Evolving Movie Contracts Through Simulated Evolution

MEDAL Blogging has a nice link to an application of genetic algorithms that I have not seen so far: movie contracts between distributors and theaters. See the whole story here.

The author of that investigation, Eunkyu Lee, implemented a hybrid method using genetic algorithm and game theory to help in that kind of business among the parts.

One of the current structures of those contracts is the so-called slide scale:

"These contracts usually come in the form of a sliding scale: in the first week, when the movie is most in demand, the studios get a larger share of the revenue - sometimes as much as 80 percent. As time goes by and demand decreases, the shares even out or reverse, giving theaters a more favorable cut of the revenue. These weekly revenue shares are negotiated on a movie-by-movie basis and are typically augmented by exception clauses for unexpectedly strong box office performances."

The method applied is helping to bring to light new ways to those structures:

"New research by Eunkyu Lee, associate professor of marketing in the Whitman School of Management at Syracuse University, questions the necessity of the complicated and costly contracting practice in the industry. Using a combination of game-theory and an optimization technique called genetic algorithm, Lee and his research partners analyzed different contract structures in simulated movie markets and compared their effectiveness and performance to the current sliding scale structure.

'The major finding of this analysis is that the contract between studios and theaters does not have to be as complicated as the current industry practice,' says Lee. 'Much simpler contracts such as a 50-50 split or a two-part tariff are just as effective as or better than the sliding scale, and they are also not as costly to implement.'"

Remember: "We'll always have Evolutionary Computation." :)