Accounting for latent classes in movie box office modeling

This paper addresses the issue of unobserved heterogeneity in film characteristics influence on box-office. We argue that the analysis of pooled samples, most common among researchers, does not shed light on underlying segmentations and leads to significantly different estimates obtained by researchers running similar regressions for movie success modeling. For instance, it may be expected that a restrictive MPAA rating is a box office poison for a family comedy, while it insignificantly influences an action movie‟s revenues. Using a finite mixture model we extract two latent groups, the differences between which can be explained in part by the movie genre, the source, the creative type and the production method. Based on this result, the authors recommend developing separate movie success models for different segments, rather than adopting an approach, that was commonly used in previous research, when one explanatory or predictive model is developed for the whole sample of movies.