Stefano DellaVigna, UC Berkeley and NBER Alec Kennedy, San Francisco Fed Moscow Media Conference October 29, 2011 Preliminary, comments most welcome
Dec. 13, 2007: News Corp. acquires from Bancroft family Dow Jones & Company Wall Street Journal Unlike Bancroft family, Murdoch's holdings include: Cable channels (i.e., Fox Sports and Fox News) Satellite television (Sky group) Movie distributor (20th Century Fox) … Media conglomerate implies conflict of interest Coverage of such businesses (or their competitors) in the Wall Street Journal may be biased.
Wall Street Journal situation hardly unique Media conglomerates: Comcast owns NBC Hearst Corporation owns ESPN and print outlets Time Warner owns AOL and Time magazine Pervasive conflict of interest But should media consolidation lead to distortion?
Cost: Loss of reputation if bias is revealed Benefit: Can persuade audience (if audience naïve about bias) Generally, persuasion rates of 5-10% from the media (DellaVigna-Gentzkow, ARE 2010)
This paper: Focus on two conglomerates News Corp. Time-Warner Measure how media outlets in these groups review movies distributed by an affiliate 20th Century Fox Warner Bros.
Identification of bias transparent (diff-in-diff): Compare review of 20th Century Fox movie by WSJ and NYT Further control group: review of Paramount movie by WSJ and NYT
1.
2.
3.
4.
Frequent (500,000+ reviews in data set) Easily quantifiable (coded on 0-100 scale by
metacritic.com)
Large industry ($60bn annual revenue) Some evidence that movie reviews influence movie attendance (Reinstein and Snyder (2005) benefits to the distributor from increased ticket sales
First data set of reviews from metacritic.com, scored 0-100
Second data set of reviews from rottentomatoes.com, scored on a 0-1 “freshness” scale
Merged data set contains 548,764 reviews from 336 media from 1985 to July 2011
Media Outlet All Reviews Chicago Sun-Times New York Post News Of The World TV Guide Times Wall Street Journal CNN.com
Entertainment Weekly Time Other Reviews
TABLE 1, PANEL A SUMMARY STATISTICS: MEDIA SOURCES OF MOVIE REVIEWS
Media Type
336 media Newsp.
Newsp.
Newsp. (UK) 2008-2011 Weekly Newsp. (UK) 2003-2011 Newsp.
Website Weekly Weekly 326 media
Years
1985-2011 1985-2011 1998-2011 1985-2009 1985-2011 1997-2007 1990-2011 1985-2010 1985-2011
Owner
News Corp. until 1986 News Corp. from 1993 News Corp.
New Corp. 1988-99 News Corp.
News Corp. from 2008 Time Warner Time Warner from 1990 Time Warner from 1990
No. of Reviews While Owned
17039 186 6278 407 980 960 555 528 4889 1375 -
No. of Reviews While Not Owned
531725 5833 4876 1218 97 519701
Usual Rating System
Varies 0 to 4 stars (1/2 0 to 4 stars (1/2 Qualitative Qualitative A to F (+/- Varies
Studios which distribute movies in the sample: Major, Independent, and Other TABLE 1, PANEL B SUMMARY STATISTICS: STUDIOS
Distributor of Movie (Studio) All Studios 20th Century Fox Fox Searchlight Fox (Other) Warner Bros.
Fine Line HBO New Line Picturehouse Warner Independent Warner Home Video Other Studios Studio Type
Major Independent Other Major Independent Independent Independent Independent Independent Other
Years
1985-2011 1985-2011 1995-2011 1987-2010 1989-2011 1990-2005 1989-2010 1989-2008 2005-2009 2004-2008 1989-2009 1985-2011
Owner
News Corp.
News Corp.
News Corp.
Time Warner from 1989 Time Warner from 1989 Time Warner from 1989 Time Warner from 1989 Time Warner from 1989 Time Warner from 1989 Time Warner from 1989
No. of Reviews
548764 32159 12547 390 44162 3764 605 16667 2590 2733 783 432364
No. of Movies
12999 449 126 13 575 80 64 233 34 26 59 11423 Notes: The sources of the movie review data are www.metacritic.com (abbreviated MC) and www.rottentomatoes.com (abbreviated RT). The data covers all reviews available from 1985 until July 2011. See text for additional information.
