People expect that the Internet and digitalization provide equal opportunities for each company to succeed. It’s a nice idea, but in practice the impact of the Internet and digitalization has been the opposite. Today, revenues and market shares are divided more and more between only a few products or businesses. This is especially seen in the entertainment industry, but it is apparent in other businesses as well.
How is this possible? Because of the Internet and digitalization, the manufacturing of products has become much cheaper. In some cases, we can now manufacture products whose creation was not possible before. Large investments used to be required for factories or recording studios to make anything. Today, we can record music with our laptops with the same – if not better – sound quality that 20–30 years ago would have required a very expensive studio session and, most likely, a recording contract. This is not the case anymore. Now, you can upload your video to YouTube and become the new Justin Bieber or Lady Gaga. Right?
I’ve believed and praised the idea that the Internet and digitalization offer everyone the opportunity to succeed. However, a couple of months ago, I read Anita Elbers’ book, “Blockbusters: Hit-making, Risk-taking, and the Big Business of Entertainment,” in which she writes that this is not always the case. I was initially skeptical of the book and focused perhaps a bit too much on finding points that I thought weren’t true. But, Elbers’ examples are indeed convincing, and I’ve had to edit my perception of how blockbusters are increasingly important in today’s Internet.
You can thank the Internet for the ability to build your own business around a small niche, but there is more and more money to be made with big blockbusters. Today, people have many opportunities to research different products to find the perfect one to fit their taste and need. But, we make so many decisions every day that we often do not have the time or energy to think every decision through, which is why we more often than not choose the product that looks good and that others are using to great effect. It is also for this reason that many people watch the same TV series on Saturday evenings: they not only know that it includes many talented actors, but it has been heavily advertised and talked about by many people. Watching that TV series is easy choice for many people, so it makes watching that series an easy decision.
If you are not convinced yet that blockbusters have become increasingly important, here is another example: According to research by Nielsen on iTunes, in 2007, 91% of the items on iTunes were purchased less than 100 times and 24% of the items were purchased only once; in 2009, 93% of the items were purchased less than 100 times and 27% of the items were purchased only once; and in 2001, 94% of the items were purchased less than 100 times and 32% of the items were purchased only once. What this shows is that the more the iTunes market grows, the more there will be purchases concentrated in a lesser proportion of the songs.
In the future, aggregators such as Amazon, Apple’s iTunes, Google Play, and Netflix will become increasingly important as they more often become the go-to places to discover different products and content.
I strongly recommend Anita Elbers’ book. Even if you don’t agree that blockbusters will become more important, the book is still provocative and made me think of things from other angles.
07 Nov 2016
31 Oct 2016