blockbusters triumph for Internet-era business

Anita Elberse’s new book, Blockbusters: Hit-Making, Risk-Taking, and the Big Business of Entertainment, convincingly argues that seeking blockbusters is the best economic strategy for symbolic businesses even in the Internet era.  The Internet makes possible an unlimited diversity of digital content and services.  That encourages belief that fragmentation of audiences and the proliferation of niche products will control business success.  However, the Internet also enhances social influence that concentrates attention and purchases on the most popular symbolic products.[1]  In current business reality, enhancing social influence is more important.  The most profitable business strategy is using all available communication tools to make a particular symbolic package highly popular: a blockbuster.

Andy Warhol Silver Clouds blockbuster opening

Social influence is hugely important.  Persons learn about goods through other people.  Valuations of goods are closely related to what persons perceive to be other persons’ valuations of goods.  As Elberse explains, a film’s earnings can be well predicted from its opening weekend box office receipts.  Opening weekend receipts depend on extensive pre-opening promotion and securing wide theatrical distribution.  Because popularity and currency create value in social communication, economies of scale exist in marketing and promotion.  To be a potential blockbuster, a film has to be good.  But being good isn’t sufficient.  Expensive, complex, and creative marketing and promotion creates blockbusters.[2]  The Internet has changed means for marketing and promotion, but not the underlying economics of marketing and promotion.

Reduced distribution costs and globalized symbolic markets increase producers’ operating leverage.  Operating leverage depends on the relation of fixed costs to marginal costs.  Reductions in marginal costs relative to fixed costs increase the profitability of selling an additional unit.  The Internet has reduced the marginal costs of distributing symbolic goods and expanded symbolic markets globally.  The profitability advantage of blockbusters has thus become greater.

Elberse describes the successes of blockbuster strategies with case studies across mass-media entertainment.  Alan Horn’s strategy of blockbuster films for Warner Brothers dominated Jeff Zucker and Ben Silverman’s strategy of managing for margins at NBC.  Grand Central Publishing paying a $1.25 million advance to an unknown author for rights to the book Dewey: The Small-Town Library Cat Who Touched the World makes sense in light of the logic of blockbuster marketing.  Elberse describes the rapidly scaled up marketing strategy by which Lady Gaga (who’s ugly) and Maria Sharapova (who’s gorgeous) became superstars.  She explains why Real Madrid reasonably paid extraordinary sums for a roster of soccer galácticos.  In the realm of new media, Jay-Z’s launch of his memoir Decoded and the online attack of the National Football League illustrate how large-scale promotion works across new and old media.

The value of blockbusters is not just a matter of big business.  The growth of Facebook and Twitter relative to blogging suggests that most people in their own small social worlds are more engaged in being a celebrity than being an author.  In materially wealthy, socially impoverished societies, providing social-psychic goods is a huge business opportunity.  Twitter is all about attracting and manipulating social followers with low-cost tweets.  Facebook’s fundamental business proposition to its users is providing “likes”: specific signs that “people like me.”  Google, which merely offers the accounting proposition of “+1,” is having a difficult time competing with Facebook.  Social media entrepreneurs exploring new business opportunities undoubtedly are developing technologies to effectively deliver “ugo girls.”  A less attractive product is “atta boys.”  Boys and men are less engaged in social media than are girls and women.

Human social nature favors commodified symbolic goods.  If persons exchange symbolic goods that they themselves have made, the goods are enmeshed in complicated interpersonal dynamics.  Socially distant, commodified symbolic goods are less socially complex and less socially risky.  Scholars seeking to be collegial thus say little substantive to each other about their work.  The structure of academic disciplines is essentially a cartel in restraint of personally troublesome discussions.  Most academics participate in online discussion lists by posting nothing other than conference notices, publication notices, retirement notices, death notices, and other academic-bureaucratic items.  In academy, having substantive, critical discussions is much less valuable than producing commodified, largely ignored items of scholarship (journal publications and books).  The underlying social economics applies more generally to everyone, but is less starkly apparent.

The growing importance of blockbusters threatens effective democracy, creative diversity, and justified differences in wealth.  The strategies and tools for marketing and promoting blockbusters differ little from those for promoting political candidates and political causes.  Unlike entertainment goods, political leaders should make difficult decisions and get challenging tasks done.  Focusing on marketing and promotion often impedes making good, timely decisions and actually doing necessary work.  The imperatives of making blockbusters heighten the tensions between creative freedom and business success.  A blockbuster culture is more symbolically homogenous and less supportive of individual creativity.  Moreover, blockbusters create enormous income differences between superstars and mere team players.  When superstars earn vastly greater income without meritocratic legitimacy, team players not deluded with improbable dreams of stardom become resentful and lose motivation to perform.  A society too skewed toward blockbusters is likely to collapse spectacularly.[3]

Elberse’s Blockbusters is an important book for aspiring media moguls, aspiring celebrities, and everyone concerned about economic, social, and political trends.  Elberse’s book deserves to be more widely read than Chris Anderson’s best-selling, awarding-winning, and factually misguided book, The Long Tail: Why the Future of Business is Selling Less of More.  Anderson, however, had better social connections in the business of promoting popular writing.[4]  Anderson’s book also told a story that was less well-known and more popularly attractive.  Big-media business has been described for more than a century.  Elberse’s book cannot compete with celebrity gossip publications.   The flyleaf of Elberse’s book highlights significant symbolic differentiation:

Anita Elberse, the Lincoln Filene Professor of Business Administration at the Harvard Business School, is one of the youngest female professors to be awarded tenure in the school’s history.  Her work has been featured in the New York Times, the Wall Street Journal, Variety, and Fortune.

Despite its greater factual merit, Elberse’s Blockbusters probably won’t become as popular as Anderson’s The Long Tail.  That’s an unfortunate reality of the blockbuster economy.

I recommend seeking truth and enjoying creativity.

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Notes:

[1] Heightened concern about security and trust with respect to digital products and services also favors concentration.  The costs of security lapses and bad publicity are higher for more popular products.  More popular products also have higher probability of exposure of security weaknesses and a larger revenue base to invest in making the product secure.  On the other hand, more popular products are more valuable targets for cyber-criminals.  On the whole, the balance seems to me to favor popular products.  Using only popular apps is a simple, common approach to avoiding very insecure apps.

[2] Production costs for films vary widely.  Spending more money in producing a film provides costly effects that can be marketed as distinctive signals.  Creating value for marketing and promoting a work is not the same as creating value in the end-customer full experience.

[3] The epilogue to Blockbusters insightfully notes:

When you look close enough, the principles and practices of “show business” can be found in a wide cross section of companies and sectors in our economy — and increasingly so.

Elberse (2013) p. 261.

[4] Anderson worked as U.S. Business Editor for the Economist and was Editor-in-Chief of Wired when he wrote The Long Tail.

[image] Opening night of Andy Warhol’s Silver Clouds blockbuster exhibit at Artisphere in Rosslyn, VA.

Reference:

Elberse, Anita. 2013. Blockbusters: hit-making, risk-taking, and the big business of entertainment.  New York: Henry Holt and Company.

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