45 Colonial Broadcasting

COLONIAL BROADCASTING COMPANY
A CASE ON MULTIPLE REGRESSION
Background
Colonial Broadcasting Company (CBC)
Major American television network
Main competitors: American Broadcasting Network (ABN) and Bellmore Broadcasting Service (BBS)
TV Movies
TV movies are movies made specially for release on televisions unlike theatrical movies
TV Movies fall into two categories Fact or Fiction
A typical TV movie is made by an independent producer, with cost underwritten by a network
By 1992, ABN, BBS and CBC were underwriting production costs of more than 200 hrs of TV movies
Networks are funded by advertisers for on-air advertising
Ratings
A networks success in attracting a large audience is reflected in the Nielsen Ratings
In 1992, each rating point represented 9,21,000 American households
Barbara Warringtons Analysis
Barbara Warrington Vice President of Programming at CBC
CBCs programming decisions whether to underwrite a TV movie were motivated by
ratings
Factors that
Daymight
of theaffect
weeka TV movies ratings:
Scheduled against tough
Month of broadcast competition
Broadcasting network Rating of the preceding program
Big-name star in the movie Movie concept Fact / Fiction
1
Variables
Variable Description
Network Broadcasting network (ABN, BBS or CBC)
Month 1 = January, 2 = February, , 12 = December
Day 1 = Monday, 2 = Tuesday, , 7 = Sunday
Rating Nielsen rating for movie
Fact 1 = based on true events, 0 = fictional
Stars Number of actors or actresses paid over $300,000
Previous Rating Nielsen rating for program immediately preceding movie on same network
Competition Average of Nielsen ratings received by competing networks during movie broadcast
Dummy Variables In The Regression Analysis (Based on the above)
Variable Value
ABN 1 if NETWORK = ABN
BBS 1 if NETWORK = BBS
OCT 1 if MONTH = 10
DEC 1 if MONTH = 12
APR-MAY 1 if MONTH = 4 or MONTH = 5
MON 1 if DAY = 1
SUN 1 if DAY = 7
Available Data
Competitio Ratings Fact Stars Previous Ratings Competition ABN BBS OCT DEC APR-MAY MON SUN
Ratings Fact Stars Previous Ratings n ABN BBS OCT DEC APR-MAY MON SUN 15.4 0 1 17.3 10.9 1 0 0 0 0 0 1
15.6 0 1 14.2 14.5 0 1 0 0 0 1 0 14.7 0 0 15.5 13.9 1 0 0 0 0 0 0
10.8 1 0 15.3 17.2 0 1 0 0 0 0 1 15.5 0 0 17.4 12.6 1 0 0 0 0 0 1
14.1 0 1 13.8 14.4 0 1 0 0 0 0 1 14.7 1 0 15.3 14 1 0 0 0 0 0 0
16.8 1 1 12.8 15.3 0 1 0 0 0 1 0 15.9 1 0 18.4 10.5 1 0 1 0 0 0 1
14.3 1 1 12.4 13.3 0 1 0 0 0 1 0 13.8 1 0 24.7 12.1 1 0 1 0 0 0 1
17.1 1 1 12.9 15.1 0 1 0 0 0 1 0 10 0 1 14.2 12.9 1 0 1 0 0 0 0
8.9 0 0 10.8 14.9 0 1 0 0 0 1 0 12.9 0 1 16.9 18.6 1 0 0 0 0 0 1
16.2 1 0 13.3 11.6 0 1 0 0 0 0 1 15.4 1 0 15.9 12.4 1 0 0 0 0 0 0
9.4 0 1 12.3 12.8 0 1 0 0 1 0 1 14.5 0 2 19.4 14.2 1 0 0 0 0 0 1
10.2 0 1 10.7 15.6 0 1 0 0 1 1 0 18.8 0 2 16.7 14.7 1 0 0 1 0 0 1
9.4 0 0 10.7 14.5 0 1 0 0 1 0 1 16.7 0 0 14.9 10.1 1 0 0 1 0 0 0
12.1 0 1 10.1 15.6 0 1 0 0 1 1 0 12.8 0 0 16.3 12 1 0 0 1 0 0 0
10.7 1 0 8.6 17 0 1 0 0 1 1 0 16.8 0 1 15.7 10.1 1 0 0 1 0 0 1
15 1 0 9.8 8.2 0 1 0 0 0 0 1 14 0 1 8.2 14.8 0 0 0 0 0 0 1
10.2 0 0 11.7 13.5 0 1 0 0 0 0 1 11.3 1 0 13 13.2 0 0 0 0 0 1 0
10.3 0 1 10.1 15.2 0 1 0 0 0 0 1 13.6 0 0 13.7 15.1 0 0 0 0 0 1 0
10.8 0 1 10.9 13.1 0 1 1 0 0 0 1 12.9 1 0 8.8 16 0 0 0 0 0 0 1
14.4 1 0 15.9 12.6 0 1 1 0 0 0 1 13.2 1 0 13.1 17 0 0 0 0 0 1 0
14.4 1 1 12.1 14.2 0 1 0 0 0 0 1 16 1 0 6.9 15.8 0 0 0 0 0 0 1
13.6 1 0 11.4 11.9 0 1 0 0 0 0 1 14.6 1 1 13.8 17.4 0 0 0 0 0 1 0
14.6 0 0 19.3 14.4 1 0 0 0 0 0 1 16.6 0 1 16.8 14.4 0 0 0 0 0 0 1
10.8 0 1 16.3 15.2 1 0 0 0 0 0 0 17.5 1 0 14.8 14.2 0 0 0 0 0 1 0
16.2 0 0 20.1 14.4 1 0 0 0 0 0 1 11.6 0 0 10 14 0 0 0 0 0 0 1
12.8 0 0 14.8 13.1 1 0 0 0 0 0 0 8.9 0 0 8.6 13 0 0 0 0 1 0 1
16 0 1 19.3 13.5 1 0 0 0 0 0 1 15.6 0 0 13.3 16.8 0 0 0 0 1 1 0
18.9 0 1 17.8 13 1 0 0 0 0 0 1 9.2 0 1 6.8 12.1 0 0 0 0 1 0 1
14 1 1 14.3 13.8 1 0 0 0 0 0 0 11.8 0 0 12.9 12 0 0 0 0 1 1 0
19.5 1 1 16.2 11.8 1 0 0 0 0 0 1 11 0 0 5.3 14.7 0 0 0 0 1 0 1
14.7 1 0 13.8 15.7 1 0 0 0 0 0 0 9.5 1 0 13 17.3 0 0 0 0 1 1 0
16.3 0 1 18 11.4 1 0 0 0 0 0 1 11.6 0 0 10.1 12.8 0 0 0 0 0 0 1
15.8 1 0 17.7 13.3 1 0 0 0 0 0 1 13.3 1 0 13.1 20.3 0 0 0 0 0 1 0
17.1 0 1 17.1 11.3 1 0 0 0 0 0 1 13.6 1 0 14.1 18.3 0 0 0 0 0 1 0
11.5 0 0 13.8 13.1 1 0 0 0 0 0 0 12.4 0 0 13.6 20.2 0 0 1 0 0 1 0
16 1 0 15.3 11.8 1 0 0 0 0 0 1 13.8 1 0 10.2 16.6 0 0 1 0 0 1 0
11.7 0 1 16.6 14.3 1 0 0 0 0 0 0 11.9 1 0 11.8 12.2 0 0 1 0 0 0 1
14.2 0 0 13.6 11.4 1 0 0 0 1 0 0 14.6 0 0 14.9 14.9 0 0 1 0 0 1 0
11.2 0 0 14.3 14.4 1 0 0 0 1 0 1 15.8 1 1 13.4 17.2 0 0 0 0 0 1 0
10.9 0 0 12.4 13 1 0 0 0 1 0 0 15.4 0 1 13.6 16.8 0 0 0 0 0 1 0
13.3 0 1 13.1 10.1 1 0 0 0 1 0 1 12.8 0 0 12.7 14.6 0 0 0 0 0 1 0
15.5 1 0 17 12.4 1 0 0 0 1 0 1 12.8 0 0 12 18.6 0 0 0 1 0 0 1
16.6 1 0 13.6 11.8 1 0 0 0 1 0 0 15.1 0 0 14.1 15.5 0 0 0 1 0 1 0
16.3 1 0 16.5 12.8 1 0 0 0 1 0 1 11.4 0 1 11.2 16.4 0 0 0 1 0 1 0
15.8 0 1 15.7 11.3 1 0 0 0 1 0 1 19.1 1 0 12.6 15.4 0 0 0 1 0 1 0
13.3 1 0 10.7 12.8 1 0 0 0 1 0 0
2
Case Facts
Characters
Barbara Warrington is the Vice President at Colonial Broad
Casting (CBC)
Bruce Gold Independent Movie Producer
Situation
Bruce Gold tries to sell a CBC movie idea based on true story
Networks Belief:
Ratings(Fact movies)> Ratings(Fiction Movies)
Barbara Warrington speculates Other factors responsible for
high Ratings(fact-based movies)
Case Facts Contd.

