Causal analysis of screen adaptation release and demand for fiction books

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• Final qualifying work - Bachelor's job
• Causal analysis of screen adaptation release and demand for fiction books

студента образовательной программы бакалавриата «Экономика»

по направлению подготовки 38.03.01 Экономика

Аннотация

Выход фильма может послужить толчком для книгоиздательств напечатать книгу в связи с повышенным интересом читателей к экранизации. Также киностудии могут вложится в перспективный проект, экранизируя бестселлер. В связи с этим, целью данной курсовой работы является анализ причинно-следственной связи между выходом фильма и спросом на художественную литературу.

Для выявления особенностей структуры российского рынка проводится опрос с выявлением ключевых характеристик, влияющих на спрос книжной литературы. Для анализа спроса также используются данные о продажах крупной книжной сети и информация об экранизациях за исследуемый период. В работе используется модель переключения, которая позволяет одновременно оценить решение киноиндустрии об экранизации фильма и сам спрос на книги.

В ходе анализа было выявлено, что при решении об экранизации фильма киностудиям важна популярность книги и её рейтинг. В то же время, если сценаристы фильма отказываются снимать фильм по книге, то данная книга продается хуже, чем любая экранизированная книга с похожими характеристиками. Более того доказано, что наличие экранизации стимулирует книжный спрос. Также были выявлены другие ключевые качественные и физические характеристики, положительно влияющие на спрос. Данные результаты могут быть использованы менеджерами книжной розничной сети для решения практических задач.

Ключевые слова: экономика культуры, художественная литература, экранизации, читательский спрос

Annotation

Since previous studies have come to opposing conclusions, which is explained by the specific features of the investigated markets. This article aims to provide evidence of the causal impact of book-based movies' release on book demand in the Russian market. To this end, the survey to determine the market structure is conducted. Furthermore, the work uses annual data on the book sales of one book retail chain of Russia and information about the movie releases during the studied period. The switching equations model with endogenous switching allows estimating the decision of motion picture industries whether to adopt book or not and the demand on books simultaneously.

As the producers rely on the ratings and number of people who have left their scores on the site, it is shown that books' popularity is important for movie industries to make the decision. Withal the results indicate that the presence of movie adaptation stimulates the book sales revenue. And those books that movie producers have refused to adopt have worse performance.

Moreover, the present study indicates book quality characteristics that drive the book demand. Therefore, these results can be used by the purchasing managers of the book retail chain to solve practical problems.

Keywords: cultural economics, fiction, movie adaptations, book demand

Introduction

A book is an experienced good (Kukla-Gryz, & Zagуrska, 2015), which means that people don't know about its quality before they buy it. It means that people rely on their previous experience or the signals of books quality. One of such signals is the screen adaptation release. It is the movie that has been adapted from a written work.

While book adaptation release is an often-used strategy in motion picture industry, it has received little academic attention. Nowadays many publishers are printing fiction because of increased interest of its readers as a spin-off of hit movies. Or vice versa movie industries want to invest their money in a reliable project - the adaptation of best-selling novels. That is why in this research it is investigated to what extent do the screen adaptation release and demand for fiction books affect each other.

All these ideas include the term “demand', which means the desire of consumers for a particular commodity, service or item. And the term “fiction” means “literature in the form of prose, especially novels, that describes imaginary events and people” (Oxford, 2017). This implies the consideration of the demand for books only, not including comics such as Marvel or other genres of non-fiction literature.

According to Sumiko Asai (2016), the Japanese book market has shown that if a movie adaptation release becomes the season hit, the book intends to become a bestseller. This work indicates that movie stimulates book sales. However, the German market disapproves these results (Schmidt-Stцlting, Blцmeke, Clement, 2011). Since the two articles have come to different conclusions, in this paper it is checked whether screening of movies affects the demand for fiction books on Russian data.

To achieve this goal, the following tasks are fulfilled:

1) analysis of the relevant sources and works on this topic and identification of the various key book demand determinants including screen versions;

2) conduction of the survey to reveal factors affecting the demand;

3) collection of the database of sales of the bookstore network, as well as a database for movies released on the screen in 2014-2015;

4) building of the models that explain the demand for fiction;

5) analysis of the movie effect on book demand through endogeneity models and comparison with the OLS specification;

6) interpretation of the results.

According to the objectives presented above the paper is organized as follows. It is divided into 5 parts. Section 1 provides a brief analysis of relevant literature review. It makes a critical assessment of other researchers' experience and determines the main trend of the development of this topic. The main factors affecting demand are identified in this section and the role of adaptations in the book and movie industry is emphasized. Section 2 presents the survey conducted in order to reveal key book determinants important for readers. It indicates the stated preferences of interviewees through descriptive statistics. Section 3 shows the data and applies the methodology of the work. It includes a description of the statistical analysis of both the collected data and the data provided by the bookstore. It also includes the research methodology used by other authors for investigating a similar problem with endogenous switching. In section 4 the results of the models are proposed. Section 5 offers some concluding and limitation remarks.

