An Economist on the Oscars

(Photo: pop culture geek)

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 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 Mintonreports 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.

Brian Libby

Give me a break. The movie industry over the past 30 years has already become overwhelmingly concerned with box-office receipts. We print box-office grosses in the paper as if they are a scorecard already. Even though the Oscars and the "winners" Academy voting produces are far from a record of the artistically best movies (the critics pick those), they at least try to reward creative quality in a way that box-office receipts can't.

If you think I'm being elitist, ask yourself if we should give James Beard Awards for cuisine to Taco Bell and Doritos. Or if the Toyota Camry should be named the most beautiful car. Or cheap $10 wine should be declared better than the most coveted French and Italian vintages. The stuff that racks up the highest sales, be it a movie or food or a car or ANYTHING, is usually the lowest common denominator. We have awards shows, at least in theory, precisely because the lowest-common-denominator favorite frequently strikes people as being misrepresentative of the highest quality.

I stopped taking the Oscars seriously several years ago, not because they weren't congruent with box-office receipts, but because they weren't incongruent enough.


Mike B

In theory "Best" would be some sort of weighted mix of acclaim by the general public and acclaim by the experts. It's a multi-part test consisting of gross, popular reception and critical reception ultimately judged by experts in the industry. A film may be a masterpiece, but if it is not accessible to the general public then that constitutes a failure in much the same way that something that sell out for higher box office returns is also a failure.

The Academy Awards aren't perfect, but that's why Historical Top X lists exist.

Tim Dellinger

Your argument hinges on the idea that consumers (moviegoers) will choose to consume that which is "best". It could be argued that they choose, say, "fun" movies, and are fully cognizant that these aren't the highest quality products on the market.

Similarly: Bud Light, McDonald's. Consumers vote with their dollars, but they're voting for utility, not for quality.


Good points. But you completely leave out the factor of initial budget, advertising, and promotion.

These mega blockbuster films get a huge head start before they even roll one foot (maybe gigabyte is a more appropriate term these days?) of film. It is the marketers/corporate leadership of the major studios that decides what will be a blockbuster (for the most part). They generate initial buzz by giving a film an ungodly budget... so people talk about that. They use that big budget to buy the rights to some story that they know has worked (made money) in the past. Almost every film made today is based on a book, another movie, or characters from another movie. Then the use more of that huge budget to hire directors and actors that people like.

It comes down to McDonalds and Budweiser... they take something familiar and wrap it up "fancy", get people you like to sell it, and spend fifty cents of every dollar you spend on their product to advertise it back to you. The real "utility" is the omnipresent advertising... not the actual product.

The Academy Awards, and organizations like that, give awards like the oscars to compensate the people that are genuinely interested in creating a piece of art for the sake of the thing rather than a buck. The people that became millionaires from their films have already received far more compensation and recognition than they deserve.


Walter Wimberly

Another way to look to the best movie is by its Return On Investment (ROI). Avengers cost a lot of money to make, and publicize. But consider a movie that "only" cost $10M, but grossed $50M, it would probably have a higher ROI than Avengers.

Would it be a "better" movie - financially yes, maybe gives a better view as well, since some movies gross a lot, but their distributors spend obscene amounts of money trying to get that gross, and the movie still loses money.

Enter your name...

I don't think that "best" and "most popular" are synonyms, or even close. McDonald's hamburgers are more popular than Kobe steaks, but mass-produced hamburgers are distinctly worse products than top-quality steak.


It is worth considering the fact that customers "vote" (with their $$) for movies BEFORE they see them. Thus, total box office revenue is, in large part, a function of marketing effectiveness...

Matthew Glidden

Many argue the Oscars exist to "sell" movies that DIDN'T do well. The Best Picture nominations for Silver Linings Playbook and Zero Dark Thirty, for example, will likely bump relative revenues more than The Avengers' billion-plus dollars. (Otherwise, why expand to nine movies?)

If Hollywood's trying to bulwark smaller money makers, I'd be interested in the revenue change for the LEAST successful Best Picture nominees over the years. Do they really get a notable boost?


I don´t think your argument is 100% valid:

It assumes that everyone who paid to watch a movie actually liked it. What if no one who watched the most profitable movie liked it? Is it still the best movie? I don´t think so.

Ben D

Two points:

1) Most people pay for a movie before they decide whether they like it or not. Unless you're seeing the movie a second time, your decision is based on reviews, advertising, etc, so it's not really a "vote" that you like the movie.

2) You often have the "vanilla ice cream" issue where the movie that is chosen is the one that all members in the group find least objectionable, not necessarily the one that any of them really like.


You raised an interesting issue. Its important to consider that the purchase of an entry ticket does not reflects the marginal utility or the level of satistaction that a consumer gets from wathching the movie. Beeing a best seller does not implies that something is the "best". It reflects a trend, but not quality. Or would you considered that the best movie is the one with higher expenditure in adds and promotion and by consequence, the more successfull atracting consumers? Going to the movies implies asimietrical information... you pay for something you suppose you would like, but it could not fullfill your expectations.


