Netflix's Choice and the Return of Louis B. Mayer

The usually reliable Edward Jay Epstein has a new column up at the Wrap detailing the transition Netflix is undergoing. Netflix currently spends around $500 million a year in postage mailing out DVDs and receiving them back. This also requires obviously, distribution centers, and along with an average price of $15 per DVD, accounts for operating profit of about 12%.

Steaming, obviously, is cheaper. No postage fees, no rate hikes in postage, instant gratification. The only problem being that Hollywood is charging premium prices for streaming rights (Netflix can simply buy DVDs from wholesalers and rent them out without costly rights fees). As Epstein notes:

The brutal reality is Netflix’s bargain days for streaming movies and television is coming to an end. As everyone else in the licensing game, Netflix will have to pay real world prices for content. Just the output deal it announced with three of the weakest studios, Paramount, LionsGate and MGM will cost it $200 million a year, a sum that exceeds its operating income last year. And if it wants the kind of output deals the other pay channels have, it will have to pay a great deal more than that.

Of course, Netflix can do something else. Create its own content. Which, in order to make money, would have to be very popular. Yes, HBO, Time-Warner Cable (HBO's Parent), Amazon, Itunes/Apple, Hulu, Google/Youtube, are all Netflix competitors, as Epstein notes. Competing on price for streaming, and on every platform: smartphones, Ipads, tablets, TV sets connected to the internet, gaming devices, and more. Netflix very likely has few illusions on this matter. But … they can create their own content.

And that can be their great competitive advantage.


Most entertainment is junk, which also loses money. Hollywood's movie system depends almost entirely on a few mega-hits: Transformers, Iron Man, and other male-oriented action movies, along with Twilight, and a few other female oriented romance movies. Stuff like "the Reader" or "the Woodsman" or "Ghost Writer" don't make money, even if they do win awards and get Hollywood's execs their next job (by catering to stars egos). Among TV series, a few mega-popular reality shows like American Idol make a lot of money (American Idol is estimated to add about $200-$300 million to Fox's bottom line). The repeat value or desire to see these on devices other than TV, live, is fairly low, however. A few other shows like NCIS, and Desperate Housewives, generate high ad dollar purchases by sponsors, and thus make money. But again, the desire by consumers to purchase these shows is fairly low.

What Netflix can do, then, is exploit the gap in broad entertainment people will pay modest amounts to view, by creating their own. Epstein, like many in and around Hollywood, over-estimates the barriers to creating original content. And the sea change a producer like Netflix which cannot survive in the Hollywood model and MUST create broadly popular entertainment across its offerings to prosper against a host of rivals. Which, amounts to a return to mass culture, and the end of niche culture and "de-massification."

Netflix is not HBO. HBO depends on keeping heads of households "happy" by offering female-skewing "edgy" content not available anywhere else. Alpha males in full a-hole glory: Tony Soprano, the folks of "Rome" and so on. HBO, of course, is available in almost all TV households but less than 30% actually pay for it. HBO gets paid if people watch their content or not. It's been very profitable, but depends on lots of excess cash among high income consumers expressing a desire to be "different." Making it vulnerable to economic downsizing and consumers being pressed into dropping the service (and cable altogether). Cable cutting, a real phenomena, is already occurring at the lower end of the income spectrum, as the cost of living inflates while income remains stagnant.

HBO depends on a large pool of high-income consumers expressing their niche content desire by paying premium prices for niche content consumption. That is not Netflix's mass consumer model. Near-premium cable folks like FX, or AMC, rely on keeping their channels as part of the basic subscription model, and thus follow HBO's model: AMC's Mad Men and Breaking Bad (Alpha male assholes appealing to women), or Nip/Tuck, Damages (Alpha female) fit that model. Mad Men famously got less than 1 million viewers per episode the first season. Yet it was considered a massive success (generating lots of publicity) and was easily renewed. Because AMC gets paid if people watch the channel or not. Again, that's not Netflix's model.

The limits of the HBO model (you cannot grow beyond the niche consumption of high end consumers) and the near-premium cable model of AMC and FX and others, come with risks of being unable to compete on price in a prolonged recession/depression. These entities depend like Hollywood movie studios and TV broadcast networks, on good times rolling not hard times a coming.

Netflix has always been different. Oriented towards mass consumer spending, not pricey niche stuff. Their play, and they are clearly edging towards it, is to create their own content. Aimed necessarily at the broad middle, and those willing to shell out modest amounts for entertainment: men. Yes, Netflix to compete will have to produce its live action competition to Call of Duty and Medal of Honor and Halo. Male skewing tales of adventure, excitement, and action-driven conflict.

