Perhaps It's Not The Entertainment Industry's Business Model That's Outdated

from the just-its-understanding dept

After last week's post in my ongoing series about the economics of non-scarce goods, where I discussed the ridiculousness (economically speaking) of saying you can't compete with free, a friend emailed me to make an interesting point. He suggested that despite the common wisdom many of us have suggested, the entertainment industry's business models aren't actually obsolete. What is obsolete is what people think the industry's business model is. And, the worst thing is that the people most guilty of this are the industry execs themselves.

A few weeks back, one of the posts in this series was about recognizing what market you're really in. I used the example of horse-drawn carriage makers, who mistakenly believed they were in the horse-drawn carriage market, rather than the personal transportation market -- leading to troubles once the automobile came around. There's an important hidden lesson in that. You can actually be succeeding in a market you don't think you're in.

When it comes to the entertainment industry, that may be exactly the case. We've been arguing that there are plenty of business models that don't involve actually selling the content, but involve selling other, related products that are made valuable by the content. In fact, that's what both the music and the movie industry already do. Everyone may think that you're buying "music" or "movies" but that's very rarely what you're actually buying. You're buying the experience of going to the movies. Or the ability to have the convenience of a DVD. Or the convenience of being able to listen to a song on your iPod. And, in many cases, it's not just one thing, but a bundle of things: the convenience of being able to hear a song in any CD player, combined with a nice set of liner notes and the opportunity to hear a set of songs the way a band wants you to hear. It can be any number of different "benefits" that people are buying, but it's not the "movie" or the "music" itself that anyone is buying.

So the problem isn't that the industry's basic business model is obsolete -- it's just that everyone thinks they're actually selling music or movies, and that leads them to do stupid things like put DRM on the music to take away many of those benefits, or making the movie-going experience that much worse by treating everyone like criminals. What they're doing, and why it's hurting them, is that they're actually taking away the features that they used to be selling -- and missing out on opportunities to sell other benefits as well. So while we may still point out that the basic business model is obsolete, it may be more accurate to simply say that it's the understanding of the business model that's really out of date.

If you're looking to catch up on the posts in the series, I've listed them out below:

Economics Of Abundance Getting Some Well Deserved Attention
The Importance Of Zero In Destroying The Scarcity Myth Of Economics
The Economics Of Abundance Is Not A Moral Issue
A Lack Of Scarcity Has (Almost) Nothing To Do With Piracy
A Lack Of Scarcity Feeds The Long Tail By Increasing The Pie
Why The Lack Of Scarcity In Economics Is Getting More Important Now
History Repeats Itself: How The RIAA Is Like 17th Century French Button-Makers
Infinity Is Your Friend In Economics
Step One To Embracing A Lack Of Scarcity: Recognize What Market You're Really In
Why I Hope The RIAA Succeeds
Saying You Can't Compete With Free Is Saying You Can't Compete Period

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  1. identicon
    ANON, 29 Dec 2017 @ 11:23am

    Evolution

    The medium is the message. Each message also incorporates its medium. Songs are 3 minutes long because that's what fit on a record. (A few disruptive elements, like Stairway to Heaven or American Pie, thoroughly confused the mix). Albums were the length of 1 or 2 vinyl discs. Cartoon were 6 minutes long because that's sufficient for the beginning of a movie, which was 1.5 to 2.5 hours because that was the best fit for a theatre, while TV episodes fit at one time in the half-hour and hour slots. Even sports was essentially defined by the medium - in the early 1900's, Baseball -which could be described on radio - was king; when TV came along, football was better action and ideally suited for replays, a capability of the new medium.

    When the disruptive tech comes along, the medium can change the massage. Netflix for example started the idea of releasing a whole season of a show at once - you essentially have an 18-hour movie that you start and stop as you feel like. Eventually, the whole concept of perfectly timed episodes in the season will disappear. As theatre revenue becomes less significant, the extended edition will become the norm for movies.

    So what is the Hollywood business model?

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