Objective
Regression to test what really drives Ratings
Warrington wants to know whether the movie concept
(fact-based or fictional) is one of the factors driving ratings.
Ratings
The networks aim is to attract a large audience.

This is reflected by the Nielsen ratings. Each rating point represents
921,000 American Households.
3
Case Facts Contd.
Three Major
Making of TV Movie
Television Networks
Networks contract
ABN with independent
producers
True story
Agreement between
BBS
producer and rights
holder
Novels/Plays/Screen
CBC play Option on
appropriate copyright
CBC is the Major American television network
Variables
NETWORK ABN/BBS/CBC
MONTH 1=January ,., 12=December
DAY 1=Monday, ., 7=Sunday
RATING Nelson rating for a movie
FACT 1=true events, 0=fictional
STARS Number of actors paid > $0.3mn
Nielsons Rating for program immediately preceding movie on the

PREVIOUS RATINGS same network
Average of Nielsons rating received by the 2 competing networks

COMPETITION during the movies broadcast
4
Dummy Variables
Dummy variables Essentially a device to classify data into mutually
exclusive categories
ABN 1 if NETWORK = ABN

BBS 1 if NETWORK = BBS
OCT 1 if MONTH = 10
DEC 1 if MONTH= 12
APR-MAY 1 if MONTH = 4 or 5
MON 1 if DAY = 1
SUN 1 if DAY = 7
Regression 1
Dependent Variable: RATINGS
Dependent Variable: RATINGS Independent Variable: BBS, ABN
Equation:
Method: Least Squares RATINGS = 13.36333-0.648333BBS+1.397193ABN
Date: 08/20/09 Time: 18:13
Sample: 1 88
Included observations: 88
Variable Coefficient Std. Error t-Statistic Prob.
BBS -0.648333 0.698953 -0.927578 0.3563

ABN 1.397193 0.591345 2.362739 0.0204
C 13.36333 0.442057 30.22991 0.0000
5
Regression 2
Dependent Variable: RATINGS Independent Variable: FACT
Method: Least Squares Equation:
RATINGS = 13.26415+1.401068(FACT)
Date: 08/20/09 Time: 18:17
Sample: 1 88
FACT 1.401068 0.533569 2.625841 0.0102

