Basic Marketing Research with Excel 3rd Edition by Alvin Burns,Ronald Bush

Exercise 10

Starlight Films
Marketing research is used to help managers in the movie industry make better decisions. There are many factors that go into making a great movie: Good scripts, directors, producers, actors, and all the support staff are fundamental. For many years, movies have been improved upon by using marketing research to gather consumer reactions. Two of the earliest users of marketing research, though primitive, were Carl Laemmie and Adolph Zukor. In the early 1900s, small, neighborhood theaters called nickelodeons showed films of the day; admission was a nickel. Laemmie observed audience and sales data for Hale's Tours in Chicago. He made notes on what types of people saw the films and determined the most popular hours of the day. Zukor, a nickelodeon operator in New York City, watched audience faces to see their reactions to different parts of the films and claimed he learned to "feel" reactions of laughter, pleasure, and boredom. Both Laemmie and Zukor must have learned something. They created the two companies Universal and Zukor Paramount-both large motion picture giants even today.
Over the years marketing research has increasingly played a role in movie making. When marketing research, conducted by the Gallup Poll, predicted a huge market success for the movie Gone With the Wind , MGM decided to price the movie between $0.75 and $2.20, when the average movie ticket of the day was about $0.25. The result was huge profits, as the Gallup predictions turned out to be correct. Marketing research has continued to be used to determine if scripts are profitable, rate the market attractiveness of the actors and actresses, profile the movie-going market segments, determine the effectiveness of advertising, and determine which type of movie ending the audience most prefers. Today, marketing research is heavily used by Hollywood to help make movies. 23 By answering the questions that follow our case material, you will have a better understanding of the role of marketing research.
Daniel Lee Yarbrough is a director and producer with Starlight Films in San Francisco, California. As part of his normal duties as a director and producer, Daniel constantly seeks scripts that he can turn into successful movies. The movie business is strongly driven by profits. While a few firms exist to make films purely for their artistic value, the cost of movie making is so huge today that few firms can afford to make movies that do not earn a respectable ROI for their investors. Daniel knows he must make "good" decisions-those that result in a film that will attract sufficient audience numbers to earn a good return.
Daniel has recently received a manuscript by a successful author, Warren St. John, who wrote the highly successful book, Rammer Jammer Yellow Hammer (a book about football fans following their team in RVs). Recently St. John turned out another manuscript about a boy's soccer team that has Daniel's interest. As he reads through the manuscript, Daniel begins thinking about decisions he will need to make if he wants to turn the manuscript into a movie.
How much should he offer St. John for the manuscript rights? Daniel knows the manuscript is very good and he assumes other film companies are going to make offers. Although Daniel has paid for manuscripts in the past, it has been about three years since he was actively involved in bidding for an author's script. Though the amount paid the author will be a small part of the total cost of the movie, it could still be a significant amount of money.
Casting decisions must be made early because they could greatly influence costs. Who should play the lead roles? Supporting roles? As always, there is a plentiful stock of talented, yet unknown actors available. On the other hand, there are "hot" actors who are very popular and draw audiences through name recognition alone.
Daniel's filmmaking experience allows him to adequately predict many of his costs. He knows, for example, what it takes to film on location versus in a studio. He also knows the costs of equipment and costs of various personnel such as camera crew, grips, and copy editors. However, of all the issues facing Daniel, the most important issue will be how many people will buy a ticket to see this movie? Emmy Awards are great, but to make the needed ROI, Daniel knows he needs people to walk into movie theaters to see his movies. Of course, while some can estimate this number, no one can assure Daniel of the exact number. But, he can get some good estimates as to whether samples of an audience like the script.
Based on the case material alone, list decisions that Daniel needs to make.