The Business of Culture

Strategic Perspectives on Entertainment and Media

Joseph Lampel, Jamal Shamsie, Theresa K. Lant

• Publisher: Psychology Press
• Year: 2006
• Print ISBN:
  9780805855821
• eBook ISBN:
  9781135609221
• Topic: Business
• Subtopic: Management
• Index: Business

The business of culture is the business of designing, producing, distributing, and marketing cultural products. Even though it gives employment to millions, and is the main business of many large and small organizations, it is an area that is rarely studied from a strategic management perspective. This book addresses this void by examining a wide range of cultural industries--motion pictures, television, music, radio, and videogames--from such a perspective. The articles included in this book will be helpful to individuals who seek a better understanding of organizations and strategies in the entertainment and media sector. But it should also provide valuable insights to managers and entrepreneurs who operate in environments that share the creative uncertainty and performance ambiguity that characterize most cultural industries.

II
The Challenge of Positioning

Two strategic achievements capture the imagination of individuals and organizations in cultural industries. The first achievement is that of first-time success: the bestselling book, the hit song, and the blockbuster movie that generates enormous sales and gains wide critical acclaim. The second achievement comes from using the first to generate more success: Using a loveable character from a highly rated program to launch a popular series, taking a proven plot line from a movie and adapting to another, or building on the notoriety of an author or a performer to launch more books and publicize forthcoming rock concerts. The two strategic achievements are not of course separate. Get the first one right, and you stand a better chance at the second. Get the second right, and you are well on the way to establishing a powerful position in your particular corner of the cultural industries.

The perennial search for strategies that can transform past success into a strong position is the main theme that runs through this section. Cultural industries are by no means unique in this respect. In most industries, managers regularly attempt to use past success as a foundation for future success. But cultural industries suffer more than most others from the problem of making sense of the past and then reliably transforming this knowledge into building and sustainable a formidable position. A film that takes an audience by storm is often regarded as a good bet for other similar films, but many a producer has lost a fortune attempting to do just that. Spinning a television series into a new one by taking a much loved character from the first into the second may seem like a sure thing, but there are few network executives who cannot tell stories of disasters that began with just such an idea.

It is this difficulty that can be translated into opportunity. An ability to repeat success has often represented the high road to career success in cultural industries. This is true for individuals who struggle to maintain their fame by following their first hit with subsequent ones, as it is for organizations that base their livelihood on using their past successes into developing new ones. In view of the gains, it is not surprising that there is intense interest in individuals and organizations that successfully carry out these strategies. The interest, however, is accompanied by much debate as to whether this success is the product of knowledge and skill, or the result of accident and luck. The added complication in these discussions is the surprising success of many novices in cultural industries, and the frequent failure of established players to make the best of position and experience.

In chapter 6, Melissa Schilling uses the video game industry to demonstrate the frequency with which industry leaders lose their dominance in spite of technological and market factors that should ensure their ability to link past success to future performance. As is often the case in cultural industries, the main cause of instability can be found in the relationship between technology and content. At first sight, technology should be the main driving force in the video game industry. The dominant firm ensures its dominance by virtue of network externalities: The more consumers adopt a particular console, the more incentive there is for other consumers to buy the system, and for game developers to produce games for this system.

Although this strategy has served firms in several other technology-driven industries, it has not worked as well in the video game industry. Technological discontinuities, more specifically, the introduction of new and more powerful microchips, have created opportunities for competitive entry by more creative rivals. Although consumers may have some desire for continuity and predictability, they are more interested in new and exciting games that are able to make the most of the new technology. This is equally true of a wide range of cultural industries.

Schelling shows how the role of content often trumps the power of technology. Atari had built up a dominant position within the industry by 1983 with $5 billion of sales, only to be displaced by Coleco within a year of the latter’s entry. The lack of new and exciting games, however, eventually led to a collapse in sales for both firms, so much so that many observers declared the video game industry to be dead.

The successful entry of Nintendo and Sega swept aside these gloomy predictions. It also established a pattern that still prevails: New and more powerful technology opens the way to establishing a strong position, but a strong position can only be sustained by delivering new and more exciting games. The technical challenge calls for managing anticipated discontinuities: New generations of consoles are planned and developed on the back of relatively predictable progress in semiconductor technology. The success of new generations of games, however, often builds on the unanticipated: on breaking with past conventions and past game concepts.

