Creative Industries: Reinvention Amidst Disruption

Only the Head Remains?

November 12, 2015 · 2 Comments

Judging from the reflections posted here, Blockbusters is bracing reading for most of you, even if it’s alternatively depressing and alienating!

What always floors me is the fact that such a small percentage of content generates the overwhelming amount of revenue in pretty much any media/entertainment category. Long tail releases comprise some 60 percent of digital music offerings, with an average of 10 purchases made per unit. Granted, the period in which these data were being harvested also coincided with a monumental shift in digital distribution from ownership to access. However, my colleague Mark Mulligan of MIDIA Research in UK, confirms that the trend has extended to the streaming marketplace, at least in music.

Indulge my sticking with music for a moment. Historically, record labels were risk aggregators plus a bank for the musician (with way worse terms than most financial institutions). Historic contracts were often onerous, but when things worked, artists had able partners in generating value. Generating value is a very much different than capturing value, however. And it is pretty obvious which party excelled at value capture under this structure.

Today, the challenge is cutting through the noise. Besides the serendipitous (such as Spotify staff adding your strummy croons to their “sophisticated coffeeshop grooves” playlist or an unpredictable YouTube spike), marshaling attention costs tons of money. And who has this money to throw around? Major labels. And what does a risk-averse, 21st century sound recording company look for? Globally bankable superstars.

Of course, traditional media companies aren’t the only ones with money to throw around. Technology companies that have already achieved scale are in a position to directly invest in creative content. We’ve talked about this before, citing examples of original programming from Netflix and Amazon. Sometimes, this programming isn’t actually produced by the companies themselves, but rather licensed exclusively from production partners. Having global reach helps a company evaluate how well an existing film or series is performing in other markets using data analysis; when bringing this programming to the United States, the choice is either to remake the source material or reintroduce it with clear branding and the powerful positioning that only those who own a consumer-facing distribution platform can muster.

Music has so far been immune to direct investment from established digital distribution platforms. Most of what we see so far is traditional endorsement deals and the licensing of existing IP to other commercial brands.

I do expect there will eventually be direct investment in music artists from non-traditional quarters. It seems obvious that digital services are in the best position to crunch the data and make bets on talent acquisition/development based on their analysis. Whether the actual contract terms are predicated on a 35-year transfer of rights is an open question. But the dynamic is basically the same as it was in the old label gatekeeper days. Consumers are trained to expect this in many ways, even as they sail endless seas of user-generated content. Actually, I think that consumers will come to demand that their platforms of choice act as a filter of some kind. The digital services are sure to accept this duty, because option paralysis can result in negative connotations with the service itself. Unless the major media companies are able to—like Disney and its beloved sub-properties—re-assert themselves as the curators of high-demand content, they will lose this ground to those best positioned to direct traffic.

I’ve enjoyed the examination of contractual structures and the often-competing needs and incentives of talent vs. talent backer. The old music label investment model is basically a fee-based arrangement, with elements of step deals. The advance is the upfront fee paid to the talent; the “step” is royalties paid to the artist post-recoupment of the initial investment. We really haven’t seen a “share” model, other than the net deals Live Nation makes with certain big draw acts. It would be interesting for, say, an artist of Taylor Swift’s stature (are there any others?) do an equity deal without a transfer of copyrights. Why would any company do a deal like that, when the talent cycle is so brutal? Because it’s actually low-risk compared to the old label model where the only revenue generating activity is selling petrochemical discs. Contemporary label deals under the 360-degree model allow for greater integration with an artist’s entire brand, but it’s not like the artist gets a slice of Universal Music’s tech incubation projects. Or do they?

Today I want to hear from you about the viability of the long tail, as well as your sense about how vertical integration of media and distribution will impact what creative content is produced and promoted. Let’s also consider what the winner-takes-all global superstar dynamic means for cultural diversity and inclusivity.

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2 responses so far ↓

  • Chloe Teevan // November 12, 2015 at 1:10 pm |

    One of the things that I found most interesting in Elberse’s book is her discussion of just how much power individual stars at the top of various different industries hold within their respective industries. We’ve spoken a lot about industry actors, such as record labels and film studios, but Elberse does seem to suggest that established artists may ultimately be as powerful as the label and studio heads, and may have the power to change the rules of the game. The MGM-Tom Cruise deal regarding United Artists suggests one way in which star power might force industry players to produce more varied and interesting content, although this still concentrates the resources at the top and thus does not answer the question of how new entrants might climb the ladder.

    Another element, that Elberse doesn’t really cover that much because she avoids matters of taste, but that Sarah touched on in her comment last week, is that we often prefer to see blockbusters at the Cinema, because these are the movies that are simply so much better on a large screen or in 3D, whereas an independent drama will be much the same on small screen or large. One has to wonder if this is not likely to be more and more the case as technology becomes ever more advanced. I am thinking particularly of film, where there have already been some first attempts at immersive film experiences. Interestingly the very first VR film was produced for UNHCR and follows a Syrian refugee girl in Zaatari camp, Jordan, immersing you in her life:

    http://techcrunch.com/2015/01/23/un-launches-powerful-oculus-virtual-reality-film-following-syrian-refugee-girl/

    I saw this film with Google glass last year and it was truly amazing. The NYTimes has recently introduced a similar idea. I wonder if it is not likely that we will enter a world where films become increasingly immersive, involving not just 3D and surround sound, but fully immersive VR experiences, where the movie takes place all around you, or increasingly appeal to all 5 senses (like the feelies in Brave New World!). Such projects would cost ever more to create and to screen, and would likely require ever more resources to be concentrated at the top. Will today’s films one day seem as quaint as silent black and white movies are today?

  • Alvaro Espiritu Santo Raba // November 12, 2015 at 7:30 pm |

    In a way, “The Long Tail” is a fundamental part of “Blockbusters” main thesis. How can content creators cut trough the noise in industries as competitive as the entertainment industries? Whether it may be Lady Gaga finding a niche audience in the gay community, or Tom Cruise making a deal with MGM to fund his own personal projects; content creators are always looking for ways to disrupt and reinvent themselves and the industries they work in.

    First of all, I think it is important that we are entering an era of new gatekeepers. Big companies might encourage consumers to spend all their money on more recognizable brands like let´s say Star Wars or Marvel. But independent cinema or more artistic options can survive and thrive if people decide to talk to others about it. Let’s use digital platforms to change the flow of the conversation.

    Second, as we discussed in class, taking risks or facing challenges in the creative world is something that only a select few can do. Making such bold choices usually require either having rich backers or some amount of money to jump the hurdles of competition.

    And not only that. Some artistic disciplines are struggling to reinvent themselves or erase some boundaries whether they may be cultural or sociological. It seems that creative industries might need to find new channels and venues to present their content for new inexperienced audiences.

    It might be trough digital technology, or it might be trough visionary leadership. But there are indeed ways to make an impact on today’s audiences. As Anita Elberse writes on one of the last chapters of the book, there have been some campaigns (or product launches) like Jay-Z “Decoded” or the Batman movie that have truly reinvented things and connected to audiences.

    So why is this not happening more frequently? Is conglomerate media afraid of takings risks (or gambles) with the advertising campaigns afraid they might lose revenue or their product won´t get attention? Or is it simply that they are stuck on on their comfort zones where long-term is just simply a blur?

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