impact of the Academy Awards may be limited at best.

The economics of Oscars — the ‘Oscarnomics’ — has also been studied by different researchers over years. It’s not that the winner of the best actor or actress award would be a trove of gold for future films.

Professor S Abraham Ravid of New York’s Sy Syms School of Business, who works on the economics of the movie business, perceived that being nominated and winning the award doesn’t mean that a movie is going to be a blockbuster. “There are quite a few films that won the Academy Awards and never became blockbusters, but it does give you a bump.” Although the salary of an Academy Award-winning actor goes up, an Oscar-winning director or the writer — rather than the actors — gets prime importance to a studio.

A 2005 research paper published in the ‘Journal of Cultural Economics’ investigated the effect of Oscar nominations and awards on movies’ financial success by estimating the impact on weekly returns and on movies’ survival time. Interestingly enough, the Oscar nomination drives the box office more than the actual winning of the movie. Winning an award contributes only little to extra revenues generated due to nominations.

Common sense would dictate that most people who are likely to see an Oscar-winning movie, might have already seen it by the time the Academy Awards goes to air. Then, although an Academy Award-winning film gets more flexibility to open again in theaters and enjoy another run, in today’s world, with many other ways to view movies, an expensive additional theatrical run is not needed to make money.

The Academy of Motion Picture Arts & Sciences certainly receives about two-thirds of its annual revenue from the broadcast rights of the Oscar award ceremony. And the economic impact of the Oscars is also huge for Los Angeles and Southern California, the permanent home of the annual Oscar ceremony. There are events, event planners, florists, limo drivers, hotels with big ballrooms, many more parties, restaurants, flights, DVDs, services, trade ads, billboards, and on and on.

Economic impact

Back in 2013, the economic impact of the Oscars on Southern California was measured at over $130 million annually by Microeconomics researcher Roy Weinstein. It’s certainly up considerably over the last decade. Today, award campaigning alone can cost more than an additional $100 million which is not reflected in that study. And Oscar’s marketing budgets run from a few hundred thousand to a few million.

Still, Weinstein admitted that his study couldn’t measure the ‘blimp effect’. “It’s like there is a blimp over Southern California when events air on TV. People see the beautiful scenery and the weather is gorgeous – and they’re back east freezing – so they say, ‘Let’s spend a week or two in California.’ Or they decide to move here. We don’t count that directly but we know it is real,” said Weinstein.

And is there any significant economic impact of ‘Rocking’ the Oscars ceremony when actor Will Smith — winner of the best actor award for his role in the film ‘King Richard’ — smacked comedian Chris Rock — the anchor — for a distasteful joke that addressed the hair loss of his wife, Jada Pinkett Smith, due to the disease ‘alopecia’? Would the slap incident help the movie, the actor, or even the Academy by enhancing their business potential, as it would invariably increase the visibility?

In fact, there’s a sign that the slap has already helped the stand-up comedian in his profession. After the Oscars Slap, the demand for tickets and also the ticket prices of Chris Rock’s ‘Ego Death’ tour has skyrocketed. For his first public appearance in Boston after the Oscars Slap, the ticket price ranged from $825 to $1,705 on the resale platform StubHub, much higher than the original $51 to $71 they were sold for on the venue’s website.

StubHub said it experienced more than 25 times the daily sales that occurred last month for the comedian’s current tour. The wings of Oscars’ business are far more widespread. There was speculation from some corners whether the pharmaceutical giant Pfizer had planned the ‘Oscar Slap’ to promote its upcoming alopecia drug. A Pfizer spokesperson, of course, rubbished the allegation.

However, even such discussions for and against such a conspiracy theory in the social and mainstream media, undoubtedly, would help the promotion of the drug. For sure. Thus, the complete coverage of ‘slapnomics’ is difficult to measure and yet unclear. Let’s keep track of experts’ analyses and pages of business and economics journals in near future.

The writer is Professor of Statistics, Indian Statistical Institute, Kolkata

Published on April 07, 2022
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