C 13.24615 0.341272 38.81405 0.0000
Regression 3
Dependent Variable: RATINGS Dependent Variable: RATINGS
Method: Least Squares Independent Variable: FACT, STARS
Equation:
Date: 08/20/09 Time: 18:21 RATINGS = 12.56846+1.799077FACT+1.258567STARS
Sample: 1 88
FACT 1.799077 0.540724 3.327163 0.0013

STARS 1.258567 0.496091 2.536969 0.0130
C 12.56846 0.425322 29.55049 0.0000
6
Regression 4
Method: Least Squares Independent Variable: FACT, STARS,BBS,ABN
Date: 08/20/09 Time: 18:23 Equation:
RATINGS = 12.15+2.08FACT+1.35STARS-1.21BBS+1.26ABN
Sample: 1 88
FACT 2.081762 0.504413 4.127096 0.0001

STARS 1.346417 0.472998 2.846557 0.0056
BBS -1.213483 0.655920 -1.850048 0.0679
ABN 1.263496 0.548478 2.303641 0.0237
C 12.14707 0.485681 25.01038 0.0000
Regression 5
Method: Least Squares Dependent Variable: RATINGS
Date: 08/20/09 Time: 18:24 Independent Variable: FACT, STARS,P_RATINGS, COMPETITION,
Sample: 1 88 BBS, ABN, OCT,DEC,APR_MAY,MON,SUN
FACT 1.894510 0.440283 4.302935 0.0000
STARS 0.744253 0.421130 1.767275 0.0812
P_RATINGS 0.185712 0.108721 1.708148 0.0917
COMPETITION -0.293556 0.110350 -2.660232 0.0095
BBS -1.049905 0.599702 -1.750710 0.0840
ABN 1.074972 1.034284 1.039339 0.3019
OCT -1.540607 0.685984 -2.245834 0.0276
DEC 1.398164 0.728015 1.920516 0.0585
APR_MAY -1.403775 0.565737 -2.481319 0.0153
MON 2.528600 1.001363 2.525158 0.0136
SUN 1.525668 0.706364 2.159889 0.0339
C 12 87691 2 012035 6 399945 0 0000
7
Regression 6
Method: Least Squares
Date: 08/20/09 Time: 18:26 Independent Variable: FACT, STARS,P_RATINGS, BBS, ABN,
Sample: 1 88 OCT,DEC,APR_MAY,MON,SUN
FACT 1.910756 0.457283 4.178500 0.0001
STARS 0.655900 0.436070 1.504117 0.1366
P_RATINGS 0.165816 0.112662 1.471795 0.1452
BBS -0.660817 0.604107 -1.093875 0.2774
ABN 1.754086 1.041084 1.684866 0.0961
OCT -1.354106 0.708808 -1.910397 0.0598
DEC 1.566094 0.753349 2.078842 0.0410
APR_MAY -1.257413 0.584852 -2.149967 0.0347
MON 2.225929 1.033391 2.154005 0.0344
SUN 1.736093 0.729093 2.381168 0.0197
C 8.589301 1.251017 6.865856 0.0000
Question 1 Equation Regression -1

a. Rank the networks in terms of average ratings for TV movies during 1992
b. On average, how much higher are the ratings for the leading network than
the ratings for the second highest network?
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.338
R Square 0.114 The regression output is:
Adjusted R Square 0.093 Rating = 13.346 + 1.397ABN - 0.6483BBS
Standard Error 2.421
Observations 88.000
ANOVA CBC
df SS MS F Significance F
Regression 2.000 64.291 32.146 5.483 0.006
Residual 85.000 498.306 5.862
Total 87.000 562.597
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 13.363 0.442 30.230 0.000 12.484 14.242 12.484 14.242
ABN 1.397 0.591 2.363 0.020 0.221 2.573 0.221 2.573
BBS -0.648 0.699 -0.928 0.356 -2.038 0.741 -2.038 0.741
If ABN = 1, CBC = 0, BBS = 0 Rating = 13.346 + 1.397 = 14.743 for ABN

If ABN = 0, CBC = 1, BBS = 0 Rating = 13.346 for CBC
If ABN = 0, CBC = 0, BBS = 1 Rating = 13.346 0.6483 = 12.6977 for BBS
a. Therefore; RATINGABN > RATINGCBC> RATINGBBS

b. The difference in rating between ABN and CBC two is 1.397
8
Question 2 Equation Regression -2
a. In 1992 , what were the average ratings for fact based movies?
b. In 1992 , what were the average ratings for fictional based movies?
SUMMARY OUTPUT
Multiple R 0.272
R Square 0.074
Adjusted R Square 0.063 The regression output is:
Standard Error 2.461 Rating = 13.246 + 1.401Fact
Observations 88.000
ANOVA Fiction
Regression 1.000 41.758 41.758 6.895 0.010
Residual 86.000 520.839 6.056
Total 87.000 562.597
Intercept 13.246 0.341 38.814 0.000 12.568 13.925 12.568 13.925
Fact 1.401 0.534 2.626 0.010 0.340 2.462 0.340 2.462
Average Rating for fact based movie, FACT = 1 Rating = 13.246 + 1.401 = 14.647
Average Rating for fiction based movie, FACT = 0 Rating = 13.246
a. Therefore the average ratings for fact based movies were 14.647
b. Therefore the average ratings for fiction based movies were 13.246
Question 3
Is the difference between the ratings for fact based and fictional movies
statistically significant? Explain
SUMMARY OUTPUT
Multiple R 0.272
R Square 0.074
Adjusted R Square 0.063 The regression output is:
Standard Error 2.461 Rating = 13.246 + 1.401Fact
Observations 88.000
ANOVA Fiction
Regression 1.000 41.758 41.758 6.895 0.010
Residual 86.000 520.839 6.056
Total 87.000 562.597
Intercept 13.246 0.341 38.814 0.000 12.568 13.925 12.568 13.925
Fact 1.401 0.534 2.626 0.010 0.340 2.462 0.340 2.462
For fact based movie, FACT = 1 Rating = 13.246 + 1.401 = 14.647

