/ Strategies for a discontinuous future / Selected work 2004-2009 /

2007 Markets, Networks, & Communities
2008 The Macropocalypse & Edge Competencies
2009 The Great Compression, Smart Growth & Constructive Capitalism

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Wednesday, August 30, 2006

How Not to Think Strategically About the Future of Media, Snake on a Plane Edition

Everywhere I look, people are pointing to Snakes on a Plane as evidence of the weakness of 2.0/the net/etc; as evidence of the longevity of the blockbuster even in the post-network economy.

Nothing could be further from the truth.

In fact, Snakes on a Plane is the big studios' first - and largely successful experiment - with Snowballs, and the democratization and edge competencies they requires.

The point is simple: unlike blockbusters, Snakes had incurred relatively tiny marketing expenditure - and so returns are already present.

And in fact, though weekend returns may not be enormous, remember the deep differences in dynamics between Snowballs and blockbusters - remember the Snowballs graph in my media econ presentation: it's convex (aka slopes acceleratingly upwards).

That implies that, unlike blockbusters, Snakes should earn larger returns going forward than in the past - it should make more and more money (per given unit of time/whatever, rather than less and less, as blockbusters generally do). Focusing on first weekend returns is looking at completely the wrong measure, because demand for Snowballs accelerates, whereas for blockbusters, it falls off a cliff.

-- umair // 5:04 PM //


agreed. so silly that critics would consider a post-blockbuster project a failure because it didn't produce a blockbuster.
// Anonymous mike // 12:15 AM

Unfortunately, it seems to be evidence against the networked audience (the same that enables a snowball) incentivizing the producers to spend the next dollar on the product, instead of marketing. Right? It is early in the game, yet.
// Anonymous Kurtiss Hare // 4:06 PM

can't wait to see the poor imitation tactics that hollywood and wannabeinteractiveagencies come up with - surely to be much less effective, with far worse execution and surely lacking the integrity and spirit of SNAKES -- maybe sony-grouper?
// Blogger Jon Reda // 6:44 AM


Assuming what you say is true (i.e. Snowball will make more money in the long run), could there be a some issues with Snowball?

Here is couple I struggle with:

1. Movie theathers are limited in number and they have a fixed cost. (i.e. running expenses are not very demand dependent. i.e. inelastic). So if there is a no big hit, the movie will be shortlived. In return it will shorten the Snowball effect. (My assumption here is that people need to see the movie to be able to fuel Snowball).

2. If above happens, DVD or other medium sales will take much longer to materialize hence the time value of money. (You know better than I do, investors want to exit sooner than later)

3. Companies who are running these cinema complexes will eventually start to pick the movies with significant marketing budgets in order to balance their risk.

I hope you can offer some ideas on this, or am I completely off track?

// Anonymous batu // 11:51 AM

I know I'm not Umair, but here's my thoughts...

1. Most movie theaters are a part of the blockbuster economy and will likely disappear. Technology advancements are putting larger and higher-quality screens in people's homes, providing them with a higher-quality viewing experience than that provided to them by mainstream movie theaters with their sticky floors, high priced food, cell phones going off, and the inability to pause to go to the bathroom. They won't survive unless they adapt and provide something the home viewing experience can't. And even then I think most of their customer base will deteriorate to make it questionable whether they'll be able to turn a profit.

2. Delivery will eventually completely bypass the production of the DVD. There's little comparative cost in providing a purchasable electronic download.

3. Quite an amusing concept if you think about it. It's like trying to put out a fire with gasoline.
// Anonymous Marc Love // 6:02 PM

Hi Marc,

Couple of comments:

1. You have a point but you are missing my argument. Indeed the movie theathers will vanish, until that time they have certain influence and I am questioning their contribution to the Snowball effect. Actually, this is part of a larger question, what are the trigger mechanism for the Snowball effect? If wide distribution of movie during the launch is a factor, I have a point in my argument.

2. You are bringing an important argument but once again it is tangent to the subject. Simply, until the internet delivery of movies becomes mainstream we will rely on DVD/HD DVD. Therefore, if what I am saying in number 1 is correct what is the impact on Snowball effect.