News Corp. Studio Other Studios Mean of the FOX-affiliated publications average score by movie Mean of the non-FOX-affiliated publications average score by movie No. movies (l-to-r):406, 6976.
Graphs by distribution
Time Warner Studio Other Studios Mean of the TW-affiliated publications average score by movie Mean of the non-TW-affiliated publications average score by movie No. movies (l-to-r):602, 4307.
Graphs by distribution
Is the bias for News Corp. statistically significant?
Is it robust to introducing controls?
OLS regression captures the effect of conflict of interest in Fox captures the effect of conflict of interest in Time Warner Sample of 473,727 reviews (qualitative reviews in RT have no 0-100 score) Standard errors clustered at the movie level
TABLE 2 CONFLICT OF INTEREST: AVERAGE BIAS IN REVIEW Specification: Dep. Var.: Conflict of Interest for News Corp.
Conflict of Interest for Time Warner 20th Century Fox Movie Warner Brothers Movie Media Owned by News Corp.
Media Owned by Time Warner OLS Regressions (1) Movie Review on a 0-100 Scale (2) (3) 1.0285
[0.9381] -1.2510
[0.7937] 1.0886
[0.9371] -1.2101
[0.7925] -2.9916*** -3.0534*** [0.7443] [0.7418] -3.2318*** -3.2496*** [0.6252] [0.6246] -4.9151*** -4.8264*** [0.2299] [0.2186] 4.2613*** [0.2763] 4.4035*** [0.2724] 2.0749** [0.8133] -1.0430
[0.6832] -4.4181*** [0.1939] 3.7427*** [0.2428] (4) 2.5651*** [0.7966] -0.4998
[0.6829] -1.7450*** [0.4612] 4.4895* [2.6362] Control Variables: Year Fixed Effects Movie Fixed Effects Media Outlet f.e.
R 2 N X X X 0 0.01
N=474,496 N=474,496 0.41
N=474,496 X X X 0.46
N=474,496
TABLE 2 CONFLICT OF INTEREST: AVERAGE BIAS IN REVIEW Specification: Dep. Var.: Conflict of Interest for News Corp.
Conflict of Interest for Time Warner Control Variables: Year Fixed Effects Movie Fixed Effects Media Outlet f.e.
Mean of Dependent Variable p-value of test of equality of conflict of interest for News Corp. and Time Warner: R 2 N (1) 1.0285
[0.9381] -1.2510
[0.7937] OLS Regressions Movie Review on a 0-100 Scale (2) 1.0886
[0.9371] -1.2101
[0.7925] (3) 2.0749** [0.8133] -1.0430
[0.6832] (4) 2.5651*** [0.7966] -0.4998
[0.6829] 61.52
X 61.52
X X 61.52
X X X 61.52
p = 0.0658* p = 0.0633* p = 0.0035*** p = 0.0037*** 0 0.01
N=474,496 N=474,496 0.41
N=474,496 0.46
N=474,496
In favorite specification, conflict of interest increases rating for News Corp. by 2.6 points out of 100 Estimate of bias increases with extra controls Unobservables unlikely to bias coefficient upward (Altonji, Elder, and Taber, 2005) Magnitude of bias: Equivalent to 1 extra star every ten reviews Small but still economically significant impact Reinstein and Snyder (2005) estimate 25% higher revenue for two thumbs up by Roger Ebert Are all media conglomerates the same? No evidence of bias for Time Warner, can reject bias of 0.9 points
Evidence of bias using RT 0-1 freshness indicator TABLE 3 CONFLICT OF INTEREST:FRESHNESS INDICATOR Specification: Dep. Var.: Conflict of Interest for News Corp.
Conflict of Interest for Time Warner Control Variables: Year Fixed Effects Movie Fixed Effects Media Outlet f.e.
