Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.

Monday, May 15, 2006

Snowball Effect

A corollary to the Snowball Effect is that returns for content producers are, on average, going to rise - especially in the short run, when there's no Googleopolist to shave their margins.

Note, though, that this isn't value creation - it's value transfer. This margin amplification is essentially at the expense of the marketing costs publishers used to pour into (crap) content (no one wanted to see anyways).

Also note that another component of this effect is that it's hard for average returns to content to fall in the short run - because of the amazingly Byzantine business model which evolved to solve the (so-called) problem of risk (=execs more interested in expense accounts than consumers) in yesterday's media industry - the NYT does a nice of explaining:

"...Until recently, that model worked something like this: a studio sold the initial rights to broadcast a program to a network within its own company or that of a competitor, usually for far less money than it had cost to make the show. The studio then waited patiently for the time, probably four years later, when the network's exclusive right to broadcast those episodes would end, thus allowing the studio to sell the show in syndication and not only erase the deficit but hopefully turn a profit."

-- umair // 6:30 PM // 0 comments


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