Tag: Chart of the Day

Streaming Profitability

The Atlantic Monthly pauses from its Ideas Report to try to explain why Netflix is so successful. Here’s the gist:

An Oldie but Goodie

In fact, the dirty little secret of the media industry is that content aggregators, not content creators, have long been the overwhelming source of value creation…

The economic structure of the media business is not fundamentally different from that of business in general. The most-prevalent sources of industrial strength are the mutually reinforcing competitive advantages of scale and customer captivity. Content creation simply does not lend itself to either, while aggregation is amenable to both.

I’m not sure what to make of this piece.  It reads something like a five-forces analysis, and argues not only that Netflix is the real deal, but that there are significant barriers to entry in the streaming content business.  It will be interesting to send this balloon up in next year’s IO class and see if anyone cares to shoot it down.

Horrific Scene in Japan

Indeed, it is just that.  If you have access to the internet or a television, you’ve probably already seen this, but here’s some absolutely astonishing footage from The Guardian.

The internet is also abuzz with discussion of its implications for Japan’s economy.  “Not good” is what jumps to mind for me, but that is evidently not a consensus view.  Here’s Larry Summers:

If you look, this is clearly going to add complexity to Japan’s challenge of economic recovery.  It may lead to some temporary increments, ironically, to GDP, as a process of rebuilding takes place.

After the Kobe earthquake in 1995 Japan actually gained some economic strength due to the process of reconstruction.

Lynne Kiesling at Knowledge Problem isn’t buying it:

Even my intro macro students, who are studying for next week’s final exam, could tell Dr. Summers that the earthquake and tsunami are a negative productivity shock, shifting the long-run Solow growth curve to the left, and that any rebuilding consumption and investment will shift the aggregate demand curve out in the short run … but those resources have been destroyed and the lives of people have been devastated.

Neither is George Mason economist, Don Boudreaux.

By this logic, Japan should have evacuated people from the buildings and triggered the earthquake and the tsunami sooner. By this logic, they should just blow up empty buildings randomly. By this logic, their $6.3 trillion stimulus spending of the past decades should have helped their economy. By this logic, they should rebuild the buildings with shovels rather than construction equipment. Or using spoons rather than shovels.

Annie Lowery at Slate discusses how it could potentially bankrupt the country (but probably won’t).

And here’s the Chart of the Day:

I guess you can make up your own minds what you care to believe.

The Levee Appears to be Drying Up

Today I give to you a couple of visual snapshots of the recorded music industry, along with a lesson on the importance of adjusting for inflation &/or population growth.

Here are the raw numbers that caused something of a hubbub.  Ask yourself — where is the industry at its peak?

So, there are several technology transitions going on here, culminating in a sorry state of affairs for the supply side of the music industry.  One implication is that the introduction of cassette tapes had no real discernible impact on industry revenues, even though people rampantly started taping one anothers vinyl at that point.  (I actually have several boxes of tapes that I recorded from record rentals from That’s Rentertainment.)   Interesting that the Record Labels only began shaking them down when the compact disk market took off).  A second implication is that CDs marked the real heyday for the record labels.

With that in mind, let’s look at these same numbers adjusted for inflation and put in per capita terms:

Completely different picture, isn’t it?

This seems to suggest that (non-prerecorded) cassettes cannibalized vinyl revenues, and it was only the introduction of the superior CD format that resuscitated the industry.

In IO, we are talking about the big challenge of the “New Economy” is often not in creating value, but in capturing it.  Do you think the total value of recorded music is 35% of what it was 15 years ago?  Or, is it more likely that consumer surplus has gone through the roof?  I don’t have any way of answering that question, but I have my doubts about the former proposition.

As per usual, I nicked this from O&M.  And their comment section pointed me to a really excellent analysis of all of this at Business Insider, where I now subscribe to their Chart of the Day!