Stimulation and Media: Markets and Financial aspects

Presentation Transcript

Diversion and Media: Markets and Economics Professor William Greene

1/47 Economic Foundations for Entertainment, Media, and Technology Special Features of the Demand for Experience Goods

2/47 Understanding the Demand for Experience Goods Differences amongst experience and "modest" merchandise Motivation for utilization Aspects of interest Implications for business sectors

5/47 Demand for a Good or Service from the Consumer's Viewpoint

4/47 Consumption of Experience Goods Experience versus Utilitarian Consumption Experience Goods - Motivation Purely inward Immediate utility (fulfillment) Rational dependence Interactive and reliant Common interests - talk Accumulation of social capital

3/47 Experience Goods versus Utility Goods The traditional hypothesis of interest misses the mark when connected to business sectors for experience products.

6/47 Rational Addiction Acquired taste (musical drama, renaissance craftsmanship, rap music) Accumulated ability – a capital stock This infers a diminishing interest versatility (an enslavement).

17/47 Economic Foundations for Entertainment, Media, and Technology The Demand for Experience Goods is Strongly Influenced by Interactions of Preferences and Consumption

7/47 Social Capital Stock Art Dali, 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 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 trap, A-Rod, March Madness Red Sox, NASCAR, Giants, Olympics, Gambling Full House Blackjack Point Spread TV Seinfeld, Jay Leno, Survivor, American Idol, You're Fired, Olsen Twins, CNN, History Channel Politics (You name it) Amusement Sky Diving Roller liner Bungee bounce 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

Someone Else's Capital Stock Art Arnold Böcklin Opera -Movies The Truman Show, Tinklebell, Pulp Fiction, The Matrix Theater -Books Max Dendermonde, Simon Vestdijk, G abriel García Márquez Sports -Gambling -TV Martin Morning, Sesame Street, Mega Mindy, Kim Possible, The Five, Phineas and Ferb Politics -Amusement Family diversions 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

8/47 Social Capital Stock Art Opera Movies Theater Books Sports Yours? Betting TV Amusement Media Music Any Others?

9/47 The Social Capital Stock Functions it serves in the group Aspects – It is like other capital stocks Maintenance Depreciation Investment Implications for request: An inspiration for utilization.

TIVO Capital 10/47 TiVo has made me understand that "pulling the fitting" as opposed to recording indicates isolates the TV boycotter from whatever is left of society. My TiVo permits me to add to discussions spinning around TV as opposed to quietly watching them.

11/47 Wal Mart and Social Capital Public Choice (2009) 138: 109–136 Does Wal-Mart lessen social capital? Craftsmanship Carden · Charles Courtemanche · Jeremy Meiners Increase utilization of "lowly products" with less outside connectedness Reduce association with the group by bringing down suitability of little "nearby" organizations (Unfortunately, experimental information don't bolster the theory.)

12/47 Interdependent Demands Bandwagon impact d(i) = f [price, different costs, Income, d(j)] Amount requested relies on upon the sum others (are known to) have acquired Applications Bestsellers (books, music, motion pictures) Movies Electronic developments This year's hot toy Others?

13/47 Bandwagons Elasticity of interest increments as deals increment Demand moves outward as purchasers see total deals rise. Suggestion 1: Lowering the cost brings vast advantages. Suggestion 2: Advertising to expand request is probably going to be extremely powerful.

14/47 Extreme Case: Concerts  i d(i) =  i d(i)[price, different costs, Income,D ] D = add up to requested (saw by the customer) Total request relies on upon watched add up to request Effect can deliver positive connection amongst cost and amount. (Note, not a "request bend.") For the show, MC = 0 (or near it) End result: Profit = income boost may happen with overabundance request (fans outside the office)

15/47 Excess Demand Paul McCartney's (April, 2002) show in Madison Square Garden was sold out inside two hours of the opening of the movies. An agent of the Garden was solicited what the impact from multiplying the $50 - $150 ticket cost would be. Her answer: "It likely would have taken three hours to offer out." A 1998 Spice Girls show at the Garden sold out inside minutes. ( http://www.eonline.com/News/Items/0,1,3245,00.html ) In the 2007 Reunion Tour: A resulting Dec. 15 one-off show at London's O2 Arena sold out in 38 seconds. ( http://www.livedaily.com/news/13609.html )

16/47 Excess Demand for U2

18/47 Network Externalities Utility from utilization of a decent by a man relies on upon the aggregate number of individuals utilizing the great. Applications: Telegraph Telephone Fax Cellular telephone Operating framework, word processor, and so on. Suggestions: Monopoly? Regular? Alluring? This imposing business model is request based, not supply.

