Sunday, April 09, 2006

Delayed Gratification and The Decentralized Film Festival

Movies, democracy, free markets, communism, competitive sports. These are the ingredients that I turn to most when cooking the thoughts on this blog. I just read "The Tipping Point" so I think I might be trying out a new spice in contagion. Movie theaters in the news tends to stimulate me into creating new recipes. And the most recent news I've been reading has a to do with the continuing fight against "Shriking windows".

Also, I'm really intrigued by an idea that came out in my last post, about the maturation of movie going preferences.

So with all this in mind, let's think about what it would be like to be able to watch any movie you wanted (i.e. even new releases) in any venue (home or at the movies). And for the sake of argument let's marginalize the effect of the cost of these movies. Let's say that it will somehow cost you the same to watch a new movie at home, as it does to watch it in a movie theater. Similarly, watching a classic in a theater will cost you as much as watching it in your personal home theater. Furthermore let's say that technology related to availability is perfect as well. You can get whatever you want as soon as you want it because the broadband pipes are big enough and because the movies are easily replicated and efficiently distributed.

Total free choice when it comes to watching movies.

As I understand it, this is the scenario that most theater owners are thinking about when they fight the "shrinking window". To me, it seems utopian. Hence, there must be some problems with it. And certainly there are.

The contention from the opposition, is that a structured system of windows allows all the "separate" markets (theatrical release, 2nd run, rental, home video, premium channel, and finally network release) to maximize their earnings. They argue that this model churns out more money than collapsed windows and simultaneous availability would.

I have always had a couple of objections to this argument. 1.) I'm not even sure if it's true. There's the possibility that there is no overlap between the people who go through the various conduits. i.e. the people who buy the dvds may not be the same ones who watch it in the theater. Thus neither market suffers at the expense of the other. And isn't there potential for people who would buy the dvd immediately, but don't after the movie has been out and discussed widely for a while? 2.) If this model does churn out more money than simultaneous availability, it seems to do so at the expense of people's choice, and doesn't offer them anything in return. Is the only reason I can't buy a dvd when a movie is first released so that I can be hit up twice for it? Why would I, as a moviegoer, ever vote for a system like that? Is it really good that people are making purchase decisions because of lack of options? I think it has a tendency to make a lot of people unhappy as they start to realize that it's not necessary.

Ok, nothing new. Back to the problems with Utopia. So what is wrong with unlimited choice? Basically, I think, it turns out that there is more to enjoyment than having full control. I'd even go so far to argue that a lot of the true pleasures in life are hidden in the actions that we don't explicitly choose. If you like a song, for example, and you end up buying the whole album because that's the only way you can listen to the music when you want to, you may end up discovering that you love the artist's other songs. Unfortunately, the opposite tends to happen as often (if not more often) which is why people put such a premium on fine grained control; like buying an individual song on itunes.

What kind of pleasures are we forced into with the movies? The most obvious is the crowd. Getting in rythm with a crowd can amplify the comedy of a funny movie. Sharing disgust with the other people in the theater can make you feel more whole after sinking 2 hours into a terrible movie. Finding a pleasant crowd can make the most tired themes seem fresh when you see people genuinely reacting to them. Crowds, of course, have a well documented downside. In fact they're the principal focus of most people's hatred of going to the movies.

But here's one that you may not have thought of. Limiting the choices you have actually helps making choosing a movie to go to a solvable problem. Right now, when you want to watch something you haven't seen before, you know you can show up at the movies and probably find something. Once you get there, you know you only have the choice of a few movies, and not every movie ever created. How would you ever choose a movie if you could watch anything? That's the oft-cited problem with cable: hundreds of channels, but nothing's on.

Furthermore, it's a convenient way to consolidate the resources that will always be limited. Even in this fantasy world, there will only be a few public venues that are capable of putting on a show as only a multiplex can. Limiting those screens to new releases, sets an acceptible public expectation of how those public resources will be allocated (film wise).

