The complementary role of advertising and electronic word-of-mouth for blockbusters and low-budget motion pictures

Abstract

Rooted on integrated marketing communication theory, the main purpose of this paper is to study the complementary role between advertising and electronic word-of-mouth (e-WOM) in motions pictures with high and low investments (i.e., production costs). This distinction is critical for studios because of the risk they face when market the movies. The research question is tested using a novel methodology in experience goods modelling, that endogenise the effect of e-WOM, advertising, revenues per screens and screens - the main constructs of our study - we apply the methodology to a random sample of 202 movies. The advertising impact on revenues and e-WOM is more critical for high than for low-production budget movies. However, a higher positive effect of advertising on screen allocation is found for movies with lower budgets. We believe our results have two important implications for managers: from the demand side, advertising affects moviegoers' attention after a certain threshold and it has a ripple effect on e-WOM. Therefore, marketing campaigns-based exclusively on e-WOM are unlikely to succeed. From the supply side, we found that theatre owners consider advertising investments as a signal of quality for movies with a limited production budget.