The relationship between the past experience and future success is further explored in chapter 7 by Eisner, Jett, and Korn. They look at the emergence of web-based magazines, or webzines, as a distinct magazine publishing category. The crucial contrast is between webzines that are launched by existing print-based magazines and new entrants with no previous print-based operations.

For print-based magazines, the web represents a discontinuity that runs through their operations and culture. They have built effective competencies in the process of mastering the challenges of managing a print-based magazine. Should they transfer these competencies to webzines? Purely economic logic points to the cost advantages of repackaging existing material for the web, but the interfacing potential of web-based access points to the attractiveness of creating new material. What works in one medium will only work in another up to a point, and what is possible in a new medium often calls for a break with the habits and ways of thinking developed in the past.

Webzines that have no print-based counterpart have more freedom to explore the technological and creative possibilities of the web. But this freedom is purchased at a disadvantage: Webzines without print-based counterparts cannot rely on revenues from traditional publishing to fund their initial content creation. Faced with this problem, Eisner et al. suggest that they affiliate their web pages with other successful sites via hyperlinks. The use of this strategy allows them to multiply content availability many times more than is ordinarily possible in traditional publishing. Internet users with maximum need for information and with limited time at their disposal will therefore consult more regularly and hence become more loyal to sites that are widely linked, and hence information rich, than sites that are constrained by the conventions and competencies of traditional print-based publishing.

Finally, Shamsie, Miller, and Greene focus in chapter 8 on the attempt by the traditional television broadcast networks to use scheduling strategies in order to translate success from one of their shows to another one. In particular, their study shows that these networks have been trying to use their successful shows to draw audiences to their other shows that are still struggling in the ratings. This practice has gained in importance as the advent of cable has led to a proliferation of channels, providing an abundance of choices to television viewers.

In this tougher competitive environment, networks are abandoning some of the traditional strategies of maintaining a stable timeslot for each of their shows and matching shows of similar content. Instead, the networks are starting to move around their successful shows much more than they have in the past. They may move shows to match up a show that is still struggling with one that has already established a sizeable audience, regardless of the similarity of their content. In other words, the networks are beginning to couple a popular comedy show with a drama that needs to build an audience.

These findings suggest that the networks face a greater challenge in transferring their success with a show into higher ratings for other shows. They are responding to this challenge through the use of a much more dynamic approach to scheduling. In the process, they are focusing much more on using a show that has already become a hit in order to develop others.

Business strategies that focus on building on past success have been a key issue in many cultural industries. In most cases, this is achieved by using the success of one product to promote the prospect of another. The potential to create such linkages, however, has been constrained by the lack of systematic knowledge. Most of what is known about how to create complementary linkages is based on accumulated industry know-how, on trial and error, rather than systematic analysis. The chapters in this section make a contribution in this direction, but they also indicate that much more remains to be done.

CHAPTER 6

Game Not Over: Competitive Dynamics in the Video Game Industry

Melissa A. Schilling

New York University

According to NPD Funworld, sales in the U.S. video game industry reached $11.4 billion in 2003, just under the $11.7 billion high attained in 2002. The industry has experienced a remarkable degree of growth and turbulence over the last three decades, making it a popular subject for speculation and analysis. The video game industry provides an exceptional context for studying competition in culturally based industries for a number of reasons. First, it is a highly visible industry that has been well documented over the past two decades. Second, the industry has undergone several distinct generations of competition, permitting us to examine how different battles played out over time and to attempt to identify the critical factors influencing the success and failure of competitors.

Finally, the video game industry is characterized by a moderate degree of network externalities, meaning that the value a game system offers to customers is to some degree a function of how many other users there are of the same game system due to such factors as compatibility and games availability (Ch...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Foreword
• Preface
• Introduction
• I: The Process of Value Creation
• II: The Challenge of Positioning
• III: The Nature of Markets
• IV: The Role of Technology
• V: The Impact of Globalization
• Conclusions