Advance Contracting,Word-of-Mouth,and New-Product Success in Creative Industries: A Quantification for Books

The odds of success in creative industries (e.g., book, music, or movie) are often said to be particularly low. Furthermore, due to the nature of advance contracting between creator and producer, the standard approach to use sales as a success measure can be misleading from the producer's perspective. This article presents a novel approach to empirically identify producer success by incorporating the standard terms of contract between creator and producer into a parsimonious model of information diffusion (word-of-mouth) about new products. The model is applied to weekly sales data for a representative sample of novels. Estimation results indicate a success rate between 10% and 15% for this market.