Studio executives carefully examine how a film performs on its opening weekend in order to determine whether – and how – to invest more in that film. Many decisions, such as increasing the number of screens that show the film and expanding the marketing campaign, are best made after reaction ca be gathered from audience who actually purchased tickets. Therefore, to maximize returns on their marketing investments, studios should initially release all their films on a small number of screens and with a limited advertising campaign.
The plan to maximize returns by initially releasing films on only a small number of screens and limiting advertising depends on which of the following assumptions?

A) Large marketing investments made before the opening weekend never eventually yield greater profits than small initial marketing investments.

B) New advertising technique such as web-based viral marketing, haven’t substantially reduced the average marketing cost for films.

C) A film’s prior performance in noncommercial settings, such as festivals, is not well correlated with how the general public tends to react to than film.

D) Across the movie industry, marketing investments do not influence the eventual financial returns of films in predictable way.

E) How a film performs during its opening weekend is a strong indicator of the film’s financial performance over its lifetime.


The solutions say "A" however I argue that "E" is correct. While I agree that A does eliminate an alternate cause, the use of the word "never" is too strong. It may be possible that large marketing investments sometime yield larger profit margins but that studios should still release all their films to maximize profit.

I don't understand why E is incorrect. The argument is based on the fact that studios can use results from opening weekend to make marketing decisions. Thus, the assumption that opening weekend results are strong indicators of the film's overall performance seems to be valid...

For some reason, I found it helpful to re-order the points, reading the argument this way:
To maximize returns on marketing $, studios should initially release films on few screens and with limited advertising $

because

Many decisions (e.g. increasing both # of screens that show the film and marketing $) are best made after reaction can be gathered from audience members who actually purchased tickets.
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This helped me put E in perspective, because E focuses specifically on the link between a film's financial performance during opening weekend and afterward.

However, the argument itself focuses on when decisions are best made. For example, the argument allows the possibility that a film is test-released on few screens and makes only a mediocre financial return. But the information gathered by that release could allow the studio to adjust its campaign, thereby making more money over the remaining life of the movie.

Thus, it is not necessary to assume that the opening weekend is a strong predictor of later financial performance by a film.

_________________
Emily Sledge
Instructor
ManhattanGMAT

Emily,

You mention: "the information gathered by that release could allow the studio to adjust its campaign, thereby making more money over the remaining life of the movie".

However, if we negate E (How a flim performs during opening weekend is not a strong indicator of film's financial performance over its lifetime), then the information gathered during opening weekend gives no idea to the sudios about the Financial potential of the film. Hence, the argument falls apart. So, I think E should be the answer.

While (E) is tempting, and one can make the argument that it is helpful for the argument, the argument does NOT necessarily fall apart if it's not true. The reason is because the CONCLUSION is saying that the limited opening plan will produce the maximum profits. While opening weekend performance is an indicator of its lifetime performance, it does not tell us anything about how a LIMITED opening weekend performance will fare. (A) correctly (especially with the strong language, "never") eliminates the possibility that a LARGE opening weekend will not be as profitable as a LIMITED opening weekend.

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Ben Ku
Instructor
ManhattanGMAT

Oh boy..it doesn't get much tougher than this...Ben, I think you meant to say...while (E) is tempting....(A) correctly eliminates...

Thanks, Ashish for the catch! That was exactly what I intended to say. After looking at answer choices all day, they sometimes get mixed up ...

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Ben Ku
Instructor
ManhattanGMAT

A talks abt the investments made BEFORE the OPENING WEEKEND
and justifies it by saying that lagre investments made before never match up with small investments ,and hence the conclusion is endorsed

E -a film's performance in its first week can be gud as well as bad.If the performance is bad ,then how can investors think abt maximising their returns.

All really well-considered comments!

I was just re-reading my own and it occured to me that there might be a better way to think about it.

The series of events is:
(1) Studio executives carefully examine how a film performs on its opening weekend.
(2) Based on (1), they determine whether – and how – to invest more in that film.
(3) Decisions at step (2), such as increasing the number of screens and expanding the marketing campaign, are best made after reaction can be gathered from paying audience.
Conclusion: To maximize returns on marketing investments, studios should initially release all their films on a small number of screens and with a limited advertising campaign.

This is our Assumption Type #3, "Eliminate Alternate Paths," often characterized by strong/superlative language in the conclusion.

The necessary assumption will RULE OUT some (any!) other way that the Studios could maximize their returns on marketing investments. (A) does so.

Also, the term "financial performance" in (E) is a little fuzzy. Is that total revenue? Revenue per ticket? Return on marketing investment? Hmmm.

_________________
Emily Sledge
Instructor
ManhattanGMAT