Can Netflix do this? Certainly, and they must. After all, soundstages are for rent to whoever can pay. Actors, directors, writers, are all for hire. So too, are many locations outside Hollywood where tax incentives matter. USA Network has already leveraged this, with In Plain Sight shot in and around Albuquerque, New Mexico, and Burn Notice in Miami Florida. Male skewing writer/producer teams like Life's Rand Ravich/Far Shariat and 24's Joel Surnow can be hired. So too, comic creators like Jim Shooter (Valiant Universe creator) or James Robinson or Brian Michael Bendis or Micah Ian Wright. The idea being to produce not just one-off movies but serial entertainment streamed right to men who have other than video games, little competition. A price point of say, 99 cents per episode, or even free with embedded ads. So the male consumer comes back.

Clearly, just trying to make the next "Vampire Diaries" or "Parenthood" is not a way to success. No matter how many tween girls (or their moms) watch, or how many PC plaudits are earned. Netflix is interested in making money, and doesn't have a massive parent to subsidize making Hollywood players happy. Amazon, Itunes, Google/Youtube, and even Coinstar's Redbox can crush them. So whoever races to their own, vertically created, distributed, and sold content gets to replicate …

Golden Age Hollywood. Characterized by "Its A Wonderful Life" and "Yankee Doodle Dandy" and John Wayne and Humphrey Bogart. No metrosexual, "I Love You Philip Morris" stuff, or "TransAmerica." You didn't see John Wayne smooching Ward Bond, in a gay cowboy movie, or Rosalind Russell playing a trans-sexual man/woman. Everything was broadly pitched, straight to the middle, as content was owned, distributed, and revenue collected, by Hollywood's studios.

Hollywood was no less filled with hard left folks in the Golden Age. Heck, many writers and actors were outright members of the Communist Party, when it actually meant something and Stalin was alive. But the economics of the mass media, vertically integrated companies requiring mass sales not niche stuff for premium prices in one way or another meant you got Jimmy Cagney extolling the virtues of the Red, White, and Blue, not a metrosexual, stalker Superman who fights for truth, justice, and "all that stuff."

Which brings us to the heart of the matter. Can Netflix create original content for less than licensing it from other creators, that will generate more money than licensed content, in a mass medium model (i.e. not niche content at niche/expensive prices)? Very likely, yes.

TV Networks action/adventure series generally average about $3-4 million dollars per episode. The more action, and the more stunts, obviously the more expensive it is to shoot versus dialog on a soundstage (like ultra-cheap soaps). So on the upper end, excluding tax breaks, it would cost Netflix about $88 million to produce a 22 episode series. Assuming it can sell each episode for about 99 cents or so, its break-even sales volume is about 4 million sales per episode. At about 5 million sales units at that price, Netflix will make about $22 million. Assuming it can build sales to about say, 10 million purchases per episode, it would be generating $132 million per "hit" series, which would be roughly half the views per episode of shows like NCIS (averaging around 20 million viewers per episode per season, excluding repeats). With, critically, revenues rising dramatically as popularity and views per episode go up.

Why was Golden Age Hollywood so mainstream? Because the people who owned it got immediate financial rewards for being mainstream (that's the feedback mechanism of vertically integrated media companies) and punishments for going niche. Warren Buffett's right hand man, Charlie Munger, was quoted as saying:

‘Well I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes [without me] getting some surprise that pushes my limit a little farther.’ That was Charlie Munger, Berkshire Hathaway Vice-Chairman, speaking before the Harvard Law School on the psychology of human misjudgement.

Munger is resolutely focussed on the power of incentives to influence human behaviour. In his speech he recounts a number of examples where incentives have been used for both good and ill. Federal Express was one such example. It has to transport packages within its network to a central location for sorting before sending them on to their final destination. For the system to work, the sorting must be quick and efficient. The trouble was that, for a time at least, it wasn’t. The company tried all sorts of incentives without much success. Then management came up with the idea of paying their staff by the shift, instead of for the shift. In other words, when the sorting was done the staff could go home. As you can guess, along with the staff at the end of their shift, the problem vanished almost immediately.

If not Netflix, then one company not already laden with perverse Hollywood incentives, will push entertainment to a vertical model, where lavish rewards await anyone who can replicate the Golden Age of Metro Goldwyn Mayer, or Warner Brothers. Amazon, Apple's Itunes, Google/Youtube, and perhaps even growth-strapped Microsoft can be players here. Creating their own content, selling it on their own pay/ad-supported network, and collecting hefty profits.

Its far more than a transition from Netflix renting out DVDs through the mail. It is about breaking the stranglehold that Hollywood has had, strangely, in creative content production, for about 90 years. With talent mobile, and lots of money at stake, it is only a matter of time. Particularly as Hollywood's post-80's niche model collapses during hard times.

