10/31/2010

PG-13 Is More Profitable, Really?

In the article, "BYU Study Finds PG-13 Rated Films Make The Most Money", Mary Richards reports on a BYU-student based study finding the difference in money making potential between a R-rated and PG-13 rated movie is about 40% more for the PG-13.  The study also finds that the closer the PG-13 movie is to receiving a R-rating, the bigger the profits.

These findings, if proven correct, will motivate the movie producers to make the necessary changes in the final product to garner the PG-13 rating.  However, producers will only cut out the least amount of content necessary to receive this rating to maximize the profits afforded to being as close to an R-rating as possible.

The result of the PG-13 movie demand curve shifting to the right is causing a forward shift in the supply curve from movie producers who are taking advantage of the shift in demand to produce higher profits and revenues.  Also, because the profitability increases even more if the PG-13 movie increases in elements and material more like an R-rated movie, the differences in material between the PG-13 and R-rated movie will continually shrink.

The article stated that 55% of movies are R-rated and 35% PG-13.  The percentage of PG-13 movies will increase in the future.  Is this study conclusive evidence that movie makers should abandon making all R-rated movies?  I do not think so.  I assume that the movie industry will want to ensure the facts in the study are correct and that the findings are true due to the conservative nature of the school producing the results and other articles reviewing the same study but reporting different numbers.

7 comments:

Ralphie said...

It has been known for years that movies less than an R rating bring in much more revenue. There are more factors involved with the studios producing these movies other than merely the bottom line. Many claim to produce the movies for "artistic reasons." If it were merely based on profits, studios would have cut down on the rated R movies years ago.

MIA said...

I agree that PG-13’s capture a larger audience creating larger sells. However, I have a hard time believing this is new knowledge. I don’t believe there will be any change in the supply and demand because of the result of this study. Suppliers would continue to create rated R movies to capture a different target market. However, what does not make sense is the greater supply of rated R movies. Like the other commenter, I agree there must be other motives for producers to make rated R movies.

Alfred said...

I think this research conclusion is long overdue. Many people do not watch R-rated movies because of the rating. It is not something that is unique to the conservative school that produced the findings. There has been an idea for a long time that says R-rated movies make more money than any other movies. Doesn’t it make sense that if demand is reduced because of the rating that revenue will be less than it otherwise could be? Most people that watch R-rated movies will not avoid a PG-13 movie simply because it is PG-13, but the reverse is true. As Hollywood realizes that these finding are accurate there is going to be an increase in PG-13 ratings and a decrease in R ratings, even if it means sacrificing artist license because, after all, Hollywood is in it for the money.

Dave said...

Writing back to ALS22 doesn't feel very personal.

Anyway ALS22, in the second paragraph you note that this is important information for the film industry (Ralphie spotted this too). Not so much: this result has been known for at least 20 years. That's why the "study was funded through BYU's Office of Research and Creative Activities". That's academic code for an undergraduate research project, not a scholarly article. I'm not saying that these guys couldn't publish it in a scholarly journal, just that it hasn't been yet - probably because they haven't figured out yet what they can say that's news.

In the scholarly community, the bigger question is why producers let their director do so many R-rated movies. What are they getting out of this if they aren't getting money?

Rex said...

I personally feel that is easier to make an R rated movie. I know the study said that PG-13 articles make more money per movie, but when I producer can easily put in sufficient violence, profanity and nudity to still draw a substantial crowd, and do it easier than making a successful pg-13 movie, they probably make more money relative to their effort.

Farva said...

I think movie producers also use this information the other way. All the talk thus far has been aimed toward taking an R rated movie down to a PG-13 rating. I have seen lots of PG-13 movies that could easily be rated PG if they omitted one word. A lot of the time that one word hardly fits and seems more like it was put in there for the sole purpose of gaining the PG-13 rating. If we think about it, how often do we see a preview for a movie and get all excited about it, just to be disappointed when we see it's rated PG. It is almost a let-down because we think it will be a childish or stupid movie. I think that movie producers have known this for years and purposely aim for the PG-13 rating to increase revenues.

Dr. Tufte said...

You know, this is actually a really interesting economic question, that I don't think has been addressed in the literature.

What we know, broadly, is that G movies make the most money, and R the least.

Here's the (interesting econometric) problem: do they make money later because they're G first, or are they rated G first because it's forecast they'll make more money later?

This is directly related to Farva's point about subtle movie changes to hit desired ratings.