For fiction based movie, FACT = 0 Rating = 13.246
The ratings for fact based movie & fictional based movie on an average differs by 1.401 with an
R Square value of 0.0742
The p-value is 0.0109 and thus difference is statistically significant
9
Question 4
Do the regressions suggest that , on average,
a. a fact based movie has a fewer stars than a fictional movie
b. a fact based movie has more stars than a fictional movie
c. fact based movie has just as many stars as a fictional movie
d. cannot be determined
SUMMARY OUTPUT
Regression Statistics The regression output is:

Multiple R 0.272
R Square 0.074 Rating = 13.246 + 1.401Fact
Adjusted R Square 0.063
Observations 88.000 Fiction
ANOVA
Regression 1.000 41.758 41.758 6.895 0.010
Residual 86.000 520.839 6.056
Total 87.000 562.597
Intercept 13.246 0.341 38.814 0.000 12.568 13.925 12.568 13.925
Fact 1.401 0.534 2.626 0.010 0.340 2.462 0.340 2.462
Question 4 (Continued)
a. a fact based movie has a fewer stars than a fictional movie
SUMMARY OUTPUT
Multiple R 0.373 The regression output is:
R Square 0.139 Rating = 12.568 + 1.799Fact + 1.259STARS
Observations 88.000
Fiction
ANOVA
Regression 2.000 78.420 39.210 6.884 0.002
Residual 85.000 484.177 5.696
Total 87.000 562.597
Intercept 12.568 0.425 29.550 0.000 11.723 13.414 11.723 13.414
Fact 1.799 0.541 3.327 0.001 0.724 2.874 0.724 2.874
Stars 1.259 0.496 2.537 0.013 0.272 2.245 0.272 2.245
10
Question 4 (Continued)
a. a fact based movie has fewer stars than a fictional movie
The regression output are:
(Eq.1) Rating = 13.246 + 1.401Fact
(Eq. 2) Rating = 12.568 + 1.799Fact + 1.259STARS
Average Rating
Movie Type
Fictional Fact based
Including stars and (Eq. 1) Rating = 13.246 (Eq. 1) Rating = 13.246 + 1.401
non stars = 14.647
Without stars (Eq. 2) Rating = 12.568 (Eq. 2) Rating = 12.568 + 1.799
= 14.367
With stars (Eq. 2) Rating = 12.568 + 1.259 (Eq. 2) Rating = 12.568 + 1.799 + 1.259
= 13.827 = 15.626
Conventional wisdom states that, STARS improve RATINGS of a movie.
In the above table we can see that FACT based movies on average have higher ratings.
Higher by 1.401, irrespective of whether there is a STAR or not
Higher by 1.799, for a given number of STARS
Therefore we can conclude that a FACT based movies has fewer stars than a fictional
movie
Question 5
On Sunday nights, CBC usually presents "Josette and Yvette" at 8.00 pm,
followed by the Sunday night movie at 9.00 pm. Typically ratings for Josette
and Yvette are 17.5. This week , Warrington is considering replacing "Josette
and Yvette" with a live rock concert that is expected to garner a rating of 2.5
points. What is the expected change in rating for the Sunday night movie?
SUMMARY OUTPUT
For every 1 unit increase in the previous program rating, the
Regression Statistics rating of the movie will increase by 0.1862 points
Multiple R 0.739
R Square 0.546
Adjusted R Square 0.480 There fore, the live rock concert that will garner 2.5 rating points
Standard Error 1.834 more than Josette and Yvette, will increase the movie rating by
Observations 88.000
0.1862 times 2.5, that is 0.4655 points
ANOVA
Regression 11.000 306.964 27.906 8.296 0.000
Residual 76.000 255.634 3.364
Total 87.000 562.597
Intercept 12.877 2.012 6.400 0.000 8.870 16.884 8.870 16.884
Fact 1.895 0.440 4.303 0.000 1.018 2.771 1.018 2.771
Stars 0.744 0.421 1.767 0.081 -0.095 1.583 -0.095 1.583
Previous Ratings 0.186 0.109 1.708 0.092 -0.031 0.402 -0.031 0.402
Competition -0.294 0.110 -2.660 0.010 -0.513 -0.074 -0.513 -0.074
ABN 1.075 1.034 1.039 0.302 -0.985 3.135 -0.985 3.135
BBS -1.050 0.600 -1.751 0.084 -2.244 0.145 -2.244 0.145
OCT -1.541 0.686 -2.246 0.028 -2.907 -0.174 -2.907 -0.174
DEC 1.398 0.728 1.921 0.059 -0.052 2.848 -0.052 2.848
APR-MAY -1.404 0.566 -2.481 0.015 -2.531 -0.277 -2.531 -0.277
MON 2.529 1.001 2.525 0.014 0.534 4.523 0.534 4.523
SUN 1.526 0.706 2.160 0.034 0.119 2.933 0.119 2.933
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Question 6.a.
Warrington fears that a movie with high expected ratings might provoke the
other networks to schedule better programming against CBC. Suppose that in
response to CBC's programming, both ABN and BBS schedule different
programs , each of which is expected to rate 2 rating points higher. What is
expected impact on the rating of CBC's TV movie?
The regression output is:
Multiple R
R Square
0.739
0.546
Rating = 12.877 + 1.895Fact + 0.744Star +
Adjusted R Square 0.480 0.188PreviousRating
Observations 88.000 - 0.294Competition + 1.075 ABN - 1.050BBS 1.541OCT +
ANOVA 1.393DEC 1.404APRMAY + 2.529MON +1.528SUN
Regression 11.000 306.964 27.906 8.296 0.000
Residual 76.000 255.634 3.364
Total 87.000 562.597
Intercept 12.877 2.012 6.400 0.000 8.870 16.884 8.870 16.884
Fact 1.895 0.440 4.303 0.000 1.018 2.771 1.018 2.771
Stars 0.744 0.421 1.767 0.081 -0.095 1.583 -0.095 1.583
Competition -0.294 0.110 -2.660 0.010 -0.513 -0.074 -0.513 -0.074
ABN 1.075 1.034 1.039 0.302 -0.985 3.135 -0.985 3.135
BBS -1.050 0.600 -1.751 0.084 -2.244 0.145 -2.244 0.145
OCT -1.541 0.686 -2.246 0.028 -2.907 -0.174 -2.907 -0.174
DEC 1.398 0.728 1.921 0.059 -0.052 2.848 -0.052 2.848
APR-MAY -1.404 0.566 -2.481 0.015 -2.531 -0.277 -2.531 -0.277
MON 2.529 1.001 2.525 0.014 0.534 4.523 0.534 4.523
SUN 1.526 0.706 2.160 0.034 0.119 2.933 0.119 2.933
1 Unit increase in average rating of competitors reduce the rating for CBC 0.294 . Thus 2 unit
increase will reduce the rating for CBC by 0.588
Question 6.b.
Oskar Morgenstern, a CBC network executive, believes that network
programming does not affect the size of the total television audience in a
given time slot. Instead, he believes that a network's programming only
determines the network's percentage share of the total audience. Does the
given regression support Morgen's position? Explain
Multiple R 0.739
R Square 0.546 Rating = 12.877 + 1.895Fact + 0.744Star + 0.188PreviousRating
Standard Error 1.834 - 0.294Competition + 1.075ABN - 1.050BBS 1.541OCT +
Observations 88.000
1.393DEC 1.404APRMAY + 2.529MON + 1.528SUN
ANOVA
Regression 11.000 306.964 27.906 8.296 0.000
Residual 76.000 255.634 3.364
Total 87.000 562.597
Intercept 12.877 2.012 6.400 0.000 8.870 16.884 8.870 16.884
Fact 1.895 0.440 4.303 0.000 1.018 2.771 1.018 2.771
Stars 0.744 0.421 1.767 0.081 -0.095 1.583 -0.095 1.583
Competition -0.294 0.110 -2.660 0.010 -0.513 -0.074 -0.513 -0.074
ABN 1.075 1.034 1.039 0.302 -0.985 3.135 -0.985 3.135
BBS -1.050 0.600 -1.751 0.084 -2.244 0.145 -2.244 0.145
OCT -1.541 0.686 -2.246 0.028 -2.907 -0.174 -2.907 -0.174
DEC 1.398 0.728 1.921 0.059 -0.052 2.848 -0.052 2.848
APR-MAY -1.404 0.566 -2.481 0.015 -2.531 -0.277 -2.531 -0.277
MON 2.529 1.001 2.525 0.014 0.534 4.523 0.534 4.523
SUN 1.526 0.706 2.160 0.034 0.119 2.933 0.119 2.933
1 unit of rating represent 921,000 viewers