There may be lots of other things that end up being very positive byproducts of the current limits on moviewatching. Just think about how much more valuable a thing feels when you can't have it all the time. I think limitations, whether they're necessary or not, is an important component of our ability to enjoy things. As they say, everything in moderation.

But does that mean that we're better off without collapsed windows and simultaneous availability of movies? Probably not. As much as the protectionist theater owners and studios would like to protect their livelihood, most people would be better off with more choice (I'm thinking of a lot of examples of developmental economics, that I think are applicable, but I'm a fairly amateur economist, so I'm not sure).

So what if we could preserve some of the benefits of forced limitations? We're probably going to have to, because I think a lot of these things are more important to the way people watch movies than they realize.

So what are some ways to "limit" how people will watch movies when they don't have to. Well, how do we limit our moviewatching now? I can think of a couple of ways. One: we wait until all our friends are available until we watch a movie. Two: we wait until we hear lots of good things about the movie.

These things might not even be that hard to simulate in the world of unlimited movie choice. If you're interested in movies that show off the beaten path, let's call you a film festival kind of guy. Chances are that you know other film festival types and you share recommendations with one another. In Malcolm Gladwell terms, you might even be considered a maven if people sought your advice on movies. One way to fill up a movie theater would be to send a message out to all the people who take your recommendations and suggest that they all check out a new movie. This is a lot like waiting till all your friends want to see a movie and probably share some of the same benefits (if everyone wants to see it, then it has a high likelihood of being good). Then if there's not that much interest, you can always purchase the movie and watch it on your own at home.

This simple idea is the basic building block of this exciting thought that incorporates all the possibilities of public theaters, home theaters, and information technology. If you're the movie recommender, let's say you suggest a movie. Several things can happen.
  • 150 people commit to watching the movie. A theater (realizing the profit that can be made from concessions) "buys" the copyrights for each moviegoer. Everyone gets to watch the movie for free and the theater makes a killing on overpriced concessions
  • People cannot decide on a time or not enough people come together to command a multiplex auditorium. People can come together in smaller groups and watch it in a good home theater, or as individuals. The distributors are still able to collect money for showing the movie. People are still able to watch the movie, although at a price higher than that if they had "waited" for a bigger crowd.
  • The commitments of the movie watchers can be communicated directly to the film makers. If the people like the film, the film makers can rally support for their upcoming projects, and potentially even funding! The deal can go something like, "Would you like to pay $10 to contribute to funding a movie about x? You'll get to watch the movie for free for the rest of your life and get a dvd. If we don't raise the amount needed to fit the budget, by a certain date, your money will be refunded"
That last part is the real gem. Is there a more appropriate way of getting funding? You're funded by the people who are most interested in seeing the movie, at a level of risk that is dynamic and acceptible to each individual. And you cut out the overhead of the standardized practices of the studio. Furthermore, the film is paid for before you even start filming. And there is still incentive to sell the film even after it's made (you can make more money selling it to people who didn't "invest" in it). As a filmmaker, who would you rather be bargaining with, the audience, or the studio? And as a moviewatcher, who would you rather be bargaining with, the filmmakers or the studio? There will still be a place for studio films (people who don't want the hassle of going to a million flakey investors trying to give their input) but for anyone who has an original and untested vision, this makes a much more appropriate start.

The people making the movie recommendations are doing exactly what I wanted to do when I said I wanted to have a movie theater. I wanted to share the movies that were good and in some oblique way contribute to making more. I'm sure there are more people who would like to do the same.

Some not so Idle thoughts on a lazy Sunday

I really should be at the movies. Or watching a movie on the screen that's 2 remote control button pushes away. But despite the long term benefits in my emotional state that this would probably be responsible for, I feel like I must immediately reflect on this article I was just reading in Harvard Magazine.

Nothing against graduates of Harvard, but my pride insists on letting you know that I don't regularly read this magazine. Martha's mom did her undergraduate work there and Martha saw the words "economics" and "irrational" on the cover and deduced that I would be interested in the article. She's good.