@Matthew Glidden For this year, yes, they got a significant boost.


In the last few weeks I have already "voted" for the "best" films of 2013. This would include Jack Reacher, Bullet To The Head and A Good Day To Die Hard. As someone who is "paying the bills" for the industry, I would say that if any of these movies gets mentioned as one of the "best" for 2013 - we're in store for one of the "WORST" years in movie history!

Mike Pozar

Interesting take. I definitely agree that the academy would do well to try to make their awards more closely tied to public perception. That said, I am not sure Box Office numbers are the best proxy. The Avengers may have the highest gross, but you may be hard-pressed to find that many people who actually thought it was the best movie they saw all year - some may have liked movie B more than The Avengers; some, C. B and C may have lower gross totals, and I suppose this means that The Avengers would win in an instant-runoff voting scheme :-)

However, this means movies that appeal to the "lowest common denominator" would be most likely to win Best Picture. I could see why the academy would want to push back against this trend.

Another argument you could make though would be that if Amour and Beast of the Southern Wild were actually such great films, then their low Box Office totals would seem to indicate some sort of market inefficiency!



Why is it assumed that everyone likes a movie they go to see? That's almost certainly false, and because of that, gross box office is a highly unreliable measure of quality. I would wager that if one were to survey everyone who watched the Avengers last year (already a biased population) about their favorite movie in the past year, the Avengers would not come up at the top of the list.

Michael Spitzer-Rubenstein

Not experts. The Academy is made up of people who make movies. If the experts are anyone, they would be the movie critics and they vote for the Golden Globes. That's very similar to how sportswriters vote for the NBA MVP.


Buying a movie ticket may be seen as a risky investment :
If I go to one of the nominated movie, I know there is a risk I just wasted my money for a bad movie, or that I'll see a very good movie. If I go to a blockbuster knowing that I'll get consistently a fair amount of fun.
Oscars may be more an indicator of how risky a movie is, the way rating agencies work.

If that's right, we could correlate the revenue of those movies with an indicator of risky behavior.

Jo in OKC

Saying The Avengers is the best movie of the year because it grossed the most is like saying that Fifty Shades of Grey is the best book of the year because it sold the most copies.


It's amusing to see people trying to compare the "quality" assessment that consumers make between a Michelin 5 Star eatery and McDonalds, with the "quality" assessment consumers make between two movies.

One would hope that those who are freakonomically minded would have sense enough to recognize the VAST price differential between Chez Cinque Stella and McDonalds, and how that might have some impact on "performance" (i.e. box office) of the two. On the other hand, a crappy movie and a good movie COST THE SAME TO SEE. So when the consumer is making a choice between Amour and The Avengers, cost isn't a meaningful factor, save perhaps having to drive a little farther to find a theater showing Amour.

So the "consumer" selection IS a much better indicator of "best" where movies are concerned than where cars or cuisine, because price isn't a meaningful differentiator. And the #1 element of a "quality" movie is simply this: does it entertain? It doesn't matter how much money a studio spends promoting a movie, it's not going to rake in 1.5 billion dollars if it doesn't entertain. Opening weekend is driven by promotion, after that, word of mouth is what matters.



This is a classic example of a market with imperfect information. Consumers purchasing movie stubs do not neccessarily purchase the ticket of the movie that is 'best', but more likely the movie that is percieved to maximize their utility best.

Revenue correlates less directly with 'best' for 3 reasons.

1. In terms of perception, as proved perhaps most obviously with James Cameron's titanic (not that it is a bad movie though), revenue can be generated easily in the film industry due to marketing, strong ad campaigns,and by hiring big name actors.

2. The movie that maximizes people's utility best when buying a movie ticket is not always the 'best' movie, even from the consumers stand-point. I, for example, went to see 'Epic Movie' in theatres twice when it came out. Is it a good movie? No! Did I know that it was a 'bad' movie going in? Yes! I (as well as many of my friends) bought the ticket knowing the movie was going to offer me little but cheap laughs, but we did so anyway because utilitarianly it was the 'best' decision for that moment. Not one of us would have claimed to have maximized 'film quality' and I think it is an absolute stretch to assume that most consumers do.

3. The third problem with such as model is the large barriers to entry. In order for a movie to be played in major theatre chains, they have to meet certain investment requirements. Essentially, movie theatre chains are risk adverse and thus will tend to keep only movies that they are reasonably confident will provide them a good return. 'Not risky', however, does not mean 'not good'. It is important to mention that cinema is an art form, as much as music, painting, or drawing is. Looking back in history to some great artworks, a few by Picasso come to mind, we see that risk does not categorically mean good or bad. Ultimately this results in consumers not having the opportunity, or at least the same opportunity, to watch many of these financially riskier films, which the consumers may finder 'more enjoyable' or 'better' even.