Mean of Dependent Variable p-value of test of equality of conflict of interest for News Corp. and Time Warner: R 2 N OLS Regressions Indicator for "fresh" in Movie Review (1) 0.0305
[0.0228] -0.0041
[0.0184] (2) 0.0294
[0.0228] -0.0046
[0.0184] (3) 0.0618*** [0.0207] -0.0197
[0.0177] (4) 0.0659*** [0.0206] -0.0127
[0.0176] 0.59
X 0.59
X X 0.59
X X X 0.59
p = 0.2397 p = 0.2460 p = 0.0027*** p = 0.0038*** 0 0.01
N=494,460 N=494,460 0.28
N=494,460 0.32
N=494,460
Back-of-the-envelope calculation of estimated benefits from distortion of movie review Case of New York Post (NYP) Suppose that NYP gives one extra star per Fox movie 500,000 average readers Persuades an extra 1% of readers to watch movie Ticket sales increase by 5,000, or $8*5,000=$40,000 Studio receives about half of increased sales, plus another half from higher rights from DVD licensing $40,000 About 400 20th Century Fox movies since 1985 Potential benefits to NewsCorp. from one extra star per Fox review by
: $16,ooo,ooo
Three main explanations for the results: (E) Explicit editorial policy conveyed to journalists (J) Bias by a journalist ultimately due to the conflict of interest, but lacking editorial pressure (T) Correlation in taste between the media reviewer (or the media audience) and the affiliated studio 1.
2.
To separate explanations, we present evidence on: Clustering of bias within a conglomerate (E and T, maybe J) Editorial policies (E only) 3.
4.
Selective bias by type of movie (E or J, not T) Omission of reviews (E or J)
TABLE 4 THE EFFECT OF CONFLICT OF INTEREST ON MOVIE REVIEWS: BY MEDIA Specification:
Chicago SunTimes
(1)
Panel A.
Dep Var.: Score (0-100) Conflict of Interest 2.3530
[4.8051]
New York Post
(2) 3.1382*** [0.9877] OLS Regressions News Corp. Conflict of Interest R 2 0.49
N
Panel B.
N=3,314 N=362,309 Dep Var.: Indicator for Fresh in Rottentomatoes Conflict of Interest -0.0166
0.0718*** [0.1261] [0.0258] R 2 0.38
0.30
N Control Variables: Movie Fixed Media Outlet N=3,435 X X 0.45
N=381,533 X X
News of the World
(3) 3.8096
[3.2221] 0.48
N=36,787 0.0130
[0.0769] 0.31
N=40,551 X X
TV Guide
(4) 2.4169
[1.6519] 0.43
N=46,740 0.0672
[0.0913] 0.32
N=42,286 X X
Times (UK)
(5) 0.0286
[2.2918] 0.46
N=73,318 0.0598
[0.0593] 0.30
N=82,516 X X
Wall Street Journal
(6) 0.5175
[3.1342] 0.46
N=47,888 0.1120* [0.0615] 0.29
N=50,265 X X Time Warner Conflict of Interest
CNN.com
(7)
Entertainme nt Weekly
(8)
Time
(9) .
.
.
.
-0.0541
[0.0436] 0.29
N=73,883 X X -0.3039
[0.7363] 0.46
N=362,266 -0.9717
[1.3957] 0.41
N=127,688 -0.0027
[0.0208] 0.31
N=379,758 -0.0079
[0.0457] 0.27
N=133,835 X X X X News Corp. media: Statistical evidence for NYP, 2-3 point bias for all 6 media No evidence of bias for any of the Time Warner media
TABLE 5 INDIVIDUAL REVIEWERS
Media Outlet Panel A. News Corp. Outlets CNN.com
Entertainment Weekly Entertainment Weekly Time Time Reviewer Name Chicago Sun-Times New York Post New York Post New York Post New York Post New York Post News of the World TV Guide TV Guide Times Times Wall Street Journal Panel B. Time Warner Outlets
Roger Ebert Lou Lumenick V.A. Musetto Kyle Smith Jonathan Foreman Megan Lehmann Robbie Collin Maitland McDonagh Ken Fox Wendy Ide James Christopher Joe Morgenstern Paul Clinton Owen Gleiberman Lisa Schwarzbaum Richard Corliss Richard Schickel
No. Reviews
184 2236 1618 1154 622 366 407 370 134 377 377 286 252 2307 1946 724 502 Most media have a small number of journalists reviewing movies
Chicago Sun Times, News of the World, Wall Street
Journal and CNN.com have essentially only one
TABLE 6 THE EFFECT OF CONFLICT OF INTEREST ON MOVIE REVIEWS: BY REVIEWER Specification: OLS Regressions Lou Loumenick (1)
Panel A.
