Advertising Elasticity: Entertainment vs. Other Industries, Launch Week vs. Full Run

ConversionSchöndeling, A.; Burmester, A.; Edeling, A.; Marchand, A.; Clement, M. · 2023Journal of the Academy of Marketing Science
Topicsadvertising elasticity·meta-analysis·entertainment·movies·video games·pre-launch advertising·supply and demand

Movie studios and game publishers spend heavily on advertising, yet lessons from other industries may not carry over to entertainment. A title's advertising response, or elasticity, is the percent rise in its sales or revenue when its advertising rises by 1%. Imagine your team is setting the advertising budget for a film or game launch and deciding how to judge the campaign. What response should the plan assume, and which weeks should decide whether the campaign worked?

Movie and video-game sales respond to advertising far more strongly than sales in other industries, and more strongly over a title's full run than in its launch week.

Data chart

Unadjusted movie and game advertising responses exceed other industries' averages

Average percent change in sales, revenue or, for movies, screen counts for 1% more advertising. Both other-industry lines are unadjusted averages.

Other industries (Sethuraman 2011): 0.12%Other industries (Henningsen 2011): 0.09%Movies and games, before adjustment0.33%Movies and games, adjusted0.20%
  • Read the unadjusted bar against the unadjusted industry lines.

Before adjustment, the response for movies and video games is about three times other industries' averages. Plan with the adjusted figure.

Entertainment averages pool 290 estimates from 59 studies, data 1960-2017, covering sales, revenue and movie screen counts. The adjusted mean corrects for missing screen or platform counts, missing competition and the assumption that every extra advertising dollar works equally hard. Sethuraman and colleagues (2011) report the unadjusted cross-industry mean of 0.12%; Henningsen and colleagues (2011) report 0.09%. Neither cross-industry average shares the entertainment correction basis.

Data chart

Advertising responses are stronger in later weeks and over the whole run

Extra percent rise in sales, revenue or screens for each 1% more advertising, compared with launch week.

Launch week comparison baseline: 0%Later weeks compared with launchweek+0.19%Whole run compared with launch week+0.21%
  • Zero marks launch week as the baseline, not zero response at launch.

Judging a campaign on launch week alone understates its advertising response in sales, revenue and screens.

Differences between advertising responses in Table 2's weighted model of 289 estimates from 59 studies of movies and video games, including sales, revenue and movie screen counts. Launch week is the comparison category, not an estimated zero response. Exact differences are +0.190 for later periods and +0.207 for the whole run; displayed percentages express extra outcome response per 1% more advertising.

Action guide

  1. Judge your launch campaigns on the whole run, not opening week alone.Sales respond more to advertising in later weeks and over the whole run than in launch week, so a scorecard built on opening week understates what your advertising did.
  2. Assess your launch advertising by timing before you move money between periods.Advertising only before launch goes with a stronger response than a budget covering the weeks before and after, a marginal difference. Advertising only after launch does not reliably differ from advertising only before launch.
  3. Plan with one response across regions, and do not cut advertising for a recession alone.A long recession can weaken the response, so review your plan if a downturn drags on.
  4. Build your forecasts on data from the social media era.The response is somewhat lower in data from 2006 onward, a marginal difference, so benchmarks from older campaigns may overstate what your advertising will do now.
  5. Plan your launch budget on a response estimate adjusted for study design.Have your finance team correct for studies that leave out screens or competing titles, or that assume every extra dollar works equally hard. The adjusted figure measures changes in sales, revenue or screens, not a return on spending.
  6. Ask your analytics team to separate demand from distribution in budget forecasts.A movie's advertising can raise demand directly and can also win more screens, which add demand. Ask for both routes before you set the budget.

Evidence

  • Before adjustment, the response across sales, revenue and movie screen counts averages 0.33% for 1% more advertising, about three times other industries' unadjusted averages of 0.12 and 0.09. Studies that leave out screen or platform counts or competing titles report higher estimates, and studies that assume every extra dollar works equally hard report lower ones. With both adjustments, the average falls to 0.20, the benchmark to plan with.
  • Without adjustment, demand (sales and revenue) rises 0.34% on average for 1% more advertising, and screen counts rise 0.21%. In studies that account for screen or platform counts, the direct demand response averages 0.27%. Separately, earlier work by Clement and colleagues (2014) links 1% more screens to 1.04% more demand, so screens gained through advertising should pass almost fully into demand.
  • Sales, revenue and screens respond more strongly to advertising when measured in later weeks or over a title's whole run than in launch week alone. The response is about 0.19 higher for later weeks and about 0.21 higher for the whole run.
  • Advertising that runs only before launch goes with a stronger response in sales, revenue or screens than a budget spread over the weeks before and after launch. The gap is about 0.17, a marginal difference. Advertising that runs only after launch does not reliably differ from advertising that runs only before it.
  • The response does not reliably differ across regions or between movies and video games. It does not reliably fall as the share of months in recession rises, but a marginal decline appears when more than 50% of the measured months are in recession.
  • The response is about 0.18 lower in data gathered from 2006 onward, after social media took off, than in earlier data, a marginal difference. The drop is a single break, not a steady decline over the decades.

Key takeaway

Customers respond far more strongly to advertising for movies and video games than for other products.

Limitations

The studies cover movies and, less often, video games, with data from 1960 to 2017, and they measure sales, revenue and screen counts, not profit. The estimates show how strongly sales respond to advertising, not whether a bigger budget pays for itself.

Source

Schöndeling, A., Burmester, A., Edeling, A., Marchand, A., & Clement, M. (2023). Marvelous advertising returns? A meta-analysis of advertising elasticities in the entertainment industry. Journal of the Academy of Marketing Science, 51, 1019–1045. https://doi.org/10.1007/s11747-022-00916-0.

https://doi.org/10.1007/s11747-022-00916-0

Exact values behind the rounded figures: advertising elasticity +0.190 higher for later weeks and +0.207 higher for the whole run than for launch week; -0.171 for budgets spanning both before and after launch compared with pre-launch-only advertising; -0.177 for data from 2006 onward compared with earlier data.