Glitner

Lemon Pie

In the Market for Lemons, the economist George Akerlof talks of used cars …

There are good used cars and defective used cars (“lemons”), but because of asymmetric information about the car (the seller knows much more about the problems of the car than the buyer), the buyer of a car does not know beforehand whether it is a good car or a lemon.  So the buyer’s best guess for a given car is that the car is of average quality; accordingly, he/she will be willing to pay for it only the price of a car of known average quality.  This means that the owner of a good used car will be unable to get a high enough price to make selling that car worthwhile.

Can this be true for online content?  A film is a perfect example of an asymmetric information market; you pay for an experience without really knowing what your level of satisfaction will be… it’s like a box of chocolate… (just kidding); Anyway, the film industry is primarily one of prototypes, and according to Akerlof, this should mean that people would only be ready to pay average prices to watch films. One could argue that there are some variables to throw in the formula …

• Test-Market screenings
• Festivals
• Press screenings and critics

Going further, by including recognizable features in films (Brad Pitt or Natalie Portman) and by increasing Publicity and Advertisement budgets; the industry managed to “reassure” the audience that they would get there money’s worth.  However, as shown in many examples, this is not always enough, and might not be appropriate for independent films.

Indeed, according to some, what will make or break the film mostly depends on word of mouth…

But online, one question remains:

Arguably people are willing to pay for content, however, are we (as Internet users) so overwhelmed by content that we are not willing to put up some cash to access it online?

Let us look at a couple of videos …

First Rupert Murdoch on the necessity of having people pay for content:

Then Eric Schmidt, who doesn’t seem to be bothered by this question:

(Update on the 2nd of December) … It seems that Google is firing back.  In an announcement yesterday, Google is now proposing a First Click Free program by suggesting to publishers to let traffic on their website for free (landing page), and once the user clicks on the website, to start charging for it…  Google is in essence saying, we bring you billions of viewers, it’s not our fault if you can profit from this.  Smart response but won’t change much for the publishers …

How can the Internet be used by premium content owners in order to enhance the value of their content? We’ll get back to this a bit later

let us first dig into different “trending” categories of cinematographic content …

Blockbusters of Blockbuster?

A very good article was published in this week’s Economist on the current divergence of media into blockbusters or niche – while the rest remains “stuck in the middle”…

In its weekly edition, the journal deciphers the current trends in Media consumptions and challenges the theory of the long tail by quoting economists suggesting that “obscure” films are being supplied at a greater rate than they are being discovered by the public, and wonder if media companies can actually profit from selling very little of great many things.  It seems that the outcome is not as black or white as Mr Anderson, or his detractors, would like it to be, and that, as a matter of fact, both the hits and the tail are doing quite well.  So what’s the deal?

Well the deal is pretty much everything that remains in the middle … all that content produced that do not make it to the top or does not actually serve a niche market; all those movies that people used to watch because there was nothing else on telly.  Looking at this chart for music, which one could argue would also be valid for cinematographic content, it seems that only the top guns are actually faring better, and that the rest is losing.   Moreover, according to the article, blockbusters often get better reviews than other films due, partly, to “Formal Theories of Mass Behaviour” as explained by William McPhee in his 1963 essay… It basically says that people watching blockbusters do not watch as many films as people watching more obscure content, and will therefore lack the critical knowledge of a more astute audience (watching many more films).  In other words,  Transformers will get more stars on Netflix than Sin Nombre could expect not because of their respective quality, but rather because the former will have more clueless critics rating it … :-/ which would explain why, past a certain point, it seems that word of mouth becomes less relevant… But remember; there can only be one.

At the other side of the tail, as more content becomes accessible and word of mouth playing a central role in the promotion of quality content, the best content serving the critically demanding public will surely benefit from the Internet.   Moreover, that premium content does not have the “Theatrical Problem” of being pushed out before effective word of mouth can develop.  Furthermore, the Internet will (and should) increasingly be used months before theatrical release as it is an incredible promotional vector for independent film distribution.

Here is an interview from Michael Lynton recorded in New York during the Economist Media Convergence conference.  Mr Lynton believes that no matter what, the film narrative structure as we know it will thrive in the future.  Furthermore, according to him, “cheap” films are a reality that will prompt studios in adapting themselves, without replacing them.

Better than Free

Now what?

Pondering on these topics brought me back to a very interesting read by Kevin Kelly, which can be found here (to keep in your bookmarks I reckon).

I am certain that in it lies some great advice in order to

1. Serve your niche audience online (in the case of Independent films),
2. Behead your blockbusting opponent online (in the case of Multi-hundread-million dollar productions),
3. Recoup the economic gap created by online lemons (if your content is worth it…),

But mostly prepare for the times to come …