From the above regression, 1 unit increase in the average rating of the competitors reduce
the rating for CBC network by 0.294
Therefore, for 1 unit increase in rating for ABN and BBS, their audience increase by 921,000
each and CBC audience decrease by 270,774
Thus overall number of viewers increase
12
Question 7.a.
Warrington believes that movies with stars tend to be shown in favorable time
slots (eg good months, good days of the week , and following highly rated
programs ).
a. Are the regressions consistent with her beliefs? Explain
Multiple R 0.739 The regression output is:
R Square 0.546
Adjusted R Square 0.480 Rating = 12.877 + 1.895Fact + 0.744Star + 0.188PreviousRating
Standard Error 1.834 - 0.294Competition + 1.075ABN - 1.050BBS 1.541OCT +
Observations 88.000
ANOVA
Regression 11.000 306.964 27.906 8.296 0.000
Residual 76.000 255.634 3.364
Total 87.000 562.597
Intercept 12.877 2.012 6.400 0.000 8.870 16.884 8.870 16.884
Fact 1.895 0.440 4.303 0.000 1.018 2.771 1.018 2.771
Stars 0.744 0.421 1.767 0.081 -0.095 1.583 -0.095 1.583
Competition -0.294 0.110 -2.660 0.010 -0.513 -0.074 -0.513 -0.074
ABN 1.075 1.034 1.039 0.302 -0.985 3.135 -0.985 3.135
BBS -1.050 0.600 -1.751 0.084 -2.244 0.145 -2.244 0.145
OCT -1.541 0.686 -2.246 0.028 -2.907 -0.174 -2.907 -0.174
DEC 1.398 0.728 1.921 0.059 -0.052 2.848 -0.052 2.848
APR-MAY -1.404 0.566 -2.481 0.015 -2.531 -0.277 -2.531 -0.277
MON 2.529 1.001 2.525 0.014 0.534 4.523 0.534 4.523
SUN 1.526 0.706 2.160 0.034 0.119 2.933 0.119 2.933
The regression does not provide enough data to support Warringtons claim
Question 7.b.
Warrington is planning to add a fictional movie to the programming schedule.
She must decide whether or not to use a star. What is the difference in
expected ratings between using a star and not using a star?

