A Commentary Note on 'Star Turnover and the Value of Human Capital—Evidence from Broadway Shows'' (Han & Ravid, Management Science, Vol.66(2), 2020)

Abstract

In "Star Turnover and the Value of Human Capital—Evidence from Broadway Shows'', Han & Ravid (2020) analyze the revenue impact of different levels of talent. They categorize performers in order of live acting talent as theatre, movie, and visibility stars; theatre stars are assumed to have superior talent, movie stars intermediate talent and visibility stars no discernible talent. Han & Ravid (2020) conclude that only theatre stars have a significant positive effect on Broadway show revenues, while movie and visibility stars have no significant effect. In this brief commentary, we discuss two methodological choices that led to the results and likely attenuated the coefficients for movie and visibility stars. First, Han & Ravid (2020) relied on a fixed effect regression model on the difference in three week average revenue after and before a cast change. Second, their working definition of visibility star is endogenous to their sample data and arguably not reflective of the concept visibility star. By providing an alternative analysis framework and exogenous definition of visibility stay our results suggest that both movie and visibility stars do have significant impact. Furthermore, the impact from visibility stars is estimated to be on the order of twice that of a theatre star.

Keywords: live entertainment, star turnover, talent

JEL Classification: Z11, M51, M12, C23