De Vany and Walls' research quantifies the stark uncertainty of motion picture revenues and shows how the industry is organized to deal with it. The industry is geared to adapt the number of engagements and the prices charged to cinema operators to the information revealed in weekly revenue reports. There is no other way to discover how good a film is than to put it on screens and let the audience decide. Film audiences make hits or flops and they do it not by revealing preferences they already have, but by discovering what they like. As audiences discover their preferences and tell their friends, they generate 'information cascades', in turn producing complex revenue dynamics.
Information cascades can carry a film to explosive growth or to swift failure.
This 'dynamic demand discovery' requires adaptive supply and pricing and the film industry' s contracts and licensing terms are designed to support these adaptations. De Vany and Walls' statistical analysis of the film industry reveals that the distribution of revenues among competing films follows a dynamic path so complex and variable that the only model capable of accounting for them is the Bose-Einstein distribution of statistical physics. Ultimately, the probability that a new viewer will go a particular film depends positively on the number who have already seen it and on the distribution of viewers over all the other films it is competing with. The Bose-Einstein process leads to extreme inequality in the final distribution of total motion picture revenues. These results show that conventional thinking about the revenue expectations of motion pictures is misleading.