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The Movie Industry's Prisoner's Dilemma

The problem with the movie business today is a problem of market crowding.  In other words when you release seven movies a weekend in the summer, and many of them have a kind of a similar feel - superhero with issues destroys a city in order to resolve these issues - the audience begins to just back away and it creates a kind of a self-fulfilling prophecy. 

I use the game theory notion of a collective action problem.  So in some ways the movie business is in the prisoner's dilemma, and the prisoner's dilemma. The simplest way to talk about it is Pakistan and India both spend billions of dollars a year building missiles aimed at each other, but at the end of the day they're no more secure than if they had not built any missiles and just spent those billions educating their young people.

So essentially what happened last summer was the prisoner's dilemma.  Everybody built very big missiles all through the end of the marketplace at once and they kind of canceled each other out.  So I'm not saying that there won't be room for the blockbuster, there will be.  But the problem with the movie business right now involves the notion of market share dominance the notion of return on investment.  The problem with market share in a business like movies is it doesn't really make much sense.  Market share makes a lot of sense in Coke versus Pepsi.  You got a commodity product that's priced the same so whoever's got the most market share is winning.  But in the movie business you may have one movie costing $35 million and another movie costing $250 million.  How does market share make any sense in that business?

And so if you're chasing market share you want to do these large budget movies, you want to do as many of them as you possibly can, and often these movies are financed by third parties, hedge fund billionaires who want to go to movie premieres, whatever reason they have, and so the movie studios don't really have a lot at risk.  They get their distribution fees, and we have this problem of too many films in the marketplace.  And that is only one of the many problems that the business is facing.  If you look at the cable TV industry, there are actually 400 channels that exist.  The Discovery Network has 15 different channels, I bet you can't name them.

MTV has 14 channels - the Viacom Television Networks.  A lot of these little channels are being carried along as part of this bundle.  If you want Comedy Central and Nickelodeon, you've got to take my eight other channels.  If you want ESPN-1 you have to take all my Disney channels.  And so this forcing of the bundle is probably something that cannot continue in the long run. 

In Their Own Words is recorded in Big Think's studio.

Image courtesy of Shutterstock

 

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