1. Literature review

The root cause of the effect of screen adaptation release on book demand is controversial in the scientific community. As reading books and watching movies takes a lion's share of people's free time, often after watching the film, people want to read the adopted book. Or there is another situation when people want to watch new adaptation of their favorite book. That is how causal effects appear. In most cases, the screen adaptation release positively affects the demand for fiction books, because people are loyal to purchase a book after getting acquainted with it. On the other hand, the increased loyalty towards book's plot makes the production of the movie successful. Each country has its own features that make the book market perform differently. Thus, the purpose of that work is to check whether screening of movies affects the demand for fiction books in the Russian market.

To analyze the Russian book market a wide range of articles studying book demand has been investigated. This pool can be divided into 4 groups: 1) market structure and demand on books; 2) book demand determinants; 3) advertising of books, 4) movie adaptation. Each of these groups is considered separately. The market structure section represents the Russian market features, that determine the book demand. To determine whether the book is worthwhile to read, or not different types of quality signals are described. It helps to indicate the factors that guide readers when choosing the book among a variety of others. As the demand for books has been recently dramatically declining, it is vital to encourage the reading and promotion of the book market. Therefore, these quality signals are used by different publishing houses to increase the demand. So, advertising becomes the key element of determination. Screen adaptations is another important advertising tool. It is used by both sides - motion and book industries to encourage the demand. That is why this work is an attempt to reveal different determinants of quality and especially focus on screen adaptations.

1.1 Market structure and demand on books

The creative product is defined as an economic good raised because of an economically valuable creative process. According to Borovinskaya (2016), the major features of the creative process include: 1) procedural nature with the following stages: production, reproduction, distribution, exchange, consumption; 2) special cultural industries, which represent a complex of institutions involved in the production of social meaning; 3) cultural value; 4) high costs of production, and low costs of reproduction; 5) involving of human capital.

This process represents the nature of book market. Russian market consists of 4 procedural steps - a writer, a publishing house, distributors with primary retailers presented and readers. There are 5800 publishing houses operating with a cumulative circulation of 58.02 million copies of fiction literature printed with total volume of retail sales of books 55.92 billion rubles in 2016 (Grigoreva, 2017). At the same time, the circulation is decreasing annually, and the demand is declining. Thus, the turnover of the book industry fell from 80.58 billion rubles in 2011 to 72.15 in 2017 (Zorina & Solovieva, 2017).

Unfortunately, it seems fair to say that the demand for books is dramatically declining. There is a tendency that people prefer to spend their leisure time watching movies and TV programs instead of reading books (Ginsburgh & Throsby, 2006; Rizzo & Throsby, 2006). On average 67% of people do not read anything except news, 13% read mostly local newspapers and advertising brochures, 15% read only popular literature and only 4% of applicants read serious literature and pretend to be omnivores (Rees & Vermunt, 1999). Russian statistics is not less disappointing. More than 1/3 part of all interviewees does not read at all (Dubin, 2004). Such people's indifference towards reading leads to the decrease of national cultural education. Consequently, the decrease in demand on books leads to spiritual and mental degradation of the person. It reflects on the museums, galleries and concert attendances (Fernandez-Blanco, Prieto-Rodriguez, & Saurez-Pandiello, 2015).

Previous researchers claimed that books are luxury goods (Ringstad & Loyland, 2006). That means that not all the families can afford to purchase books on their own. Furthermore, people get bored with books and try to find close subsidize. They start watching TV, movies or playing video games. However, the latest research investigated that books have become normal goods in Russian market (Kochkina & Popova, 2017). It means that price of the book is acceptable to consumers.

Therefore, it is necessary to encourage the reading and promotion of the book market in every possible way, using mass media as the distribution of advertising, developing publisher support programs and stimulating reading. Varlygina (2015) came up with the same conclusion. She investigated the reading habits and interests on the example of Kostroma. Varlygina revealed that both publishers and retailers need to pay more attention to the search for various advertising strategies and the formation of interest in books. Otherwise, the tendency of decreasing book demand will continue.

1.2 Book demand determinants

The quality of many cultural products such as movies, music songs or different apps is not observable to the consumer before buying, as they are “experienced goods” (Dekker, 2015). Books are also “experienced” for their readers, as they cannot predict its benefit. Therefore, the key question regarding purchasing a book for readers is whether the book is worth reading or not. To measure the quality of an experienced good Kapric suggests a classification of quality indicators. She proposed the following factors: author's and publisher's strength; experts' reviews; public opinion (as cited in Kochkina & Popova, 2017, p. 4).

To begin with, author's and publisher's strength is the reputation, measured by the annual circulation or lists of top authors in well-known magazines, readers' surveys. An empirical analysis of hardcover and paperback editions in Germany has proved the fact that authors power has a strong impact on demand for books (Schmidt-Stцlting, Blцmeke, & Clement, 2011). The digital technologies development has allowed authors to publish works themselves without resorting to the traditional publishing houses. Research by Reimers and Waldgogel (2015) supports that the third part of the international market of romantic fiction consists of works published outside publishers, the main intermediaries of which are Internet sites, such as Amazon. As for Russian book market, Ridero becomes the main intermediary between the buyer and the independent publicist (Grigorieva et al., 2017). It hangs a real threat over the traditional publishing houses who are trying to attract writers and publicists.