Dep Var.: Score (0-100) Conflict of Interest 3.0068** [1.3149]
New York Post
Kyle Smith (2) 6.0914*** [2.3501] News Corp. Conflict of Interest Jonathan Foreman (3) -0.2606
[2.8959] R 2 N 0.46
N=175,793 0.45
N
Panel B.
Dep Var.: Indicator for Fresh in Rottentomatoes Conflict of Interest N=165,133 0.0614* [0.0348] N=82,384 0.1537*** [0.0558] R 2 0.30
0.31
N=87,197 0.46
N=42,165 0.0368
[0.0769] 0.31
N=45,559 Megan Lehmann (4) 5.4902* [3.1414] 0.44
N=25,553 0.1479* [0.0837] 0.31
N=25,634
TV Guide
Maitland McDonagh Ken Fox (5) (6) 6.0412*** [2.1031] 0.43
N=20,826 0.2377** [0.0918] 0.32
N=20,214 -4.2065
[5.0740] 0.47
N=5,708 0.0105
[0.1812] 0.35
N=5,326
Entertainment Weekly
Owen Gleiberman (7) Time Warner Conflict of Interest Lisa Schwarzbau Richard Corliss
Time
Richard Schickel (9) (10) -0.3830
[1.1448] 0.44
N=172,627 -0.4791
[1.0141] 0.45
N=152,808 -0.0097
[0.0309] 0.30
N=180,977 0.0059
[0.0298] 0.30
N=162,379 0.9784
[1.8489] 0.42
N=71,569 0.0511
[0.0639] 0.28
N=75,084 -4.6170** [2.3329] 0.38
N=43,975 -0.0182
[0.0719] 0.26
N=46,505 News Corp: Statistical evidence of bias for 3 out of 4 NYP journalists, and one of TV Guide journalists Time Warner: No evidence of positive bias Significant Clustering: Pattern suggestive of editorial bias, but could also be correlated tastes, or similar journalists
Two tests of editorial policies
1.
Personnel Policy: Change of reviewers at change of ownership – No evidence
2.
Bias in Assignment: Assign affiliated movies to more generous reviewers Estimate average reviewer generosity in score: Reviewers differ significantly in their generosity Are movies by affiliate studios more likely to be assigned to more generous reviewer?
No evidence– assignment quasi-random Bias at Newscorp. is unlikely of editorial origin Could be correlation in journalist bias or in tastes
TABLE 5 REVIEWERS FOR MEDIA AT RISK OF CONFLICT OF INTEREST
No. of Reviews F.e. for Average Score (s.e.) Media Outlet Reviewer Name Panel A. News Corp. Outlets Chicago Sun-Times New York Post New York Post New York Post New York Post New York Post News of the World TV Guide TV Guide Times Times Wall Street Journal
Roger Ebert ('85-'11) Lou Lumenick ('98-'11) V.A. Musetto ('98-'11) Kyle Smith ('05-'11) Jonathan Foreman ('98-'04) Megan Lehmann ('02-'04) Robbie Collin ('08-'11) Maitland McDonagh ('97 Ken Fox ('97-'08) Wendy Ide ('03-'10) James Christopher ('03-'10) Joe Morgenstern ('01-'11)
Panel B. Time Warner Outlets CNN.com
Paul Clinton ('98-'05)
Entertainment Weekly Entertainment Weekly
Owen Gleiberman ('90-'11) Lisa Schwarzbaum ('94-'11)
Time Time
Richard Corliss ('85-'11) Richard Schickel ('85-'08) 184 2236 1618 1154 622 366 407 370 134 377 377 286 252 2307 1946 724 502 10.23 (.46) -2.19 (.56) -1.34 (.57) -7.38 (.78) -0.74(.80) -3.81 (.98) -0.62 (1.17) -0.60 (.48) 4.29 (.50) -7.82 (.96) -4.59 (1.28) -3.64 (.66) .
