Is the Electronic Word of Mouth Effect Always Positive on the Movie?

Article excerpt

ABSTRACT

Previous studies have been arguing that the movie revenue is affected by the volume or the valence or both of electronic word of mouth (Liu, 2006; Chintagunta et al., 2010, Bae et al. 2010). Those studies analyzed the effect of the electronic word of mouth (eWOM) in the film industry with the assumption that the volume of eWOM unilaterally affects revenue. However, they overlooked that box-office revenue, in turn, can influence the volume of eWOM. Therefore, in this study, a simultaneous equation that considers the influence of box-office revenue on eWOM as well is formulated. The authors found that the valence of eWOM affects box-office revenue and the volume of eWOM is not cause of the revenue except the first week. The volume of eWOM is affected by the revenue on the contrary.

The authors also found that eWOM effect in the result above does not work on the successful movie. Because the audiences have a lot of information sources about the successful movie, they don't have to check out the eWOM on the website before going to movie theater. But, in the case of the unsuccessful movie the audiences don 't have enough sources to gather the information about the movie except eWOM on the website, so that eWOM is critical to them. The authors conclude that the movie companies have to use the eWOM as an important communication channel especially if it is expected to be the unsuccessful movie.

INTRODUCTION

Word-of-mouth(WOM) and electronic word-of-mouth (eWOM), which are forms of customer-to-customer information exchange, have become subjects of interest for companies and marketing researchers as possible alternatives for traditional mass-media commercial advertisements, which have been losing their appeal due to increased competition.

WOM is distinct from traditional sources of information, such as commercial advertisements, in two ways. First, WOM provides more credibility to customers than other sources of information. Beck (1992) explained the uniquely credible status of WOM as an information source, by arguing that WOM has a stronger influence on the purchasing decisions of customers because it is perceived as advices from other customers faced with similar circumstances. In particular, WOM has been found to be especially influential when customers make purchasing choices about newly-released products that they are aware of but are not well-informed about (Mahajan, Miller, and Kerin, 1984). Films, by nature, exhibit characteristics that are largely similar to those of newly-released products, and it has also been well established that WOM generally has a significant effect on the movie-going choices of customers (Austin, 1989; Bayus, 1985; Faber and O'Guinn, 1984; Neelamegham and Chintagunta, 1999).

Second, unlike advertisements, which are transmitted to customers via mass-media, WOM information is easily accessible for customers via social networks (Benerjee, 1992; Brown and Reingen, 1987; Murray, 1991). The accessibility of eWOM has vastly expanded due to the rapid growth of the Internet population and is now available via various channels and forms such as Internet messengers, online forums, communities, or purchase reviews posted on shopping websites. The resulting eWOM is exerting an even larger influence on the information searching and purchase decision-making actions of customers than the offline WOM of the past (Bussiere, 2000; Chatterjee, 2001). Many websites are being used not only as providers of product information, but also as forums for information exchange, and heavily influence the purchasing decisions of customers. A few marketing studies that have been conducted on the subject of WOM data include: one study on the effect of WOM information from Usenet newsgroups on television shows (Godes and Mayzlin, 2004); one study on the effect of eWOM information on revenue, which analyzed the customer review data accumulated in the two online bookstores of Amazon.com and BarnesandNobles. …