Nevertheless, the reputation of publishing houses as well as the reputation of the authors remains one of the key signals of the quality of the book (D'Astous, Colbert, & Mbarek, 2006). Shehu, Prostka, & Schmidt-Stolting (2013) suggest that publishing houses while distributing their budget decide several issues: whether to publish a book or not; and whether to advertise it or not. The shares of budget aimed at book's advertising correlate with the future demand for that book. Even though 49% of advertised books have been already known to the public through newspapers or magazines, publishing houses remain authoritative to readers.

Secondly, the expert review includes awards and nominations awarded by literary critics. According to “Basetop rating” such awards as the Prize for Liberty, the Hans Christian Andersen Award, the Russian Booker, the SEA Writer's Award, ABC Award, the Booker Prize, the Prix Goncourt, the Pulitzer and Nobel Prizes are signals of high expert appraisal. Moreover, it should be noted that not only international prizes but also national ones are significant for Russian reality: the Big Book, the Student Booker, the National Bestseller, the Yasnaya Polyana and Novaya Slovestnost Prizes (the annual Russian literary prizes, that are awarded for the best artworks in Modern Russian prose's category). The book, nominated for one of these awards, is perceived as worth reading by readers. This has been confirmed by several studies.

On the positive side of the ledger, Caliendo (2015) illustrated the meaningful impact of 3 of these awards in the German market. However, Ponzo and Scoppa (2015) proved that this effect is diminishing after the first weeks of the nomination. They considered the results to be biased because of personal preferences, as literary critics don't randomly choose what a book to review. Unfortunately, the effects of expert review on demand lack empirical support.

Dekker's (2015) study found following: "There is virtually no overlap in the books that receive recognition by different expert juries. Only in the U.S., we find some evidence of a consensus among expert book juries, active and passive consumption and long-term consecration. From this comparison we draw theoretical implications, drawing on the theory of economic coordination regimes by Karpik, about the different meaning of awards as signals of quality. In particular, we argue that when authenticity is important, we should not expect quality signals to converge, but when authenticity is less important, quality signals should be expected to converge more” (p. 1). To sum up, the experts' review is likely to be less essential for readers than it has been previously suggested.

Finally, public opinion can be presented by readers' ratings and reviews on book sites, lists of bestseller books (Sorensen, 2007), word-of-mouth (Shehu, Prostka, & Schmidt-Stolting, 2013) and film adaptation (Asai, 2017). A substantial number of studies focus on social relations as an inseparable aspect of people's behavior. Thus, choosing between experts' reviews, authors' and publishing houses' power and public opinion people tend to rely on their peers. 21% of readers tend to listen to the advice of friends when choosing a book, while 12% of their readers are inclined to listen to their friends (Varligina, 2015). Recently the surprising statistics from movie motion industry proved that the stronger the influence of social networks in society is, the stronger the dependence of box office results from the premiere week to the whole period of screening (Moretti, 2011).

Sites with online reviews, ratings, and recommendations are widespread instruments for expressing the personal opinion. On average, 32% of sales are the influence of such social environment. Using the Amazon website, researchers assembled evidence that there is a direct link between the number of recommendations and the number of sales (Jungsun, Pei-Yu, & Shin-yi, 2004). They also figured out that recommendations work better for less popular books than for other ones. If people waste a lot of time searching for a book, they rely on its ratings and recommendations more than if the cost of searching is low. Focusing on the popularity of the book, researchers determine the amount of time spent by readers on its search. Due to this, they showed the influence of positive reviews on the probability of buying a book. However, they did not consider the influence of negative feedback in their work.

However, Judith, Chevalier, and Mayzlin (2006) revealed that one star of negative feedback is stronger than five positive stars. Even though it can lead to decrease in demand, in some cases it makes people to get acquainted with the unknown authors. And when the negative effect weakens, they are loyal to buy a book of the writer they have met before (Berger, Sorensen, & Rasmussen, 2010). In this case, negative public opinion has a positive impact on sales. Interestingly, the rating of books on such websites is constantly quite high, as readers prefer to leave a feedback only on the books they liked. That fact makes most of the ratings uninformative and all the measurements biased.

Lists of bestsellers have a similar effect on book demand. These lists contain ratings of best-selling books for a particular period of time (week, month, year) published in the mass media: newspapers, magazines etc. The most popular sites are livelib.ru/books; books.imhonet.ru; bookmix.ru. The ratings, compiled on the basis of sociological surveys, are a kind of "mirror of time" (Sukhorukov, 1996), showing the popularity of certain works in the space of a certain (national, regional) culture at a specific historical time, and, therefore, necessary for readers (Rubanova, 2014).