6.49 (.58) 8.41 (.53) 3.53 (.88) 2.50 (1.11)
Share reviews of affiliated studio
8.70% 6.98% 0.25% 6.67% 6.91% 7.10% 9.09% 9.19% 9.70% 5.31% 9.09% 22.46% 12.83% 11.97% 16.71% 16.73%
If bias is due to conflict of interest, should be optimal: Bias when marginal return (persuasion) is highest Maximize impact on revenue Proposition 2. Small or no bias for very low quality movies If bias is due to correlated tastes, no such prediction Assumption for this test: Movies with negative reviews by others are unlikely to benefit from a lone positive review Movies with other positive reviews more likely to benefit from more positive review
TABLE 7 THE EFFECT OF CONFLICT OF INTEREST ON MOVIE REVIEWS: SELECTIVE BIAS Specification: Dependent Variable: Conflict of Interest Conflict of Interest * (55
Chicago SunTimes
(1) -1.8511
[8.1669] 6.6737
[8.9600] -5.5183
[8.7293] 0.58
N=3,314 X X X X OLS Regressions Movie review score (0-100)
New York Post
News Corp. Conflict of Interest
News of the World TV Guide Times (UK) Wall Street Journal
(2) 1.6053
[1.5719] (3) 9.3846** [4.5067] (4) 2.7745
[3.1145] (5) 3.0971
[3.1936] (6) -0.4418
[4.6435] 1.2414
[2.2644] 5.6198*** [2.1265] -15.0553** [6.9450] 5.5208
[6.1254] -3.4936
[3.9723] -0.1861
[3.9991] -5.8530
[5.8224] -6.4469
[5.0638] 6.0759
[6.6080] 2.1793
[6.2369] 0.48
N=362,272 0.51
N=36,772 0.47
N=46,740 0.49
N=73,308 0.48
N=47,880 X X X X X X X X X X X X X X X X X X X X Time Warner Conflict of Interest
CNN.com
Entertainme nt Weekly Time
(7) .
(8) 0.0172
[1.2686] (9) -1.3100
[3.4622] .
.
-0.1049
[1.7136] 1.2430
[1.7644] 0.9607
[4.0386] 1.6107
[3.9919] .
.
0.48
N=362,230 0.43
N=127,682 X X X X X X X X X X X X Evidence of selective bias for NYPost and qualitatively for WSJ – Bias due to conflict of interest No evidence for other media
If bias is due to conflict of interest, and audience not fully rational, bias by omission: Review high-quality affiliated movies Omit review of low-quality affiliated movies Do not expect this pattern if correlated tastes Rare setting to separate bias by omission and by commission Outlets differ substantially in probability of review Use matching procedure For each media, find ten matching media in terms of average probability of review of a movie Plot local polynomial regression of dummy for review on average review score
TABLE 8 CONFLICT OF INTEREST AND OMISSION BIAS: MISSING REVIEWS Specification: Dependent Variable: Conflict of Interest * Average Rating Conflict of Interest R 2 N Control Variables: Movie f.e.
Media f.e.
Media f.e.*Av. Rating Sample:
Chicago SunTimes
(1) -0.0189* [0.0103] 1.0969* [0.5838] 0.31
N=3,278 X X X
New York Post
(2) 0.0011
[0.0012] OLS Regressions Indicator variable for review of a movie by media m News Corp. Conflict of Interest Time Warner Conflict of Interest
News of the World
(3) -0.0008
[0.0027]
TV Guide
(4) 0.0039* [0.0022]
Times (UK)
(5) -0.0035** [0.0016]
Wall Street Journal
(6) 0.0051* [0.0027]
CNN.com
(7) 0.0024** [0.0010]
Entertainme nt Weekly
(8) 0.0004
[0.0007]
Time
(9) 0.0034*** [0.0009] -0.1214
[0.0750] -0.0142
[0.1546] -0.1896
[0.1212] 0.1329
[0.0936] -0.3019** [0.1439] -0.0903
[0.0605] 0.0939** [0.0388] -0.1493*** [0.0483] 0.52
N=109,747 0.44
N=28,974 0.44
N=37,048 0.32
N=76,978 0.48
N=28,974 0.23
N=85,316 0.48
N=133,331 0.34
N=133,342 X X X X X X X X X X X X X X X X X X X X X Newscorp.: No systematic evidence of omission bias X X X Potential review in featured media and in each of 10 matched media, with match based on similar average probability of review
So far focus on most obvious conflict, for reviewers Conflict of interest hardly stops there: Rottentomatoes.com, also independent when launched in 1998, was acquired by IGN Entertainment in June 2004, and IGN was purchased by News Corp. in September 2005. IGN, and hence RottenTomatoes, was then sold in January of 2010 by Newscorp.
