The Effectiveness of Movie Trailer Advertising

Abstract

Prior to a movie release in theatres, trailer advertising provides valuable information that can help viewers and investors form expectations about the movie's future success. While previous research has looked at the financial implications of movie advertising budgets, the effects of trailers' creative characteristics on abnormal returns have not yet been investigated. Using a sample of movie trailers, results from our event study and cross-sectional analysis show that the appeal of the movie plot revealed in the trailer, the number of scene cuts and the inclusion of violent, sexual, or humorous scenes influence the movie's abnormal returns. However, the use of special effects in the movie trailer does not impact investors. Results also suggest that investors react more strongly to first than to follow-up trailers released for the movie, and that early release of the first positively impacts the movie's returns.