Many authors usually use lists of bestsellers to determine the quality of books and the analysis of sales. Lists of bestsellers significantly increase sales of books, especially with unknown writers (Sorensen, 2007). Moreover, Sorensen found that the appearance of a book in a bestseller list positively affects the sales of related to one's books with the same genre, or author. It was also revealed that there is a certain group of genres and authors of the bestselling books that are prevalent in the pages. In such lists, 20% of fiction books are TV spin-offs (Feather & Woodbridge, 2007). This fact makes media and film adaptation an integral part of the film industry.

1.3 Advertising increases demand

Publishing houses use book quality signals to increase the demand for books. Therefore, advertising becomes the key element of determination. Advertising is a kind of message transmission that is designed to promote a product, a service, or an idea. It makes people think about the issue and increase the willingness to acquire it. It reaches people's mind in various ways using mass media and social network. There is a surprising statistic that the fact of getting acquainted with the good through advert is more important than the one's context (Rao et al., 2017). Even negative advertising can increase sales (Berger, Sorensen, & Rasmussen, 2010). Because people don't attach much importance to the plot of the message, they remember the deed.

A growing literature is concerned about the effectiveness of advertising in different spheres of cultural goods. Results from the literature indicate that advertising influence the financial performance. It can increase product demand and indirectly benefit stock prices through higher revenues and profits. For example, it was found that movie trailer advertising influences the movie's abnormal returns (Karray & Debernitz, 2015). Furthermore, if the app appears on the top bestseller list the willingness to buy this app increases by $ 4.5 compared with the same one, but not on the top.

Book market uses the same scheme. Different types of quality signals are used to advertise the cultural good in order to increase the demand. Film release is one of the most widespread tools for advertising published book by publishing houses.

1.4 Film adaptation

Closely related to other book advertising strategies, the movie adaptation is another area of impact. According to Demchenko (2006), the publishing houses and motion picture industry often use the relation between books and movies to increase interest in new interpretations. Demchenko (2006) explains two different approaches to reveal this issue.

On the one hand, there is abundant evidence when a bestselling book entails setting the movie. For example, an increased popularity of Moyes' novel “Me before you” in 2012 has led to its adaptation in 2016. Also, a bestseller in 2013 “Inferno” written my Brown consequently, was adopted in 2017. According to Xinran (2015), “popular books have a strong influence on domestic box office performance of film adaptations”. Movie industries are interested in investing in reliable projects of bestselling books rather than unknown authors to get more profit. Xinran (2015) shows the revealing statistics that box-office depends for 75% on the popularity of the book, and for 25% on the movie's budget. This effect is notably strong for the first week of release (Joshi & Moa, 2012). Moreover, the similarity of the plot of the movie and the book increases the success of the screening. However, many hit adaptations have become popular due to a kind of rethinking that allowed them to become independent phenomena in art rather than due to a similarity with the original, such as "One Flew Over the Cuckoo's" by Foreman and " The Godfather " by Coppola (Elizarova, 2014).

On the other hand, there are a lot of examples, when a successful movie adaptation leads to a rapid rise in book sales. For example, many viewers wanted to read the Gogol's novel after the release of the "Taras Bulba" in 2008. A similar reaction followed screen adaptation release of the novel "The Master and Margarita" in 2005 and the novel "Idiot" by Dostoevsky in 2003 (Yelizarova, 2014). Moreover, according to “USA Today”, an internationally distributed American dailymiddle-market newspaper, such books as “The Martian” written by Andy Weir, and "Alice's Adventures in Wonderland" written by Lewis Carroll became best-sellers after the release of their adaptations. So, publishers use movies' adaptations to build their own strategy. Several researchers show that they firstly print hardcover books, but when a movie becomes a hit they print paperback copies as demand on books rises (Asai, 2015; Clerides, 1999). Moreover, publishing houses often set prices for books based on the screening release (Bittlingmayer, 2010). According to Asai (2017) and Ashworth, Heyndels, and Werck (2010), the synergy effect between movies and printed books plays a significant role, as it is advantageous for publishers to participate in the production of movies.

In conclusion, the Russian market is suffering from the lack of reading promotion schemes both from the retailers' and publishers' sides. It makes the advertising - the promotion of books extremely important. So, different signals of a book such as an author's and publisher's strength, literature awards, bestseller lists, and online ratings and recommendations determine the quality and as a result the demand on books. Movie adaptations are the most controversial signals of the quality because of its causality. Although the causal effect of book and movie relationship has not been clearly investigated, it does seem safe to conclude that both approaches proposed by Demchenko (2006) exist simultaneously. In this work, the adaptation effect is checked in order to analyze whether it prevails over the others on Russian data.

book market film industry

2. Research question

Every countries book market has its own features that determine the demand and supply equilibrium and behavior of its players. Previous research studies have identified several book quality features that drive consumers to purchase a particular book.

To investigate the Russian book market, we conduct a survey to obtain key determinants for fiction. This questionnaire helps to analyze factors that are important for readers and include them in the book demand analysis models. To build the models and verify their consistency we use data from one of the biggest countries retail chains in Leningrad region. Therefore, the sales data to measure consumers behavior and identify key factors affecting demand from the buyer's side is applied.

