It is what it is....

Sunday, February 25, 2007

The exploitation of inefficiency - If it's too good to be true, it is!!

Robert Young always writes thought provoking and interesting posts on GigaOm and this one got me thinking....

They say technology refreshes itself every six months. So it seems logical that if you compress many six month periods together and apply the technology change to the original market frozen in time and compare it to the current market chances are you will be looking at the equivalent of a square and and circle or Big Foot(the monster truck) to a Toyota Prius. Free markets, by definition, gravitate towards the most efficient products, not necessarily the cheapest products. What was cost effective for the entertainment industry 30 years ago most likely isn't cost effective to them today. What used to take a big budget and major cooperation from many different parties(film crew, editing, special effects, music, USPS, chain of command approvals) can now be done by a single person with a video camera. Why? The micro markets got efficient and allowed for the common person to have access to the tools and skills that had been surrounded by unnatural barriers to entry. Unnatural barriers to entry aren't sustainable and over time erode. Is old school Hollywood really so naive that they can't see the fact that they exploited an inefficiency in a market to get where they got? Consider the Television market from 20 years ago and how a product was given the thumbs up or thumbs down. Surely it was inefficient from an aggregate perspective to have the gating factor of whether or not a prospective TV show made it be decided by one person when that person may or may not be who the creator of that show was trying to align with or identify themselves as. As evidenced by the case of Nobody's Talking, the Youtube revived sitcom which was not picked up by NBC after the pilot but gained support on YT. Whoever passed on that probably has moved on to greener pastures, huh? :)

This seems like common sense and something we should accept as being what it is, reality. But the only markets which readily accept and embrace this evolutionary notion are those of technology. Why? Because most leaders in technology got to be leaders in technology by virtue of their innovation. Innovation in technology typically leads to greater efficiency for that or of that technology.

What is the point in this? Basically that this shift in power, for lack of a better term, has been gaining momentum for a quite some time and ubiquity in the access to and of information is accelerating the breakdown of those unnatural barriers to entry....ie, the internet leveled the playing field. The studios, believing they actually deserved to be in their current positions instead of realizing the short term nature of them, continued to invest in protecting those unnatural industry walls instead of innovating on new product, while the rest of the world was coming up with ways to target the inefficiencies of free markets and cognisant of it or not, halt the exploitation of those inefficiencies as soon as they come to light.

The end result? More efficient marketplaces with the increasingly blurred delineation of consumers and producers. Efficiency is bringing McCluhan's Global Village to life and should be good for those that aren't solely dependent upon the exploitation of an inefficiency to further themselves. As we know, inefficiencies can't last forever in a free market society. I, as the consumer, now have choice on what I buy/watch/eat/etc and how/where/when I consume it. That in and of itself is useful and valuable to me but has even greater value to the producers of that content which I consume because, trust me on this, that content wasn't being 'let' out by the powers that had been in Hollywood. Advertisers, the great subsidizing force of content production(that is a whole other issue), now have the ability to actually target and market to very specific and unique subsets of the general population by virtue of that populations choices. In the past those advertisers were stuck with choosing between the three major TV networks in very very specific time slots. Today their options are infinite. Literally.

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