Conflict of interest for RT: more positive reviews of the 20th Century Fox movies in 2006-2009 Control for rating of same review in MC
Specification: Dep. Var.:
TABLE 10 BIAS IN ROTTEN TOMATO: EFFECT OF NEWSCORP. OWNERSHIP Indicator for 20th Century Fox Movie * (RT owned by Newscorp.: 2006-09) Indicator for 20th Century Fox Movie 0-100 Review Score 0-100 MetaCritic Review Score (2) -0.0637* [0.0330] -0.0366** [0.0161] (3) OLS Regressions RottenTomatoes 0-1 "Freshness" indicator (4) (5) (6) -0.0073
[0.0069] -0.0082** [0.0037] 0.0182*** [0.0001] -0.0075
[0.0069] -0.0070* [0.0038] 0.0183*** [0.0001] 0.0002
[0.0084] -0.0060
[0.0049] 0.0394*** [0.0002] -0.0557
[0.0349] -0.0470** [0.0185] (7) -0.0049
[0.0188] -0.0255** [0.0111] 0.0174*** [0.0001] Control Variables: Year Fixed Effects Media Outlet Fixed Effects Sample: R 2 N X X X X 0.04
0.64
N=419,375 N=419,375 X X X X Only Reviews Scored in RT Reviews with 50<=Score<=70 X X X X Only Reviews Unscored in RT 0.65
N=394,908 0.57
N=152,343 0.05
N=97,375 0.56
N=24,467 RT 0-100 Score (8) -0.1609
[0.1471] -0.1698* [0.0948] 0.9597*** [0.0012] X X Reviews Scored in RT and MC 0.94
N=53,108 Remarkably, no evidence of bias, even for qualitative reviews, where bias is easier to hide Can reject small bias
Local polynomial regression of ‘fresh’ indicator on average movie score – no evidence of bias
Event study comparing residual freshness (after controlling for score) for FOX and non-FOX movies
We documented the extent of bias due to conflict of interest for two media conglomerates Average bias: 2.6 points bias out of 100 for Newscorp. outlets No bias for Time Warner outlets, can reject even small bias Bias is clustered within a media conglomerate No evidence of editorial policy to assign movies Selective Bias: Evidence for New York Post, not for other media Omission Bias: Evidence for two Time Warner outlets Interpretation: Best fits with bias due to conflict of interest for journalists, with clustering of such bias
Overall, remarkably little evidence of distortion from conflict of interest: No distortion in review for Time Warner No distortion for Rottentomatoes No distortion in editorial assignment However, bias still does occur: Small, but significant, bias for Newscorp. Outlets Some omission bias for Time Warner outlets Suggests that transparency and emphasis on reputation (for example because of competition) critical to keep media honest Paper allowed us to decompose potential media bias in novel ways Relates to Conflict of interest in other settings: Significantly less distortion than for analysts Less distortion than for advertising
Different types of movies can have different returns to positive reviews Snyder and Reinstein: Larger effect of movie reviews for independent movies However: Independent movies also have smaller revenue, so bias may be less worthwhile Examine the effect of conflict of interest separately
TABLE 6 CONFLICT OF INTEREST AND MOVIE REVIEWS: MAINSTREAM AND INDY MOVIES Specification: Dep. Var.: Sample: Indicator for Fox Movie on News Corp.-Owned Outlet (Measure of Conflict of Interest for News Corp.) Indicator for Warner Bros. Movie on TW-Owned Outlet (Measure of Conflict of Interest Time Warner) Control Variables: Full Set of Fixed Effects R 2 N OLS Regressions Movie Review on a 0-100 Scale for Movie m in Media Outlet o Mainstream Movies (1) (2) 2.5983* [1.4236] 0.4313
[1.0724] 2.8442** [1.3612] 0.3885
[0.9885] (3) Indy Movies 1.6165
[3.0139] 2.1168
[2.2233] (4) 1.3400
[3.1804] 3.1600
[2.4409] 0.0084
N=109,669 X 0.5381
N=109,669 0.0564
N=5,895 X 0.619
N=5,895 Significant bias for News Corp. only for mainstream movies