Creative destruction in the entertainment business has had blockbuster results
America has seen some spectacular investment booms: think of the railways in the 1860s, Detroit’s car industry in the 1940s or the fracking frenzy in this century. Today the latest bonanza is in full swing, but instead of steel and sand it involves scripts, sounds, screens and celebrities. This week Disney launched a streaming service which offers “Star Wars” and other hits from its vast catalogue for &6.99 a month, less than the cost of a dvd. As the business model pioneered by Netflix is copied by dozens of rivals, over 700m subscribers are now streaming video across the planet. Roughly as much cash—over &100bn this year—is being invested in content as it is in America’s oil industry. In total the entertainment business has spent at least &650bn on acquisitions and programming in the past five years.
This binge is the culmination of 20 years of creative destruction (see Briefing). New technologies and ideas have shaken up music, gaming and now television. Today many people associate economic change with deteriorating living standards: job losses, being ripped-off, or living under virtual monopolies in search and social networks. But this business blockbuster is a reminder that dynamic markets can benefit consumers with lower prices and better quality. Government has so far had little to do with the boom, but when it inevitably peaks the state will have a part to play, by ensuring that the market stays open and vibrant.
The entertainment business is fast-moving by its very nature. It has few tangible assets, it relies on technology to distribute its wares and its customers crave novelty. The emergence of sound in the 1920s cemented Hollywood as the centre of the global film business. But by the end of the 20th century the industry had grown as complacent as a punchline in a repeat episode of “Friends”. It relied on old technologies—analogue broadcasting, slow internet connections and the storage of sounds and sights on fiddly cds, dvds and hard drives. And the commercial approach was to rip off consumers by overcharging for stale content packaged into oversized bundles.
The first shudder came in music in 1999, with internet services soon putting established music firms such as EMI and Warner Music under pressure. In television Netflix broke the mould in 2007 by using broadband connections to sell video subscriptions, undercutting the cable firms. When the smartphone took off it tailored its service to hand-held devices. The firm has acted as a catalyst for competition, forcing the old guard to slash prices and innovate, and sucking in new contenders. The boom has seen star writers paid as if they were Wall Street titans, sent rents for Hollywood studio lots into the stratosphere and overtook the 20th century’s media barons, including Rupert Murdoch, who sold much of his empire to Disney in March.
Amid the debris and deals the outlines of a new business model are becoming clear. It relies on broadband and devices, not cable-packages, and overwhelmingly on subscriptions, not advertising. Unlike in search or social media, no firm in television and video streaming has more than a 20% market share by revenues. The contenders include Netflix, Disney, at&t-Time Warner, Comcast and smaller upstarts. Three tech firms are active, too—YouTube (owned by Alphabet), Amazon and Apple, although their collective market share is still small. The music industry is also contested, with the biggest firm, Spotify, having a 34% market share in America.
Disruption has created an economic windfall. Consider consumers, first. They have more to choose from at lower prices and can pick from a variety of streaming services that cost less than &15 each compared with &80 or more for a cable bundle. Last year 496 new shows were made, double the number in 2010. Quality has also risen, judged by the crop of Oscar and Emmy nominations for streamed shows and by the rising diversity of storytelling. Workers have done reasonably. The number of entertainment, media, arts and sports jobs in America has risen by 8% since 2008 and wages are up by a fifth. Investors, meanwhile, no longer enjoy abnormally fat profits, but those who backed the right firms have done well. A dollar invested in Viacom shares a decade ago is worth 95 cents today. For Netflix the figure is &37.
Many booms turn to bust. Unlike, say, WeWork, most entertainment firms have a plausible strategy, but too much cash is now chasing eyeballs. Netflix is burning &3bn a year and would need to raise prices by 15% to break even—tricky when there are over 30 rival services. It hopes that its fast-growing international markets will create economies of scale. As well as saturation, the other danger is debt. Deals and high spending have caused American media firms to build up &500bn of borrowing.
When the shake-out comes, history offers two dispiriting examples of how a consumer-friendly boom can turn into a stitch-up. Telecoms and airlines in America saw a riot of competition in the 1990s only to become financially stretched and then reconsolidated into oligopolies that are known today for poor service and high prices.