Multiple R 0.739
R Square 0.546
Rating = 12.877 + 1.895Fact + 0.744Star + 0.188PreviousRating
Adjusted R Square 0.480 - 0.294Competition + 1.075ABN - 1.050BBS 1.541OCT +
Observations 88.000 1.393DEC 1.404APRMAY + 2.529MON + 1.528SUN
ANOVA
Regression 11.000 306.964 27.906 8.296 0.000
Residual 76.000 255.634 3.364
Total 87.000 562.597
Intercept 12.877 2.012 6.400 0.000 8.870 16.884 8.870 16.884
Fact 1.895 0.440 4.303 0.000 1.018 2.771 1.018 2.771
Stars 0.744 0.421 1.767 0.081 -0.095 1.583 -0.095 1.583
Competition -0.294 0.110 -2.660 0.010 -0.513 -0.074 -0.513 -0.074
ABN 1.075 1.034 1.039 0.302 -0.985 3.135 -0.985 3.135
BBS -1.050 0.600 -1.751 0.084 -2.244 0.145 -2.244 0.145
OCT -1.541 0.686 -2.246 0.028 -2.907 -0.174 -2.907 -0.174
DEC 1.398 0.728 1.921 0.059 -0.052 2.848 -0.052 2.848
APR-MAY -1.404 0.566 -2.481 0.015 -2.531 -0.277 -2.531 -0.277
MON 2.529 1.001 2.525 0.014 0.534 4.523 0.534 4.523
SUN 1.526 0.706 2.160 0.034 0.119 2.933 0.119 2.933
For a fictional movie with star, the average rating = 13.621, i..e.12.877+1.895
For a fictional movie without star, the average rating = 12.877
So the difference in expected ratings would be 1.259
13
Question 8
The conventional industry wisdom is that fact-based movies have higher
ratings than movies on fictional stories. Do the regressions support or
contradict this view?

Multiple R 0.739
Rating = 12.877 + 1.895Fact + 0.744Star + 0.188PreviousRating
R Square 0.546 - 0.294Competition + 1.075ABN - 1.050BBS 1.541OCT +
Observations 88.000
ANOVA
Regression 11.000 306.964 27.906 8.296 0.000
Residual 76.000 255.634 3.364
Total 87.000 562.597
Intercept 12.877 2.012 6.400 0.000 8.870 16.884 8.870 16.884
Fact 1.895 0.440 4.303 0.000 1.018 2.771 1.018 2.771
Stars 0.744 0.421 1.767 0.081 -0.095 1.583 -0.095 1.583
Competition -0.294 0.110 -2.660 0.010 -0.513 -0.074 -0.513 -0.074
ABN 1.075 1.034 1.039 0.302 -0.985 3.135 -0.985 3.135
BBS -1.050 0.600 -1.751 0.084 -2.244 0.145 -2.244 0.145
OCT -1.541 0.686 -2.246 0.028 -2.907 -0.174 -2.907 -0.174
DEC 1.398 0.728 1.921 0.059 -0.052 2.848 -0.052 2.848
APR-MAY -1.404 0.566 -2.481 0.015 -2.531 -0.277 -2.531 -0.277
MON 2.529 1.001 2.525 0.014 0.534 4.523 0.534 4.523
SUN 1.526 0.706 2.160 0.034 0.119 2.933 0.119 2.933
Yes, fact based movie has higher rating then fiction base movie
This can be concluded as the coefficient of the variable FACT is positive
Question 9
Warrington wants to put the TV movie in the best possible slot so as to help
ensure high ratings. She has 3 slots available:
a. APRIL, SUNDAY (following a show that typically receives a rating of 8.5)
b. MARCH, MONDAY (following a show that typically receives a rating of 13.0)
c. DECEMBER, SUNDAY (following a show that typically receives a rating of
8.5)
R e g re s s io n S t a tis tic s
M u lt ip le R
R S qu a re
0.709
0.503
Rating = 8.589 + 1.911Fact + 0.656tar + 0.166PreviousRating
A d ju s t e d R S q u a re 0.439 + 1.754ABN 0.661BBS 1.354OCT + 1.566DEC 1.257APR
S ta n d a rd E rro r 1.905
O b s e rva t io n s 8 8 .0 0 0 + 2.226MON + 1.736SUN
A NO V A
df SS MS F S ig n ific a n c e F
R e g re s s io n 1 0 .0 0 0 2 8 3 .1 6 0 28.316 7 .8 0 3 0.000
R e s id u a l 7 7 .0 0 0 2 7 9 .4 3 7 3 .6 2 9
To t a l 8 7 .0 0 0 5 6 2 .5 9 7
C o e ff ic ie n ts S t a n d a rd E rro r t S t at P -va lu e L o we r 9 5 % Upper 95% L o we r 9 5 . 0 % U p p e r 9 5 .0 %

