Entertainment and Media: Markets and Economics. Professor William Greene. Economic Foundations for Entertainment and Media. Special Features of the Demand for Experience Goods. Understanding the Demand for Experience Goods. Differences between experience and “humdrum” goods
Professor William Greene
Special Features of the Demand for Experience Goods
The classical theory of demand falls short when applied to markets for experience goods.
The Demand for Experience Goods is Strongly Influenced by Interactions of Preferences and Consumption
ArtDali, Pollock, Monet, Picasso, Barnett, O’Keefe,
Warhol, Haring, Wyeth, Rembrandt, Klimt
Opera Pavarotti, Carmen, Tommy, Aida, Soap
Movies Gone with the Wind, Casino Royale, Kill Bill, Brave One, KONY2012
Theater Lion King, TONY, Rent, Blue Man Group, Hairspray
Books E. Leonard, J. Collins, W. Greene, S.Hawking, H. Clinton, Sarah Palin,
Dan Brown, T. Clancy, J. Grisham, T. Wolfe, J. Michener, Ann Coulter
Sports Yankees, Rugby, T. Woods, Super Bowl, Replay Camera,
Agassi, Lebron James, Hat trick, A-Rod, March Madness
Red Sox, NASCAR, Giants, Olympics,
Gambling Full House Blackjack Point Spread Final Four
TV Seinfeld, Jay Leno, Survivor, American Idol, You’re Fired, Olsen Twins, CNN, History Channel
Politics (You name it)
Amusement Sky Diving Roller coaster Bungee jump
Media Time, Slate, People, Scientific American, The Economist, NYT, YouTube
Music Britney Spears, Norah Jones, BB King, Clapton, Grammys, Eminem, VMA, Dire Straits, Billy Joel, Bonnie Raitt, Fleetwood Mac, Music Choice
Gadgets iPod, iPhone, Blackberry, Guitar Hero
Movies The Truman Show, Tinklebell, Pulp Fiction, The Matrix
Books Max Dendermonde, Simon Vestdijk, Gabriel García Márquez
TV Martin Morning, Sesame Street, Mega Mindy, Kim Possible, The Five, Phineas and Ferb
Amusement Family games
Media NRC, Le Monde, Nice Matin, Dagens Industry, Wikipedia, Reuters
Music XFM, SlamFM, NonStopPlay.com, Radio4.nl, BBC World Service,
France Inter, DJ Tiesto, Yelle, Eminem, Queen, Michael Jackson,
Lionel Richie, ABC, Robbie Williams
TiVo has made me realize that “pulling the plug” rather than recording shows separates the TV boycotter from the rest of society. My TiVo allows me to contribute to conversations revolving around TV rather than silently observing them.
Public Choice (2009) 138: 109–136
Does Wal-Mart reduce social capital?
Art Carden · Charles Courtemanche · Jeremy Meiners
Putnam warns that our stock of social capital– the very fabric of our connections with each other, has plummeted, impoverishing our lives and communities.
Putnam draws on evidence including nearly 500,000 interviews over the last quarter century to show that we sign fewer petitions, belong to fewer organizations that meet, know our neighbors less, meet with friends less frequently, and even socialize with our families less often. We’re even bowling alone. More Americans are bowling than ever before, but they are not bowling in leagues. Putnam shows how changes in work, family structure, age, suburban life, television, computers, women’s roles and other factors have contributed to this decline.
Have greatly reduced the cost of maintenance and acquisition of social capital.
Elasticity of demand increases as sales increase
(1) Demand shifts outward as buyers see aggregate sales rise. (It shifts outward because it shifts outward.
(2) Lowering the price brings larger benefits (in terms of increased sales) than it would otherwise.
(3) Advertising to increase demand is likely to be more effective than it would be otherwise. The success of advertisting is leveraged.
D = total demanded (observed by the consumer)
Paul McCartney’s (April, 2002) concert in Madison Square Garden was sold out within two hours of the opening of the box office. A representative of the Garden was asked what the effect of doubling the $50 - $150 ticket price would be. Her reply: “It probably would have taken three hours to sell out.”
A 1998 Spice Girls concert at the Garden sold out within minutes.(http://www.eonline.com/News/Items/0,1,3245,00.html)
In the 2007 Reunion Tour: A subsequent Dec. 15 one-off show at London's O2 Arena sold out in 38 seconds. (http://www.livedaily.com/news/13609.html)
What happened to Myspace? (1600 employees in 2008, 200 in 2011)
Yes: P > .5
Yes: p = .5 No: p = .5
No: P < .5
PERSONALIZED MOVIE RECOMMENDOR PROVIDES NETFLIX VISITORS WITH HIGHLY ACCURATE FILM RECOMMENDATIONS BASED ON THEIR INDIVIDUAL MOVIE TASTE HISTORY
“It sold well because lots of people bought it.”
Duncan Watts study in NYT. (4/15/07)
[W]hen people tend to like what other people like, differences in popularity are subject to what is called “cumulative advantage,” or the “rich get richer” effect. This means that if one object happens to be slightly more popular than another at just the right point, it will tend to become more popular still. As a result, even tiny, random fluctuations can blow up, generating potentially enormous long-run differences among even indistinguishable competitors — a phenomenon that is similar in some ways to the famous “butterfly effect” from chaos theory. Thus, if history were to be somehow rerun many times, seemingly identical universes with the same set of competitors and the same overall market tastes would quickly generate different winners: Madonna would have been popular in this world, but in some other version of history, she would be a nobody, and someone we have never heard of would be in her place.
Smart Money Magazine: March 8, 2010http://www.smartmoney.com/investing/stocks/The-Oscars-A-Corporate-Scorecard/?print=1
“The entire planet can get along nicely now with maybe a dozen champion performers in each area of human giftedness.” (Kurt Vonnegut, Bluebeard, 1987.)Winner Take All Markets
The Winner-Take-All Society, Frank, R., Cook, P., Penguin, 1995.
Sherwin Rosen, “The Economics of Superstars,” AER, 1981.
Of the top 50 best sellers of all types in 1990-1998, 43 were novels and 41 of them were by John Grisham, Stephen King, Danielle Steel, Michael Crichton, Tom Clancy, and Mary Higgins Clark. Together, they sold just under 200,000,000 books.
Any others? James Patterson: 20,000,000)
Danielle Steel 800,000,000+
Price effect or quantity effect? Mainly quantity. a dozen champion performers in each area of human giftedness.” (Kurt Vonnegut,
End Class 1 – Part 2