3. If the cinema complexes realize they could swing the snowball, they could exert some influence. I also understand your argument, if they do what I say, they will end up with less movies because studios will utilize Snowball marketing more and more. Therefore, they will lose more audience and hence the death sprial.
But what if they could swing Snowball success?

I think it all comes back to factors that trigger and push Snowball. Assuming movie distribution has no impact could be dangerous.

Batu (batu at enliva dot com)
// Anonymous Batu // 10:16 AM

Interesting points Batu. Unless I'm overlooking something, I don't see how movie theater chains could have influence in creating snowballs. Snowballs start from things like blog entries (and not from fake blogs written by publicists), engaging the consumer in the production of the product, regular ole word-of-mouth, and more importantly creating a quality product that an audience will respond to. I don't see how movie theaters can be involved in that at all.

It seems to me there are two players here we're talking about. The movie production studios and the movie theater chains.

Theater chains will primarily be effected by the technology, because after all they make most of their money off of popcorn and soda. As long as they can find movies that will get people in their seats, they'll be okay financially. Snowballs or blockbusters, doesn't matter a whole heck of a lot to them. As the technology progresses though, they will begin disappearing.

Movie studios are highly effected by blockbusters vs. snowballs though because their profit margin is at stake. They can help the creation of snowballs, but only by opening themselves up to their audiences during production and by spending less money on marketing and more money on creating products audiences will enjoy.

Case in point...

Warner Brothers spent approximately $250 million to produce and promote Superman Returns. The president of Warner Brothers has said he expects it to bring in $400 million, but many think he's being a little optimistic and it was hoped that it would make at least $500 million. Assuming they make $400 million, its a 60% return on their investment.

Last year, New Line Cinemas spent $14 million to produce and approximately $15 million to market Brokeback Mountain, $29 million total. It made over $178 million worldwide. A 514% return on their investment.

I don't give this example because I think no one here is aware of it, but rather because it makes my point very well.

Brokeback Mountain didn't require any movie studio or cinema complexes manipulation of the market to become a snowball. In fact movie studio after movie studio created obstacle after obstacle to keep Brokeback from ever being created. Why? Because it was risky.

Snowballs will occur when quality products of relevence are created which requires risk. All the studios have to do is stop making 1 Superman Returns and start making 8 Brokeback Mountains; stop trying to play it safe to appeal to a huge audience with one film and start start taking risks to appeal to 8 different "niche" audiences with movies that matter to them.
// Anonymous Marc Love // 12:45 PM

Hi Marc,
I think we are getting somewhere. I did try to trace how this "Snakes on a plane" got started and it goes back to Aug 2005.

I think the primary factor, perhaps even behind your "quality product" argument is "the products ability to individuate themselves from the rest". In other words, nobody wants to write about a "me too" chick flick, but "Snakes on a plane" is almost unorthodox/absurd hence demands and gets audience. This audience is the fuel of Snowball. (I could make the same argument about Brokeback mountain)

When I think about your suggestion, making 8 movies instead of one big one, all I see is further segmentation of market and relying on alternative distribution mechanisms (VoD, DVD etc) and taking advantage of snowball to sell what you have.

At the extreme this would go as far as producing movies/contect for a single buyer. (Wait and see this unfolds with the help of game technology). And this is already happenning in other segments. (Check out Puma's Mongolian Shoe BBQ web site)

Coming back to my original point, movie theather and as an extension the blockbusters will be here for some time. And I think movie theathers will prioritize large marketing budget movies over marginal ones, because of their economics. (They will likely to assume big marketing budgets attracts larger crowds). Whether such behaviour impacts snowballs or not will be largely depend on the availibility of movies via alternative channels (VoD, DVD etc).

Thanks for your comments.

// Anonymous Batu // 7:24 AM

Excellent wrapup and summary Batu. I couldn't agree more. It's been fun chatting with you.
// Anonymous Marc Love // 7:52 PM

But...in the event SoaP seems to have made 40% of its revenues from the first weekend's box office. See http://qurl.com/8q9nf. The Freakonomics guys were talking about Snakes and Borat at the weekend (http://qurl.com/7lh22) and I was going to take issue with their blockbuster-focused analysis...but from the evidence of SoaP's takings it doesn't look like they're all that far off.
// Anonymous Seamus // 10:09 AM
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