During the whole book demand analysis, adaptation release plays the most important role, as this phenomenon is lack of empirical investigation. We assume that the screening of books is a factor that positively influences the sales of fiction. Therefore, the goal of this study is to determine to what extent do the screen adaptation release and demand for fiction books affect each other.

According to the goal of this work, two main hypotheses are distinguished:

H0: Screen adaptation release increases the demand for books;

H1: Popular books are more likely to be screened then less known books;

While measuring the book-movie effect the causality problem arises. The book can be sold in connection with the increased readers' interest due to the release of its screen version. As people are loyal to purchase books after getting acquainted with its plot. On the contrary, it is possible that the book that became a bestseller for a number of reasons became interesting for motion picture studios and a movie is made on it. Therefore, to avoid the causality problem, we use a methodology that allows measuring the decision of the movie producers and book demand simultaneously.

To this end, the sales of the bookstore have been divided into two pools: screened books and books that movie producers have not screened. Correspondingly the information on the characteristics of books and movies has been collected and analyzed.

3. Stated preferences survey

To identify reading habits the consumer survey is carried out (Appendix 1). In the first part of the questionnaire the participants have been answering the general issues about their reading habits - whether they read or not, how often do they read and where do they prefer to buy books. To make the answers more specific we proposed a question about the latest book experience- what book have they been recently reading and why have they chosen this book. Finally, a series of general questions is proposed about different quality signals and personal readers' characteristics.

A total of 159 participants with an average age of 18 to 25 years old were interviewed online from 2016 to 2018 via various social networks. Most interviewees are female (83%). More than a half (61%) of participants have a high school degree and study at university. Almost all people are single and have no children. As for the financial position, less than 8% of all participants answered that they barely "make ends meet". And the rest part of people can pay all the necessary daily bills and payments. Therefore, they can afford not only basic necessities but also luxury goods.

As for reading habits, 53.5% of participants read once a week or more often, regardless of age. Among readers, 45.9% purchase their books from bookstores, while 18.2% download for free or purchase from websites selling books. A half of the interviewees follow the literary novelties occasionally.

People have been asked about the source of the reviews they rely on while choosing a book (figure 1). 112 persons have answered that they rely on the recommendation from their friends and relatives. 16 people rely on mass media advertisements, 67 people believe in online recommendations and book ratings. Moreover, book annotation is also very important for readers (38.4%).

According to results, people are very loyal towards mainstream books (68.6%). Almost all people (74.8%) think that the design (cover and title of the book) are extremely important. Surprisingly, a half of the participants claim that their mood affects their decision to purchase a book.

Figure 1. Sources to discover new reads

According to open-ended questions, main factors affecting reader's habits have been identified (table 1). People could write more than one reason why they have chosen a specific book. A half of the participants listen to their peers and friends' recommendations. And 14.31% search for the online ratings and recommendations. However, word of mouth referral is a secondary reason, because someone before has chosen this book according to other signals of quality.

The second position is author's authenticity. People are loyal to the work of particular writers, their fame, and reputation. Both the plot and genre occupy the third place in the scale of quality significance (19.08%). Participants have written about particular themes according to reader's interests. Importantly, book annotation also reflects the book plot.

Moreover, readers are interested in the book if it is a sequel (2.75%) or a theatre play performance (0.92%). If the book is a mainstream or has an eye-catching design (4.77%) it is also likely to be read. One of the interviewees noticed that the presence of literary awards such as Pulitzer prize is crucial in the decision-making process. Many responses include other reasons for choosing the book to read such as a gift (11.13%), a task from the teacher or the pleasure to read in the original language.

The most important thing is a movie adaptation. 14.31% of the respondents started reading because of the screening. From one point of view, people start reading books after watching the movie, for example, Harry Potter. On the contrary, some people prefer to read a book and then compare it with the adaptation. A few respondents answered that they have decided to read the book after getting acquainted with the movie advertisements, such as trailers, posters, and teasers.

To sum up, these stated results make an investigation of the book-movie effect and such book determinants as ratings, genres, prizes and book design that are presented reasonably in this work.

Table 1 Factors affecting reading habits

Factor	N	N, %
A word of mouth	31	49.29%
Author	17	27.03%
Plot	12	19.08%
Genre	12	19.08%
Movie adaptation	9	14.31%
Recommendations	9	14.31%
Book annotation	9	14.31%
Gift	7	11.13%
Sequel	3	4.77%
Design	3	4.77%
Mainstream	3	4.77%
Theatre play performance	1	1.59%
Literary award	1	1.59%
Other	54	85.86%

4. Data

4.1 Database of the books

To test the aforementioned hypotheses revealed preferences data is collected. It consists of two datasets on movies and books.

The unique dataset from the Russian book market to measure the adaptation effect on sales of fiction books is used. The source of the sales data is a large Russian network of bookstores. This data comprises information on weekly sales, including price and time of purchase, the individual ID of every book title, and such characteristics as a publishing house, genre, and cover of the book. Thus, the sample is constituted by all the 34865 different book titles that have been sold in 2015. Genres that cannot be adopted (such as quotations, aphorisms) are excluded from the sample, leaving the truncated sample of 25341 book titles.

