THE EFFECT OF CAST DIVERSITY ON THE FINANCIAL SUCCES OF MOVIES Sunaina Braam 10110364 22-06-2018 MSc. in Business Administration – Marketing track University of Amsterdam – Amsterdam Business School Thesis supervisor : F. Situmeang 1 Contents Statement of originality.............................................................................................................. 3 Acknowledgements .................................................................................................................... 4 Abstract ...................................................................................................................................... 5 1 Introduction ........................................................................................................................ 6 1.1 Thesis overview........................................................................................................... 9 2 Literature review ............................................................................................................... 10 2.1 (Social) identity theory and Social cognitive theory ................................................. 11 2.2 Uses and gratification theory..................................................................................... 13 2.3 Determinants of success ............................................................................................ 15 2.4 Movie reviews ........................................................................................................... 17 2.5 Conceptual model ...................................................................................................... 20 3 Methodology ..................................................................................................................... 20 3.1 Independent variables ................................................................................................ 21 3.2 Control variables ....................................................................................................... 23 3.3 Analysis ..................................................................................................................... 24 4 Results .............................................................................................................................. 24 4.1 Correlations ............................................................................................................... 28 4.2 Analysis ..................................................................................................................... 30 5 Discussion ......................................................................................................................... 36 5.1 The amount of non-white actors in Hollywood movies is not representative for US population ............................................................................................................................. 36 5.2 There was no significant effect found of ethnic diversity on box office sales .......... 37 5.3 Genre doesn’t influence the relation between diversity and box office .................... 39 5.4 The impact of diversity on reviews was not proven.................................................. 40 5.5 Theoretical implications ............................................................................................ 41 5.6 Managerial implications ............................................................................................ 42 5.7 Limitations and recommendation for further research .............................................. 42 6 Conclusion ........................................................................................................................ 43 7 References ........................................................................................................................ 45 8 Appendix .......................................................................................................................... 53 8.1 Results ln transformation of Boxoffice variable ....................................................... 53 8.2 Top distributor list ..................................................................................................... 54 8.3 Full movie list............................................................................................................ 55 2 Statement of originality This document is written by student Sunaina Braam, who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents. 3 Acknowledgements Writing my master thesis has been quite a bumpy road. While never encountering any difficulties during my academic or high school journey before, finishing this master has been quite the challenge. I was faced with a personal tragedy during my first attempt for my thesis, I had to stop my studies and stop working. Trying to keep all those different balls in the air at that time resulted in all of them dropping on the floor all at once. This was a few years back though, and I came back stronger. However, each year I was hesitant to work on my thesis. I even though about giving up. In hindsight, I was afraid I would fail again and that believe held me back of actually doing it. Instead I focused my energy on what was going well for me, my professional career. Now that graduation is close, I feel privileged and thankful that I had the opportunity to pursue this degree with support from my family in a country that enables me to do so. I want to thank my boyfriend Joël for helping me with the enormous database during the thesis process, but more importantly his support every step of the way, during the good times but also the very bad. I came back stronger because you were there. I want to thank my thesis supervisor Frederik Situmeang for his continued support, flexibility, words of encouragement and trust. He never stopped believing in me. Last but not least, I want to thank my parents for the sacrifices they made to give me and my brother everything we ever wanted and their continued support in everything I do in life. I wouldn’t be close to where I am in life right now, if it weren’t for them. Thank you from the bottom of my heart. 4 Abstract This research builds on existing literature on predicting box office revenues. The purpose of this study was to examine the relation between the level of ethnic diversity in a movie and box office success. This is the first study to research a sample of this size and incorporate diversity as one of the variables in a predictive regression model. A sample of 774 movies released between 2013 and 2017 was analyzed and the main actors were labelled by their ethnicity. The effect of diversity on customer and critic reviews was researched as being a possible mediator. Production costs, top distributor and the number of days a movie is shown in theatres, were used as control variables. The positive relationship between the number of non-white actors and box office success was not significant after controlling for the other variables. The data further shows that movie casts are not representative for the U.S population and that the relation between diversity and movie success should be further investigated. Results also indicate that there is a clear distinction to be made between the top grossing movies and the overall collection as they have different control variables and the effect of diversity is much larger in the top movies, though not significant enough in this study. This study debunks a long hold belief in Hollywood that diversity doesn’t sell overseas. The findings should encourage other scholars to examine the effects of diversity and may be used as input for prediction models with diversity as one of the independent variables. 5 “Our ability to reach unity in diversity will be the beauty and test of our civilization” – Mahatma Gandhi 1 Introduction Over the years Hollywood has received significant backlash for their lack of ethnic diversity. A telling example was discovered in the leaked Sony emails of 2014. A Sony producer contacted an executive complaining that The Equalizer, a movie starring Denzel Washington, failed to achieve success overseas because Denzel was black. The producer went further suggesting that Sony should avoid black actors in an effort to appease international markets. Hollywood was also scrutinized for its lack of diversity via the #oscarssowhite hashtag campaign on Twitter. Protesters from all over the world, including several famous actors, voiced their dismay over the lack of people of color among the Oscar nominees. Deciding who should anchor a story is mostly imbued with financial considerations (Smith et al. 2016). In the film industry, hiring a non-white lead is deemed risky and automatically considered as catering to a different audience. There is a common belief among filmmakers that movies with largely black casts will be seen as ‘‘Black movies’’, that white audiences will largely avoid (Weaver, 2011). For a long time, in Hollywood it has been often assumed that movies with non-white lead actors would not be commercially successful, especially overseas. Is it financially risky to cast minority actors? Shattering records worldwide, some see Black