The return of Louis B. Mayer awaits.
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Why Dollhouse is a Flop and What It Means for Popular Culture

For those who care, and judging by the ratings, most don't, the latest TV series from Joss Whedon, "Dollhouse," is a flop. Judging by reviews, the series and lead actress (Eliza Dushku), have performed "below expectations" and even Television Without Pity, a forum of certified boosters of all things Whedon, have weighed in on a Dollhouse Cancellation Pool. Buzz has been negative, with delays in filming so scripts could be re-written, and the cast and producers/writers packed with various Whedon cronies and relatives.

"Dollhouse" is of course unimportant in and of itself. But it's probable failure, contains clues as to what will not work and what will in Television, and thus clues to important trends in popular culture: the end of "demassification" and subcultures, and the rise of a new mass unified culture. With of course, profound implications for politics and society.



Dollhouse is not very well executed. But it's likely execution does not matter that much. Had Dollhouse premiered in say, 1997, it might well have succeeded. But the recession, and changing ad market, are transforming the nature of television and pop culture in general. Contrary to the Long Tail hypothesis of continued "demassification" of culture, a lengthy recession is likely to significantly reduce fragmentation of culture, and produce a more unified culture. For simple business reasons: appealing to a broad group of society is the only way to make money given scarce advertiser dollars. Yes, we are entering an era of scarcity after nearly sixty years of nearly un-interrupted prosperity.

The failure of Dollhouse is thus a signal, of how the culture of America is being transformed from a fragmented mess of various sub-groups, into a more uniform (and populist) mass culture, not seen perhaps since the 1980's. This has significant impacts on how culture will drive politics and policy.

First, let's look at how pop culture worked under the old, "prosperity" model. A commenter on Television Without Pity summed up the old model, which traded mass viewers for a more "desireable" segment. This strategy of "demassifying" or cult culture, was pioneered by former NBC head Grant Tinker in the early 1980's, with renewals of low-rated but desirable demographics ( rich Yuppies) shows such as "Hill Street Blues" and "St. Elsewhere." This strategy sustained the low-rated "Seinfeld" during it's first few years (1989-91) as it drew low ratings initially but favorable demographics. Wealthy Yuppies that advertisers would pay premiums to reach created cult shows like "Hill Street Blues," and that model was later extended to young, female consumers with shows like "Buffy the Vampire Slayer" and "Dawson's Creek." A lot of money was made selling Pantene Shampoo and Conditioner to young women.

This was (and is) Amazon's model, selling lots of things that don't have mass appeal, but can be sold at a mark-up premium, to lots of people. Apple's Itunes store is another good example. Since their operating costs are low, and in the case of Apple inventory cost is near zero, they can afford to carry lots of songs or DVDs or books (in the case of Amazon, sitting in the inventory of partners) and sell them in small amounts (no major hits) to lots and lots of customers. Advertising had worked the same way, making lots of cult shows such as "Farscape" or "Battle Star Galactica" (the remake by Ron Moore) at least possible and sometimes even profitable, given the premium rates charged advertisers for desirable demographics, i.e. young and wealthy consumers.

As TV accelerated the process of dumping male viewers in favor of what advertisers wanted, which was female viewers (viewed as key purchase decision makers), this hyper-fragmentation continued. One network, the WB, was devoted almost entirely to young female viewers, and it's successor network CW has continued that focus. However, this strategy of cutting up the mass audience into small pieces and producing entertainment that appealed only to the small pieces required a constantly rising economy, rising consumer spending, and thus rising advertising rates as sponsors clamored to get their message across to ever smaller groups of tightly focused demographic segments. There was also the problem of the "missing men," who as they remained single longer and longer, remained out of reach of advertisers and relatively unimportant in consumer messaging.

This particular strategy of sub-group focus was failing even before the economy crashed. Last year it was rumored the CW network would shut down because of revenue shortfall caused by very low ratings and not enough advertising spending even with the desired 12-17 and 18-34 female demographic. The problem? Sponsors were seeing that demographic cut back spending on products such as specialty shampoos and conditioners, clothes, ringtones, and other luxury consumer goods that defined discretionary spending. Moreover, there just was not enough young women around, given the decline in birth rates.

Now ad spending is down even more dramatically. Of course Auto companies have been hit by the recession, even Toyota and Honda are shedding thousands of jobs and cutting back on TV and other advertising, let alone GM, Ford, and Chrysler. So too, banks, insurance companies, and other segments of advertisers, hurt hard by the economic crash, and in many cases taking bailout money that politically makes advertising almost impossible. Nor has there been any recent recovery in the spot market, indeed rates for spot advertising (instead of pre-arranged ad purchases) are lower than the contracted rates. Analysts don't see relief any time soon. Even Local TV stations are hurting. CBS, the most profitable of the networks, managed to eke out a small profit, but they are down more than 50% from last year.

