The Impacts of Online Word of Mouth on Motion Picture Revenue: An Analysis Based on Simultaneous Equation Model

Abstract

In this research, we check the pattern of word of mouth and ways illustrating movie’s success in China. We choose 120 movies released in China in 2017, with movie ratings and the number of ratings as the valence and volume of WOM respectively. We employ a simultaneous equation model to analyze the causal relationship between online WOM and success of movies. The results reveal that online WOM information affects movie box office through both persuasive and awareness effects. For movies achieving higher box office in China, WOM works mainly through awareness effect. However, for movies with lower revenue, the effect of WOM on revenues seems not important in China’s motion picture industry.