Tuesday, October 19, 2010

TV as quality entertainment

Here's an interesting comment from Alex Tabarrok on the economics of big and small screen entertainment (and how it leads to quality differences. He's responding to the original post here.):
The movies, however, have become more reliant on large audiences--at least relative to television. Note that even though the movies are not free, a large chunk of the revenue is generated by concessions--thus the movie model is actually closer to a maximizing mouths model than it might first appear (see also my brother's comments on how flat movie pricing makes it difficult for indie films to compete). Finally, the rise of international audiences for movies has fed a lowest common denominator strategy (everyone appreciates when stuffs blows up real good). As a result, the movies have moved down the quality chain and television has moved up.
The graph from Alex's post is an interesting take on what is going on (see below). Basically, he makes the excellent point that maximizing eyeballs might not maximize consumer surplus.

That's one way to draw it, but this assumes that people get more value on average from "character-driven adult programs" than from "when stuffs blows up real good." I'm not sure that I am willing to make that judgment call.

The explanation also ignores the reason to go with the max-eyeballs approach: advertising, concessions and related products like Napoleon Dynamite t-shirts. Viewed from this angle, a show will find it profitable to go with the max-eyeballs approach when people who watch are susceptible to complementary products. If this is true and sophisticated drama lovers scrimp on concessions, the box office will respond by providing fewer movies with sophisticated plots (because those don't bring the same concessions).

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