In te rc e p t 8.589 1 .2 5 1 6 .8 6 6 0 .0 0 0 6.098 1 1 .0 8 0 6.098 1 1 . 08 0
F ac t 1.911 0 .4 5 7 4 .1 7 8 0 .0 0 0 1.000 2.821 1.000 2 .8 2 1
S ta rs 0.656 0 .4 3 6 1 .5 0 4 0 .1 3 7 -0 .2 1 2 1.524 -0 .2 1 2 1 .5 2 4
P re vio u s R a t in g s 0.166 0 .1 1 3 1 .4 7 2 0 .1 4 5 -0 .0 5 9 0.390 -0 .0 5 9 0 .3 9 0
ABN 1.754 1 .0 4 1 1 .6 8 5 0 .0 9 6 -0 .3 1 9 3.827 -0 .3 1 9 3 .8 2 7
BBS -0. 6 6 1 0 .6 0 4 -1 . 0 94 0 .2 7 7 -1 .8 6 4 0.542 -1 .8 6 4 0 .5 4 2
O CT -1. 3 5 4 0 .7 0 9 -1 . 9 10 0 .0 6 0 -2 .7 6 6 0.057 -2 .7 6 6 0 .0 5 7
DEC 1.566 0 .7 5 3 2 .0 7 9 0 .0 4 1 0.066 3.066 0.066 3 .0 6 6
A P R -M A Y -1. 2 5 7 0 .5 8 5 -2 . 1 50 0 .0 3 5 -2 .4 2 2 -0 . 0 9 3 -2 .4 2 2 -0 .0 9 3
M ON 2.226 1 .0 3 3 2 .1 5 4 0 .0 3 4 0.168 4.284 0.168 4 .2 8 4
S UN 1.736 0 .7 2 9 2 .3 8 1 0 .0 2 0 0.284 3.188 0.284 3 .1 8 8
A) Rating = 8.589 + (0.166 x 8.5) - (1.257 x 1) + (1.73 x 1) = 10.473

B) Rating = 8.589 + (0.166 x 13) + (2.226 x 1) = 12.973
C) Rating = 8.589 + (0.166 x 8.5) + (1.56 x 1) + (1.73 x 1) = 13.29
Therefore, option C gives the maximum rating
14
Question 10
Warrington is unsure of which TV movie to schedule. Due to the limited
budget for a TV movie, CBC can choose either a fictional movie with a star or
a fact-based movie without a star. Both movies are identical in all other
respects. Assuming she wishes to maximize ratings, which movie should
Warrington choose?
Multiple R 0.709
R Square 0.503 Rating = 8.589 + 1.911Fact + 0.656tar + 0.166PreviousRating
Standard Error 1.905 + 1.754ABN 0.661BBS 1.354OCT + 1.566DEC 1.257APR
Observations 88.000 + 2.226MON + 1.736SUN
ANOVA
Regression 10.000 283.160 28.316 7.803 0.000
Residual 77.000 279.437 3.629
Total 87.000 562.597
Intercept 8.589 1.251 6.866 0.000 6.098 11.080 6.098 11.080
Fact 1.911 0.457 4.178 0.000 1.000 2.821 1.000 2.821
Stars 0.656 0.436 1.504 0.137 -0.212 1.524 -0.212 1.524
ABN 1.754 1.041 1.685 0.096 -0.319 3.827 -0.319 3.827
BBS -0.661 0.604 -1.094 0.277 -1.864 0.542 -1.864 0.542
OCT -1.354 0.709 -1.910 0.060 -2.766 0.057 -2.766 0.057
DEC 1.566 0.753 2.079 0.041 0.066 3.066 0.066 3.066
APR-MAY -1.257 0.585 -2.150 0.035 -2.422 -0.093 -2.422 -0.093
MON 2.226 1.033 2.154 0.034 0.168 4.284 0.168 4.284
SUN 1.736 0.729 2.381 0.020 0.284 3.188 0.284 3.188
Rating of Fictional movie with a star Rating = 8.589 + 0.656Star = 9.245

Rating of a fact based movie without a star Rating = 8.589 + 1.911Fact = 10.5
Therefore, Warrington should select Fact based movie without a star
Harsanyi Electrics Offer

Willing to sponsor a CBC TV Movie
Fee of $7,500,000 for 28 minutes of advertising
The conditions for CBC:
CBC to guarantee rating of 19 points
For every shortfall of 1 point in rating, Harsanyi would get a rebate of $1,000,000
If rating exceeded 19 points, no additional fee would be paid to CBC
Fractional ratings would be pro-rated (eg. If rating is 18.4, rebate will be $600,000)
Probability Value
For the next 2 questions, assuming that a normal distribution 0.2 m - 1.3s
with mean m and standard deviation s, can be approximated 0.2 m - 0.5s
with the following discrete 5-point distribution. 0.2 m
0.2 m + 0.5s
Thus, each point gets the same probability, 0.20 0.2 m + 1.3s
15
Question 11
Suppose that Warrington has scheduled a fact-based movie without a star for a
Monday time slot in March (again, following a show that typically receives ratings
of 13.0). Should Warrington accept Harsanyi Electrics offer or accept the fixed fee
of $5,000,000?
R e g re s s io n S t a tis tic s The regression output is:
M u lt ip le R 0.709
R S qu a re 0.503 Rating = 8.589 + 1.911Fact + 0.656tar + 0.166PreviousRating
A d ju s t e d R S q u a re 0.439
S ta n d a rd E rro r 1.905 + 1.754ABN 0.661BBS 1.354OCT + 1.566DEC 1.257APR
O b s e rva t io n s 8 8 .0 0 0
+ 2.226MON + 1.736SUN
A NO V A
df SS MS F S ig n ific a n c e F
R e g re s s io n 1 0 .0 0 0 2 8 3 .1 6 0 28.316 7 .8 0 3 0.000
R e s id u a l 7 7 .0 0 0 2 7 9 .4 3 7 3 .6 2 9
To t a l 8 7 .0 0 0 5 6 2 .5 9 7
C o e ff ic ie n ts S t a n d a rd E rro r t S t at P -va lu e L o we r 9 5 % Upper 95% L o we r 9 5 . 0 % U p p e r 9 5 .0 %