Anyway, the article was talking about the hot new field of "Behavioral economics" which seems to have a growing appeal to the most current generation of people entering the field of economics. The way I understand it, behavioral economics is interested in the predictable, but not perfectly rational way in which people make decisions. This is a subset of the general study of economics which studies how people translate their values into choices, and how that can affect resource allocation, planning, production, finance, etc.

Naturally, this intersects with a lot of the "work" I've developed through this blog. Going to the movies involves people all around you (including yourself) making irrational decisions to the max. And a lot of the time, it seems to just work out so that most people win. In this way, it's a bit like a little model of the real world.
The part of the article that really got me thinking was this.
Suppose a company wants to sell more soap. Traditional economists would advise things like making a soap that people like more, or charging less for a bar of soap. A behavioral economist might suggest convincing supermarkets to display your soap at eye level -- people will see your brand first and grab it.

As an economist, even when you think psychology is important, you don't think it's this important. And changing interest rates is expensive, but these pyschological elements cost nothing.
Economists are famous/notorious for phrasing their world in terms of costs and values, and this article posits that behavioral economists are especially sensitive to empirical evidence (they see irrational behavior in real life and seek to resolve it). The problem with this line of thinking, is that the author has stopped thinking like either a tradional economost OR a behavioral economist.

Of course invoking psychological elements has a cost. What happens when people learn the hard way that they were manipulated into doing something that does not maximize their utility? Sometimes you use up your one chance at one shot gimmick. Shouldn't the behavioral economist attention to empirical evidence unturned this stone?

My guess is that this can be largely ignored, because in aggregate (as people in marketing know well) it's never a one shot deal. You get new, inexperienced "suckers", without even trying, and the gimmick never seems to lose it's power. The cost is negligible. Unless you're listening to the people who got suckered.

Let's say we're talking about movies (and we always are). Everyone on the production/distribution/exhibition side wants people to sell more movies. Moviegoers clamor for lower prices, a more comfortable experience, and better movies. Much like the traditional economists suggestions for how to sell more soap, people thinking rationally about what they think would make them go to more movies suggest "real" improvements to the value proposition. But time and time again, observable trends in box office results and extensive studies of moviegoer behavior will support the idea that if you cut a certain kind of trailer and follow a certain kind of plot formula, this will have a much bigger effect on how much you can sell, than all of those other things.

But amidst all this, there's no shortage of people complaining. Forums everywhere are full of embittered people who were duped by a trailer and convinced of nothing but Hollywood's disingenuity. Is behavioral economists to suggest that "psychological" elements like cutting a trailer that appeals to your generic instincts is as likely to work on these people as it is on people who haven't been burned?

I'll concede that in many cases, the same tricks work over and over again (seeing a trailer for the same kind of action movie, or reading a review that pumped up a movie that I initially didn't think I'd like have gotten me into a theater seat many many times). But you have to consider that a lot of times they don't. As people learn, and become more experienced, their decision making changes.

People are not static, and the decisions that we make are not independent of one another. That's what causes phenomena like "ad blindness" and over saturation of marketing efforts.

This is yet another predictable element of economic decision making that doesn't get a lot of press. I think it's pushed to the margins because the "educated" people in any given area of life will always be outnumbered by the inexperienced, and thus their actions will get drowned out as noise. But I think it would be an interesting and productive study how to wield an understanding of how people's decisions evolve as they mature.

Maybe what happens is that people eventually start doing what I have been doing: Constructing their own personal movie watching experience (choosing their own movies and viewing conditions), when their needs outgrow what the public venues are able to provide. The booming home theater and "netflix" industries are certainly evidence of this.

Then, in effect, what the hollywood blockbuster and multiplex machines have developed is a kind of moviewatching school. A crash course in the visual language. They have discovered the best ways to draw in the uninitiated into the world of movies, and give them enough of a taste to develop their own preferences.

This, of course, makes this idea of behavioral economics, a bit more like child pyschology. And just because those "children" occupy adult bodies, the idea that some parts of the way they make decisions is underdeveloped should not be ignored.