This is why government has a role in keeping the entertainment business competitive. First, it should prevent any firm— including the tech giants—from acquiring a dominant share in the content business. Second, it should require the companies that own the gateways to content, such as telecoms firms or handset providers such as Apple that can control what screens show—to have an open-access policy and not discriminate against particular content firms. Last, it should make sure subscribers can move their personal data from one firm to another, so they do not become locked in to one service.
Don’t lose the plot
Few people look to Hollywood for economics lessons. But the entertainment epic has featured vibrant capital markets. Buy-out firms, stockmarkets and junk bonds have all financed the industry’s reinvention. The stars have been billionaire entrepreneurs such as Reed Hastings, Netflix’s boss. And open borders have set the scene, since talent comes from around the world and a majority of streaming subscribers now live outside America. Across the economy, these elements are at risk as politicians and voters veer away from open trade and free markets. For a reminder of why they matter, turn on your screen and press play.
核心词汇: binge /bɪndʒ/ n. 狂欢，狂闹；放纵 vt. 放纵vi. 狂饮作乐；大吃大喝 [Collins]N-COUNT If you go on a binge, you do too much of something, such as drinking alcohol, eating, or spending money. 放纵 V-I If you binge, you do too much of something, such as drinking alcohol, eating, or spending money. 放纵 Culmination /ˌkʌlmɪˈneɪʃn/ n. 顶点；高潮 Deteriorate /dɪˈtɪriəreɪt/ vi. 恶化，变坏 / vt. 恶化 Vibrant /ˈvaɪbrənt/ adj. 充满生机的，生气勃勃的；鲜艳的；醒目的；洪亮的；强劲的；颤抖的，震动的 tangible assets 有形资产tangible adj. 有形的；切实的；可触摸的 crave novelty 渴望新奇 cement /sɪˈment/ n. 水泥；接合剂；纽带；使人们团结的因素；黏固粉；牙骨质；沉积岩基质v. 粘牢，胶合；巩固，确定；在......上抹水泥；（物质）在沉积岩中黏附（颗粒 ） [Collins]1.N-UNCOUNT Cement is a grey powder which is mixed with sand and water in order to make concrete. 水泥 2. V-T Something that cements a relationship or agreement makes it stronger. 巩固 (关系、协约) punchline/ˈpʌntʃlaɪn/ n. （笑话最后的）关键句，妙语；画龙点睛之语 [Collins]N-COUNT The punchline of a joke or funny story is its last sentence or phrase, which makes it funny. 笑话或警句令人发笑的最后一行 Rip vt. 撕；锯vi. 裂开，被撕裂n. 裂口，裂缝rip off 偷窃；扯掉；欺诈；剥削[Collins]PHRASAL VERB If someone rips you off, they cheat you by charging you too much money for something or by selling you something that is broken or damaged. 宰人; 坑人 hand-held device 手持设备 overtake /ˌoʊvərˈteɪk/vt. 赶上；压倒；突然来袭/vi. 超车 [Collins]1.V-T If someone or something overtakes a competitor, they become more successful than them. 超过 2.V-T If a feeling overtakes you, it affects you very strongly. 强烈影响 3.V-T/V-I If you overtake, or overtake a vehicle or a person that is ahead of you and moving in the same direction, you pass them. 超过 bust /bʌst/v. 打破；炸破；猛烈打击；突击搜捕n. 胸围；半身像；经济萧条；逮捕； 没价值的事物adj. 坏的；破产的 plausible /ˈplɔːzəbl/ adj. 看似可信的；花言巧语的，巧言令色的；貌似真实的，貌似有理的[Collins]1. ADJ An explanation or statement that is plausible seems likely to be true or valid. (解释或叙述) 看似合理的2. ADJ If you say that someone is plausible, you mean that they seem to be telling the truth and to be sincere and honest. (人) 看似可信的 Dispiriting /dɪˈspɪrɪtɪŋ/ adj. 令人沮丧的；使人气馁的/v. 使沮丧；使气馁（dispirit的ing形式）[Collins]ADJ Something that is dispiriting causes you to lose your enthusiasm and excitement. 令人沮丧的 stitch-up v. 故意欺骗；诬陷；陷害；操纵局势（非正式）discriminate against 歧视；排斥 entrepreneurs美[ˌɑntrəprəˈnɜrz] n. 创业者，企业家(尤指涉及财务风险的);
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