In te rc e p t 8.589 1 .2 5 1 6 .8 6 6 0 .0 0 0 6.098 1 1 .0 8 0 6.098 1 1 . 08 0
F ac t 1.911 0 .4 5 7 4 .1 7 8 0 .0 0 0 1.000 2.821 1.000 2 .8 2 1
S ta rs 0.656 0 .4 3 6 1 .5 0 4 0 .1 3 7 -0 .2 1 2 1.524 -0 .2 1 2 1 .5 2 4
P re vio u s R a t in g s 0.166 0 .1 1 3 1 .4 7 2 0 .1 4 5 -0 .0 5 9 0.390 -0 .0 5 9 0 .3 9 0
ABN 1.754 1 .0 4 1 1 .6 8 5 0 .0 9 6 -0 .3 1 9 3.827 -0 .3 1 9 3 .8 2 7
BBS -0. 6 6 1 0 .6 0 4 -1 . 0 94 0 .2 7 7 -1 .8 6 4 0.542 -1 .8 6 4 0 .5 4 2
O CT -1. 3 5 4 0 .7 0 9 -1 . 9 10 0 .0 6 0 -2 .7 6 6 0.057 -2 .7 6 6 0 .0 5 7
DEC 1.566 0 .7 5 3 2 .0 7 9 0 .0 4 1 0.066 3.066 0.066 3 .0 6 6
A P R -M A Y -1. 2 5 7 0 .5 8 5 -2 . 1 50 0 .0 3 5 -2 .4 2 2 -0 . 0 9 3 -2 .4 2 2 -0 .0 9 3
M ON 2.226 1 .0 3 3 2 .1 5 4 0 .0 3 4 0.168 4.284 0.168 4 .2 8 4
S UN 1.736 0 .7 2 9 2 .3 8 1 0 .0 2 0 0.284 3.188 0.284 3 .1 8 8
Rating = 8.589 + 1.911Fact + 0.166PreviousRating + 2.226Mon = 8.589 + 1.911 + (0.166x13) +

2.226 =14.884
1. 19 Rating $7,500,000. For each 1 point reduction, deduct $1,000,000
2. Difference = 19- 14.88 = 4.12
3. Harsanyis Offer = $7,500,000 - (4.12 x $1,000,000) = $3,380,000
4. Fixed offer = $5,000,000
5. Since fixed offer is more than Harsanyis offer accept the fixed offer
Question 11
Point estimate for ratings is 8.59 + 1.9108 + 0.166*13 +
2.23 = 14.8
The break even rating is 16.5, 2.5 points under the desired
19.
If there were no ceiling on the variable-fee deal is not
favorable (14.8 < 16.5).
The deal with the ceiling is even less favorable. Thus, accept
the $5,000,000 fixed-fee proposal.
16
Thank You
17

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COLONIAL BROADCASTING COMPANY

A CASE ON MULTIPLE REGRESSION

Case Facts Contd.

The networks aim is to attract a large audience.

CBC is the Major American television network

MONTH 1=January ,., 12=December

DAY 1=Monday, ., 7=Sunday

RATING Nelson rating for a movie

FACT 1=true events, 0=fictional

STARS Number of actors paid > $0.3mn

Nielsons Rating for program immediately preceding movie on the

Average of Nielsons rating received by the 2 competing networks

ABN 1 if NETWORK = ABN

Variable Coefficient Std. Error t-Statistic Prob.

BBS -0.648333 0.698953 -0.927578 0.3563

Variable Coefficient Std. Error t-Statistic Prob.

FACT 1.401068 0.533569 2.625841 0.0102

Variable Coefficient Std. Error t-Statistic Prob.

FACT 1.799077 0.540724 3.327163 0.0013

Variable Coefficient Std. Error t-Statistic Prob.

FACT 2.081762 0.504413 4.127096 0.0001

Question 1 Equation Regression -1

If ABN = 1, CBC = 0, BBS = 0 Rating = 13.346 + 1.397 = 14.743 for ABN

a. Therefore; RATINGABN > RATINGCBC> RATINGBBS

For fact based movie, FACT = 1 Rating = 13.246 + 1.401 = 14.647

The p-value is 0.0109 and thus difference is statistically significant

Regression Statistics The regression output is:

1 unit of rating represent 921,000 viewers

Regression Statistics The regression output is:

The regression output is:

C o e ff ic ie n ts S t a n d a rd E rro r t S t at P -va lu e L o we r 9 5 % Upper 95% L o we r 9 5 . 0 % U p p e r 9 5 .0 %

A) Rating = 8.589 + (0.166 x 8.5) - (1.257 x 1) + (1.73 x 1) = 10.473

Rating of Fictional movie with a star Rating = 8.589 + 0.656Star = 9.245

Harsanyi Electrics Offer

Fee of $7,500,000 for 28 minutes of advertising

The conditions for CBC:

CBC to guarantee rating of 19 points

If rating exceeded 19 points, no additional fee would be paid to CBC

C o e ff ic ie n ts S t a n d a rd E rro r t S t at P -va lu e L o we r 9 5 % Upper 95% L o we r 9 5 . 0 % U p p e r 9 5 .0 %

Rating = 8.589 + 1.911Fact + 0.166PreviousRating + 2.226Mon = 8.589 + 1.911 + (0.166x13) +

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