Master Thesis Cultural Economics and Cultural Entrepreneurship 2009 Faculty of History and Arts, Erasmus University Rotterdam Spanish director Pedro Almodóvar and actress Penélope Cruz. 20 October 2006 Photo by Jlmaral, Flickr user <http://flickr.com/photos/jlmaral/275352571/> Domestic Demand for Spanish Cinema: The Popularity of Star Film Directors as Determinant for Theatre Attendance Supervisor: Hans Abbing Silvia Olalde-Vegas Second reader: Berend Jan Langenberg Student no.: 323411 [email protected] This master thesis is dedicated to all Spanish film makers who keep producing Spanish cinema in spite of all adversities. I would like to thank my supervisor Hans Abbing for his patience and confidence until the end of the project and my second reader Jan Berend Langenberg for his valuable comments. Thanks to Kristien Werck for her help with understanding econometrics. Special thanks also to my husband Ángel for his endless support and encouragement. Finally, thanks to my daughter Lucía and to my whole family in Spain for their love. Table of Contents 1. Introduction......................................................................................................................1 2. The Spanish film industry ..................................................................................................4 2.1. The Spanish cinema in the domestic film market .......................................................5 2.1.1. The Spanish film market in the year 2008 ..........................................................5 2.1.2. The Spanish film market between 1998 and 2008 ..............................................9 2.2. Spanish cinema in the European Union film market.................................................13 2.3. Home cinema practices and film piracy....................................................................16 2.3.1. Home cinema in Spain .....................................................................................16 2.3.2. Digital piracy in the film industry......................................................................20 2.3.3. Film piracy in Spain..........................................................................................23 3. Theoretical framework....................................................................................................27 3.1. Demand uncertainty in the movie industry..............................................................27 3.1.1. Accounting for quality in studies of demand for cultural goods ........................27 3.1.2. Cultural goods as experience goods .................................................................29 3.1.3. Cultural goods as information goods................................................................31 3.2. Accounting for quality in demand studies for the cinema ........................................32 3.3. Determinants for box office performance................................................................33 3.4. The superstar phenomenon.....................................................................................35 4. Hypothesis......................................................................................................................39 5. Research method............................................................................................................41 5.1. Methods for analysis of the role of stars as determinants for film success ...............41 5.2. Operationalization of stardom.................................................................................43 5.3. Construction of the data set ....................................................................................46 5.4. Econometrical model...............................................................................................48 5.5. Categorization of variables ......................................................................................49 5.5.1. Spectators .......................................................................................................49 5.5.2. Ticket price ......................................................................................................49 5.5.3. Consumer income............................................................................................51 5.5.4. Director’s Popularity ........................................................................................51 5.5.5. Cast Popularity.................................................................................................53 5.5.6. Genre ..............................................................................................................54 5.5.7. Error term........................................................................................................54 5.5.8. Variables not used ...........................................................................................54 5.5.8.1. Box office revenue ...................................................................................55 5.5.8.2. Budget .....................................................................................................55 5.5.8.3. Subsidy ....................................................................................................55 5.5.8.4. Price of Substitutes ..................................................................................56 5.5.8.5. Piracy.......................................................................................................57 5.5.8.6. Running time............................................................................................58 5.5.8.7. Awards and expert’s opinion....................................................................58 6. Data analysis and results.................................................................................................59 6.1. Descriptive statistics................................................................................................59 6.2. Distribution analysis of spectators ranking...............................................................59 6.3. Distribution analysis of director’s popularity............................................................61 6.4. Distribution analysis of cast popularity ....................................................................61 6.5. Correlation analyses ................................................................................................62 6.5.1. Correlation between director’s popularity and number of spectators ..............62 6.5.2. Correlation between cast popularity and number of spectators .......................64 6.5.3. Correlation between genre and number of spectators .....................................65 6.6. Multivariate regression analyses..............................................................................66 7. Conclusion and final remarks ..........................................................................................73 8. References......................................................................................................................77 8.1. References ..............................................................................................................77 8.2. Online sources.........................................................................................................81 9. List of abbreviations........................................................................................................84 10. Appendixes .................................................................................................................85 10.1. Population Growth Rate, Inflation and Purchasing Power Parity in Spain for the years 2004-2008 .................................................................................................................85 10.2. Data set...............................................................................................................86 10.2.1. Film ranking according to number of spectators...............................................86 10.2.2. Film ranking according to box office revenue ...................................................90 10.2.3. Director’s and Cast’s Popularity.......................................................................94 10.2.4. Genre ..............................................................................................................99 1. Introduction The film industry is undergoing deep changes at the turn of the 21st century. Technological advances in the treatment of audiovisual products and the expanding network effect of the internet are reshaping the map. The distribution and exhibition sectors are the first to feel the impact of such changes. Cinema researchers relate the worldwide continuing decline in cinema attendance to new consumption habits surrounding the audiovisual sector. One wonders whether traditional economic theory for the demand of cultural products is able to account for this new situation. Current economic theory around the movie industry explains that the demand for the cinema is extremely uncertain and the movie industry1 is a risky terrain. These statements are associated to the idea that every movie is a combination of unique factors and that rational consumers will choose the optimal combination. Uncertainty also exists in the Spanish cinema industry. The year 2008 showed a worrying fall in the number of cinema spectators compared with the previous year. The press blames the low performance of Spanish movies on the absence of works by star directors