Table 2 reports descriptive statistics. On average, 1.36 copies with the same ID number are sold weekly and 30 copies annually. Each book receives the rating score that varies from 3 to 5 with average 4.07 marked by about 775 people. It is also revealed that book price varied from 9 to 4000 rubles. The average price of the book is 821.07 rubles. The period of book publication varies from 1972 till the year of the investigated period. This bookstore network has a very diverse assortment of each book title with different physical characteristics which are expressed in different formats, cover types and number of book pages. Therefore, the number of pages varies from 18 to 5569.

Table 2 Descriptive statistics. Analysis of book sales

Variables	Description	Mean	SD	Min	Max
Quantity	ID number	1.36	1.34	1	6
Price	Weekly price, rubles	821.07	796.23	9	3999
Rate	Ratings on litres.ru from 0 to 5	4.07	0.37	3	5
NRate	Number of people who rated the book	774.89	3286.15	1	55325
Page	Number of book pages	412.8	190.43	18	5569
Year	Year of publication	2012	2.59	1972	2015

Table 3 shows the descriptive statistics of book characteristics. Since a given book can be released in many different formats (such as hardback, paperback, etc.), 60% of the revealed data is printed in hardcover. Digital and audio format releases are discarded. The size is divided into 3 categories according to Ozone.com classification: big size is 205*260 mm and higher formatted books; medium is 120*165 - 170*240 mm; little books are from 107*117 to 100*140 mm. According to statistics medium size books are the most popular among consumers.

Table 3 Descriptive statistics. Book characteristics

Variables	Description	N	N, %
Cover	Dummy variable (1 hardcover)	15207	60.01
Size	ordinal variable for types of formats	28882	100
Little	1	6816	23.6
Medium	2	21671	75.03
Big	3	395	1.37
Movie	Dummy variable (1 adaptation)	928	3.66
Prize	Dummy variable (1 literature award)	36	0.12
Transl	Dummy variable (1 translation to English)	14676	51.52
Publisher	ordinal variable by the share of circulation in 2015	25323	100
Eksmo	1	14930	58.96
Prosveschenie	2	236	0.93
Azbuka	3	1933	7.63
Veche	4	353	1.39
Centropolygraph	5	581	2.29
Genre	Bookstore's classifier, a set of dummy variables	25341	100
Foreign literature		91	0.36
Foreign prose		6805	26.85
Fantasy		5969	23.56
Folklore		110	0.43
Memoirs		1347	5.32
Novel		1033	4.08
Citation		3	0.01
Poetry		97	3.36
Russian Prose		5062	19.98
Thriller		4919	19.41

A total of 4% of all books are adapted to movies. As for publishing houses, “Eksmo" is the sales leader. The bookstore distinguishes 8 genres of a fiction book. Foreign and Russian prose, fantasy and thriller are the most popular ones. Only 36 books have been nominated in different literature awards. Surprisingly, that only a half of the sample has been translated into the English language.

4.2 Database of the movies

Furthermore, the dataset on movies is gathered. It includes data on 236 book-based movies released between 2014 and 2015 with a wide range of control variables. It consists of individual movie characteristics that have been collected from the kinopoisk.ru and IMDb.

Tables 4 and 5 represent the summary statistics for this data. The relevant information from the Web page on each film in the sample is extracted, including ratings, budget, box offices, viewers, country of production and genre. If the movie genres were used, the correlation with book genres would emerge. Due to this, movie genres are removed from the sample.

Table 4 Descriptive statistics. Movies based on books

Variables	Description	Mean	SD	Min	Max
Budget	million, $	76.92	43.88	4.83	260
W_box_of	World box office, million $	246.33	209.59	0.57	758.54
US_box_of	US box office, million $	397.39	699.69	0.01	1868.48
R_box_of	Russian box office, million $	11.84	11.05	0.03	61
Producer_ rating	From 0 to 10	7.41	0.72	4.66	8.15
F_rating		7.31	0.79	4.2	8.2
R_viewers	Russian viewers, thousand people	1859.09	1551.48	1.82	5310

On average, the movie production costs $77 million. However, the minimum budget made by Russian production is $800,000. Surprisingly, Russian box office is 10 times less than US box office and constitute 3.5% of the world box office. Both movie (SD=0.79) and producer's ratings (SD=0.72) does not differ significantly. In addition, the number of Russian viewers differs significantly with a mean of 1859.09.

The most popular genres of adopted movies are drama, thriller, and fantasy. The American motion picture industry is the most extensive and popular, making up half of the sample.