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21/47 Fastest Growing and Largest Website on the Planet Until 2007

22/47 150,000,000 individuals (… 160, … 170,… )

23/47 Facebook The item Information Sharing Virtual Community It's not only for amusement only. Publicizing deals Valuation

26/47 Bestsellers and Blockbusters Herding conduct: Acting not well (against one's best enthusiasm) in light of outer data. (Lemmings) Information Cascades (Bikhchandani et al.) Public flag = watched choices of past leaders Consider a grouping of chiefs Decision Payoff = +1, likelihood = 1/2 Yes Payoff = - 1, likelihood = 1/2 Public Signal Private Signal High: p > .5 Low: p < .5 No: Payoff = 0, likelihood = 1

27/47 Blockbuster Movies

28/47 Outside Information IMDb NetFlix

29/47 Connecting Consumers: Cinematch PERSONALIZED MOVIE RECOMMENDOR PROVIDES NETFLIX VISITORS WITH HIGHLY ACCURATE FILM RECOMMENDATIONS BASED ON THEIR INDIVIDUAL MOVIE TASTE HISTORY http://www.nytimes.com/2008/11/23/magazine/23Netflix-t.html?hp=&pagewanted=all (11/23/08)

31/47 Cumulative Advantage "It sold well since heaps of individuals got it." The Publisher

30/47 A Theory of Justin Timberlake's Cumulative Advantage Duncan Watts concentrate on in NYT. (4/15/07) [W]hen individuals tend to like what other individuals like, contrasts in notoriety are liable to what is called "combined preferred standpoint," or the "rich get wealthier" impact. This implies in the event that one question happens to be somewhat more mainstream than another at simply the right point, it will have a tendency to end up more well known still. Thus, even modest, arbitrary changes can explode, creating possibly tremendous long-run contrasts among even vague contenders — a marvel that is comparable in some approaches to the popular "butterfly impact" from bedlam hypothesis. Along these lines, if history somehow happened to be by one means or another rerun commonly, apparently indistinguishable universes with a similar arrangement of contenders and a similar general market tastes would rapidly create diverse victors: Madonna would have been prominent in this world, yet in some other adaptation of history, she would be no one important, and somebody we have never known about would be in her place.

32/47 No Longer a Fad

33/47 Inference from Cascades Model Cascades happen as people substitute others' activities for their own particular private data Outside data originates from certifiers (pundits, film buffs) Cascades ought to happen more often than not.

34/47 Cascades and Experience Goods Why are experience merchandise powerless to grouping, falls and crazes? Can't evaluate quality without devouring Limited benefit of publicizing Inherent vulnerability in utilization Social capital part of utilization Network impacts Membership and social standing Sources of outside data – pundits and certifiers Riskiness of basic data – endogeneity of audits What part do prizes play? (Oscars, MTV Video Awards?)

35/47 Creating Cascades The Discipline of Market Leaders (1995). The writers subtly bought 50,000 duplicates from book shops whose business drive the New York Times blockbuster list. Also, … .

36/47 The Roles that Critics and Experts Play Critical praise Academy Awards, All time best rundown, "100 Must See Films of the 20 th Century" Booker Prize in distributed Music rivalries Rewards = f(acclaim) Or, approval = f(rewards) Why do we have the institute grants? ("Honors, Success and Esthetic Quality in the Arts: Ginsberg, JEP) Smart Money Magazine: March 8, 2010 http://www.smartmoney.com/contributing/stocks/The-Osca