T he notion is that companies, content producers in the world of entertainment, record labels, film studios, television networks and many sport producing companies live and die by what I call the blockbuster strategy.
They are willingly taking bets — big bets — on what they think are the most likely winners. … This idea of making these big bets actually tends to translate into big revenue for those big bets.
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Photo by: MARC BRYAN-BROWN
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This is not easy though.
It is not nearly easy as making bets on products because making bets on talent is intertwined with all kinds of risks, right? … And in general, they have very short life cycles, particularly so in sports.
We see that athletes … are getting bigger and bigger paychecks at an earlier stage of their career.
LeBron James hit $90 million when he just came out of high school due to a shoe contract. Because of that, because they are rich at an earlier and earlier stage, they tend to be comfortable with more risky endeavors later on in their careers.
[James] fired his agent and then said, ‘I think I can do this myself,’ so he started his own marketing agency. And they started pursuing deals that were very different from the kinds of deals that they traditionally pursued.
We want to have deals where we have some share. … Where we get a share of the revenues, or a share of the profits, or an equity stake.
It creates a tug of war. It sets up a battle between stars and the firms that invest in them, whether it’s for content reasons or because they want them as endorsers. And that creates tension.
There are many, many people who in the last decade or so … have argued that digital technology will change everything and will undermine the power of blockbusters and superstars, and I’m here to argue that that is absolutely wrong. In fact, it will probably fuel them even more.
This discussion goes back to a concept called the long tail, which was introduced by Chris Anderson in the mid-2000s. He wrote an article and then he wrote a best-selling book, arguing that because costs are getting lower, we will see lower barriers of entries. … Anyone can produce content and make it available to everyone else.
His second argument is what I think I have issue with. He was saying there’s not just a supply-side phenomenon, there’s also a demand-side phenomenon. What will happen is because there’s more stuff available in the tail, because all this new content is there, people will flock there.
What we actually see is that there is a winner-take-all trend going on in which, if there is movement, the movement is toward the head of the distribution and not towards the tail.
Hulu always was betting on the head of the distribution and it probably was a good bet for them to start off with. They have focused on premium videos and they’re seeing a relatively higher return on the premium videos.
Netflix and Google … were going to bring us the long tail and are increasingly realizing the same thing.
And of course they’re doubling down on the strategy by making huge bets on things like “House of Cards” and “Orange is the New Black,” which is really the way television networks have been operating for quite some time.
The NFL in particular realizes that they have the blockbuster product that keeps television networks afloat nowadays. … So what they’re doing more than anything else is using the Internet to increase their leverage. Use the Internet to increase their negotiating power. Slicing and dicing all the content giving smaller packages to everyone and having them bid more for their content.
No consumer-facing company with their right mind would say let’s partner with the No. 17 rapper in the world. They want to partner with the No. 1 rapper.
And for superstars … They are actively managing their businesses and, I would argue, much more as media companies.
I think the example I am very enamored with is Cristiano Ronaldo. … If you look very closely, there is a photographer who is following him around 24/7. That is a photographer who is employed by his agency. … [It] is information that they own and is content that they own and they control that they can do with it whatever they want.
So I got a call one day asking if I wanted to meet Sir Alex [Ferguson]. … Then it turns out he was really interested in having someone document what his main leadership lessons were.
And I said, ‘Well, actually what we do is we write cases. So I would like to turn this into a case study in which we have students who get to read 12 pages or so on what it is you do on a daily basis and how you structure your affairs and have them figure out what those lessons are. But at the same time I would love for us to work together on an article that describes the lessons from your point of view.’
And that has now evolved into a true partnership in which he is an executive education fellow at the school.