Table 5 Descriptive statistics. Movies based on books

Variables	Description	N	N, %
F_genre	Movie genres, a set of dummy variables	237	100
Adventure		9	3.83
Biography		5	2.13
Cartoons		9	3.83
Drama		78	33.19
Fantasy		41	17.45
Horror		7	2.98
Melodrama		9	3.83
Military		7	2.98
Thriller		38	16.17
Country	Production, a set of dummy variables	237	100
The USA		104	44.64
France		19	8.15
Germany		14	6.01
The UK		40	17.17

5. Methodology

Analysis of the bookstore's demand in order to determine the effect of screen adaptation release is conducted. The previous research articles have shown that the book sales variable that indicates the number of purchased books is the most appropriate variable to measure the book demand (Moretti, 2011). Therefore, for the purpose of our model, the number of books sold is the measure of demand outcome. Previous studies have indicated that the relationship between actual sales and various characteristics of books (rating in the best-seller's book, screening and literary awards) is log-linear (Judith, Chevalier, & Mayzlin, 2006; Joshi, & Moa, 2012; Ponzo, & Scoppa, 2015). Since the demand for books is constantly elastic (figure 2), this study also uses a log-linear specification of models.

Figure 2. Demand for fiction books

The reader's desire to buy the book is influenced by two groups of factors - price (price of the goods) and non-price (personal preferences of the buyer), therefore we consider several independent variables.

Publisher strength. According to Reibstein, & Farris (1995), “larger publishers have superior negotiating power over retailers as compared to smaller publishers, making it easier for large publishers to achieve greater distribution and better positioning within a store” (as cited in Schmidt-Stцlting, Blцmeke, & Clement, 2011). In addition, the most prestigious publishers carefully select books for publication and thus serve as a quality signal for the book. Therefore, we use publisher strength as an ordinal variable for the biggest publishing houses according to the annual turnover for the observation period (table 2).

Ratings. The rating has a great influence on the reader's decision to buy or not to buy a book. It is important for people to know, that the book has a high rating, as it reflects other people's satisfactory of the book context. Furthermore, the number of people who rated the book indicates the popularity of the book. The greater the number of people, who have left their scores on the site, the more readers this book has.

Appearance. A consumer's first impression of a book is often based on its cover, size, and a number of pages. If these characteristics satisfy with the reader, he won't put aside it on the first step of the decision-making process to buy the book. Moreover, according to the purpose of the purchase, readers can be divided into two types of people: those who collect books, have home libraries and wish to reread books; and people who buy books on the road. The former types of readers prefer hardcover books, the latter ones prefer books in soft cover because it is more convenient to put in a bag, transform and carry.

Genre. A book market is very diverse in genres categories. Every book genre is defined according to the context, which helps consumers to make decisions to buy it.

Prize. Book award ceremonies are always accompanied by mass media, which leads to greater popularity for the author and the book. Literary awards and nominations can be interpreted as a quality indicator for customers. So, nine of the most famous international literary awards and six national ones are included in this study.

Movie. Screening increases interest in corresponding books, although it can also be a result of increased readers' demand. Thus, the movie adaptation releases during the period of the purchasing book lifecycle are controlled.

We use two alternative econometric models to examine the differential impact of book characteristics on the demand:

1. an OLS regression specification,

2. a switching equations model with endogenous switching.

5.1 The basic statistical analysis: OLS regression

The basic econometric model is:

In equation (1), is the outcome variable, is the logarithmic price of the book sold, is a vector of physical book characteristics (size, number of pages, cover), is a vector of quality book characteristics (publishing house, rating, number of people who rated book, year of publication, literary award, genres, presence of movie adaptation), is unobserved book i specific heterogeneity, and is the error term.

This model indicates the relationship between explanatory variables and the demand outcome. It helps to reveal the effect of the movie on the demand for fiction and obtain effects of each of the book characteristics.

5.2 Switching equations model with endogenous switching

The causal effect of movie adaptations for demand on books is a controversial issue. According to different countries' features, previous researchers have come to the opposite conclusions. On the one hand, movie industries want to invest money in deliberately profitable projects such as the screen version of bestsellers. Or successful movie releases can make an adopted book the bestseller.

While the econometric problem of fitting a model with endogenous switching arises, the OLS regressions procedure does not provide any direct information about the causality effect. Therefore, to determine the relationship between movies and book sales the maximum likelihood estimation of endogenous switching regression models is used. This methodological apparatus has more recently been analyzed in a different context by several people, who have been investigating a self-selectivity problem. Coates et al. (2004) applied it to the measuring and explaining differences in students learning between face-to-face and online education. Loshkin and Zajaia (2004) applied the model to the problem of estimating individual earnings in private and public sector. In these research papers, the maximum likelihood method has been used.

The basic model that we investigate is given by:

where i denotes a book title; eq. (4) is a switching regression, and I_i is the probability that the book will be adapted, and then depending on predicted I_i the demand for books is determined according to one of the 2 scenarios.

Scenario 1: If the motion picture industry decides to make a movie from a book, is has more copies sold in the observable period of time. If studious refuse to make adaptation from a particular book, it has worse performance.

Scenario 2: Books that have a better performance attract studious' producers to make a movie. And books that do not suit the required characteristics with low-demand are eliminated from the screening decisions.

Therefore, eq. (2) and (3) indicate that the book demand (number of copies sold) either for adapted or non-adapted books is a function of the physical and quality book characteristics that are captured by a set of variables. Here as well as in eq. (1)

is the outcome variable, is the logarithmic price of the book sold, Z_i is a vector of physical book characteristics, W_i is a vector of quality book characteristics, в_o is unobserved book i specific heterogeneity, and е_i and з_i are the error terms.

