06 December 2016

It's the Economics, Stupid?

Here's an interesting bit of cultural criticism from The Economist's arts column that — either ignorantly or ironically — completely ignores the two neoclassical-economics pink elephants dancing in the room.

Why do executives and viewers continue to fall into the trap of never-ending narratives?

The obvious reason is money, and to ignore the business side of this creative industry would be naive. It is likely that some die-hard Gilmore Girls fans subscribed to Netflix simply to catch up on the lives of Rory, Emily and Lorelai (pictured). Fantastic Beasts and Where to Find Them, the first of five Harry Potter spin-offs, took $75m at the American box office and £15.3m in Britain in its opening weekend. Star Wars: The Force Awakens (2015) has grossed more than $2bn worldwide. The DC and Marvel universes continue to spawn films regardless of how poorly conceived they are, simply because they make a profit. After all, Batman v Superman (2016) was dubbed “the most incoherent blockbuster in years” and still enjoyed the eighth-biggest opening weekend of all time.

Thanks to this flow of cash and viewers, networks seem unable to quit while they’re ahead. A fifth series of House of Cards is in the works, despite a clear decline in quality since season two and rumours that Kevin Spacey—the drama’s lynchpin—is planning to leave. Narcos, which had a natural ending with the death of Pablo Escobar, is instead continuing into a third season with a renewed focus on the Cali Cartel. There are whisperings that Game of Thrones, a show that HBO has said that it would happily keep on air forever, might get a prequel. Networks use declining viewing figures as the impetus to cancel a show, not the coming of a natural and logical conclusion.

"Is This Era One of “Peak TV” or Weak TV?" (05 Dec 2016; typography corrected). The two elephants are pretty easy to spot, though: Amortization of sunk costs and market definition.

Entertainment-industry figures are fond of whingeing about the increased costs of later seasons of serial works, pointing particularly at "outrageous" fees demanded by on-screen talent. They're quite a bit less public, however, about all of the costs foregone by these continuations, particularly since those costs are often buried in the parts of accounting statements that turn big successes into ventures that don't generate any "net profits" to be shared with "net profits" participants. It's not just the advertising/publicity/marketing, although that's far from insignificant; it's more mundane things like reuse of material and benefits for other products (e.g., all of those crossover episodes on the CW last week), infrastructure, stability of personnel (and, correspondingly, less need to invest in training those personnel for specific work), and — in the biggest grab of all — increasing use of "shares in the production" as means to maintain the loyalty of key personnel, both on-screen and off... remembering, all the while, that there won't be any net profits.

The second elephant is a bit harder to explain, at least as it's sort of hinted at in the article. One of the big fears in the entertainment industry is stated very simply: "Despite all of our experience, knowledge, research, and drunk-or-otherwise-intoxicated guesswork, we don't really know who is, or the size of, the audience for a new work." Exhibit A: Jupiter Ascending. Exhibit B: Firefly. Exhibit C: Buffy the Vampire Slayer (film or TV, take your pick). Exhibits D through ZZZZZZZ: fill in the blanks. A serial work, however, tremendously reduces that guesswork... and neoclassical economics as they have evolved today equate "uncertainty" with "risk." In a way, this makes sense, but only at the extremes: Spending $100M on a CGI-laden feature with appeal limited to half-a-dozen hard-core quantum physics nerds makes no more economic sense than does limiting the budget of a production pretty well guaranteed to outdraw the Super Bowl to $22M. The same goes for publishing: The beta statistic tells us that an $8M advance for a political memoir is stupid, but that so is a $5K advance for a wide-appeal novel (or, at least, one that would have wide appeal if not relegated to a ghetto). That is, the beta statistic is a valid decisional device only outside the bulk of the bell curve (something that business-school gurus and neoclassical economists who had actually studied stochastic processes and Markov chain analysis — instead of p-hacking — would have understood).

Then, too, there's the unstated assumption that economics is, in fact, the prime factor, with little acknowledgment of ego-feeding. <SARCASM> But no decisions are ever made in the entertainment industry that are driven by ego. Right, Mr West? Right, Mr Lucas? </SARCASM> Or, as in the instance of the article's nom de web, survival...