I_i is a latent variable that measures the decision of movie industries whether to adopt a book or not. Therefore, I_i is a dummy variable that takes value 1 if the book i has a screen adaptation. The decision is based on special book characteristics. X_i is a vector of book characteristics that affect producer's decision to make a movie. Motion picture industries want to invest their money in high-profit projects. They make decisions based on the high ratings of books, they also search for popular bestseller books. To this end, we include such book characteristics as book rating and the number of people who rated the book on Livelib.ru. Moreover, there are specific book genres that cannot be screened (for example aphorisms, folklore, poetry, citations, and quotations). To indicate such genres, the dummy variable is constructed, which indicate 1 if the book cannot be screened. The last but not the least variable is translation to the English language. As the 91% of the whole sample is a foreign movie production, especially in the USA (41%) industry, it is important to monitor for the presence of a translation to English. Otherwise, the chances that the movie will be released on the book are significantly reduced, since the producers will not be able to get acquainted with its plot. It is important to make an assumption that either the translation to English language or book genres that can be screened are endogenous to book demand.

Under the assumption of the model above:

where:



Ф- is the probability density function for an N(0;1) variable; - is the cumulative density function for N(0;1) variable.

The predicted difference in demand for adapted books in comparison with books without movie screening for a random book is given by:

Loshkin, M. and Sajaira, Z. (2004) in their work propose “the implementation of the full-information ML algorithm to simultaneously fit binary and continuous parts of the model” (p. 282). So, instead of the two-step estimating process, when firstly the probability of book adaptation (eq.4) is measured by ML methodology, and then the are calculated to measure the demand regressions (eq. 2 and 3), we measure them at the same time. It provides consistent standard errors.

This methodological approach enables to simultaneously evaluate the book demand models and models for adaptation release decision. It allows to avoid endogeneity problem caused by causality effect and at the same time compare the effect of screen adaptation release on demand. Moreover, the methodology enables to obtain effects of each of the book characteristics on book demand.

6. Results

6.1 An OLS regression specification

Table 6 represents the results of the OLS regression estimation. They show that the model is significant (F=606.88, p<0.01) with an of 0.32.

The variable movie is equal to 1 if the book has been screened. The point estimate is 0.43 and is significant at the 1% level. This means that the presence of movie adaptation stimulates the book sales. This confirms the null hypothesis that screen adaptation's presence positively affects the demand for books.

The publishing house "Eksmo" is important for readers, because, with the switch to less replicated publishers, demand is falling. The independent variable year shows that the earlier the book was published the more sold copies it has during the observed period. The presence of a high rating increases the book demand by 19%. This means that one-star rating growth vastly raises the number of sold books. Moreover, the number of people is also important for consumers. The greatest stimulating effect is observed in the presence of a literary nomination or an award - sales increase by 43%. Neither the detectives, nor memoirs or sentimental novels does not increase the demand in comparison with foreign prose. An exception is a fantasy that has the estimated point of 0.15 at the significant level 1%.

As for a book appearance, when switching from hard to soft cover, demand falls by 41%. Readers prefer little-format books with the small number of pages.

Surprisingly, on average, all other things being equal, with a probability of 99%, it can be argued that with an increase in price by 1%, demand increases by 52%. This means that the price elasticity is positive. Books are high-quality, coveted products. And peoples' preference for buying them increases as a direct function of their price, instead of decreasing according to the theory of supply and demand.

Table 6 Linear regression

Variables	lnDemand
Ln(Price)	0.52*** (0.02)
Movie	0.43*** (0.05)
Publishing house	-0.05*** (0.004)
Year	0.29*** (0.005)
Cover	0.41*** (0.03)
Page	-0.0002*** (0.00005)
Size	-0.49*** (0.03)
Rating	0.19*** (0.02)
Number of people who rated book	0.00005*** (0)
Literary award	0.43* (0.23)
Detective	-0.19*** (0.03)
Fantasy	0.15*** (0.03)
Russian prose	-0.008 (0.03)
Memoirs	-0.36*** (0.05)
Novel	-0.65*** (0.05)
Folklore	-0.13 (0.16)
Poetry	0.0008 (0.05)
R2	0.32
	0.32
N	28788
F-statistic	606.88
Prob (F-statistic)	0

Note: Robust standard errors are reported in parentheses.

The symbols ***, ** and * indicate that coefficients are statistically significant, respectively, at the 1, 5 and 10 % level

6.2 Switching equations model with endogenous switching

The second specification allows to simultaneously evaluate the probability of a film's release from the book with the demand for adapted and non-adapted books. The maximum likelihood method guarantees asymptotically efficient estimators.

Results show that movie industries, making the decision whether to start production of the movie based on the book or not, rely on the ratings and the number of people who rated the book. This means, that the popularity of the book is important for producers and this fact confirms the second hypothesis H1. The more people have rated the book, the more readers it has. So, the more likely that the directors will decide to make a screen adaptation. Furthermore, if the book is printed only in the Russian language without any English-version translations, it reduces the likelihood of making an adaptation.