The few advertisers willing to spend money, are packaged consumer goods companies like Proctor & Gamble, or Nabisco, and they won't pay extra to reach small segments of consumers, rather current advertisers want broader reach and all possible consumers, young and old, male and female alike. Since their message is value and affordability in a time of lasting recession and they cannot afford to ignore key segments such as men, as in the past. Advertisers such as Pantene have greatly reduced their advertising since their target customers, young women, have cut back on spending like everyone else.

A look at the ratings for 2009 is instructive. Fox's Ratings, NBC's ratings, ABC's ratings, CBS's ratings, and CW's ratings are all found at the links. Taking non-repeat showings, and averaging the numbers, produces the table shown below:

Network	Show	Average Non-Repeat Viewers (Millions)
Fox	Dollhouse	4.45
Fox	American Idol	25.49
Fox	House	14.88
Fox	24	11.74
Fox	Fringe	11.5
Fox	Lie to Me	12.1
CBS	The Mentalist	18.85
CBS	NCIS	18.45
CBS	CSI	19.3
CBS	CSI: Miami	15.05
CBS	CSI: NY	12.08
CBS	Without a Trace	12.82
CBS	NUMB3RS	10.33
CBS	Flashpoint	9.75
CBS	Ghost Whisperer	10.78
CBS	Eleventh Hour	12.02
CBS	Survivor	13.55
NBC	Medium	8.4
NBC	Heroes	8
NBC	Chuck	7.6
NBC	Law and Order	8.39
NBC	Life	5.4
NBC	Knight Rider	5.28
NBC	ER	7.28
ABC	Grey's Anatomy	14.5
ABC	Lost	10.85
ABC	Private Practice	11.02
ABC	Ugly Betty	7.42
ABC	Life on Mars	5.48
ABC	Desperate Housewives	13.95
CW	Smallville	4.03
CW	Supernatural	3.18
CW	Gossip Girl	2.43
CW	Privileged	1.43
CW	One Tree Hill	2.7
CW	90210	2.38

You can see in the data a few broad patterns. First, I've excluded sitcoms to focus on hour-dramas only. With a few high-rated reality shows to compare the dramas against. Even facing audience erosion after a number of years, a show like "American Idol" averages 25 million viewers. This is less astonishing, mind you, than at first glance.

In 1968, with a population of 200 million or so, "the Beverly Hillbillies" drew 60 million viewers. As compared to "American Idol" today with a full 33% more people, or 303 million. For "American Idol" to draw comparable numbers to the "Beverly Hillbillies" in terms of proportional amount of the population, viewers would have to reach 80 million or so. It's worth noting that the Superbowl the last two years has reached about 98 million viewers, so people will watch in those broad numbers if what is on offer is of enough interest. There is a great amount of money to be made in mass culture, "American Idol" alone is responsible for a great deal of Fox's revenues, given their only middling performance of other dramas.

But these issues aside, broad patterns emerge. Shows featuring a strong male lead, who in some way leads a team of disparate people, with strong female characters, generally will draw a lot of viewers. The shows feature a strong and conservative moral message, valuing teamwork, professionalism, loyalty, duty, family, decency and honor over career and status that mass audiences clearly like. Desire for closeness to family and loss (often of family) is a theme running through most of these shows. Moral lessons: don't cheat on your spouse, sleep around, neglect your family, put career first, act arrogantly, or care more about status than people, are often important plot points. CBS is chock-a-block full of those types of shows, their "Crimetime" police procedurals of one form or another, and their generally conservative throw-back nature (adult White Males are in charge in nearly all of them) appeal to both male and female audiences. Not lost on female audience is the fact that these types of shows almost always have strong female second leads who wield (responsibly) power and authority. These shows are the most popular after "American Idol," and include "the Mentalist" (18.9 million viewers), "CSI" (19.3), and "NCIS" (18.5). Even lesser rated or known shows such as "the Unit" (not shown) and "Flashpoint" ( a Canadian import) can pull in 9 million viewers or so. If CBS seems formulaic, they are. Because the formula works. Most of Fox's Dramas follow this pattern as well, from "House" to "24" to "Bones."

Female night-time soap operas, ranging from Desperate Housewives and Grey's Anatomy, to Ugly Betty, will garner 14 to 7 million viewers or thereabouts. Not as much as the "Crimetime" formula, and less consistently, but still respectable. Unlike the "Crimetime" formula, however, these shows are strictly for women only, with nothing in them to interest men who are not gay. Since these shows leave out men, advertisers are beginning to lose interest in paying a premium for them, given the need in a recession to make every penny of ad spending count.

Hour long shows that tend to straddle genres, such as comedy-dramas like "Chuck," or Superhero soap operas like "Heroes" or quirky mystery-conspiracy crime dramas like "Life" tend to underperform relative to straight up Female Soap Operas or "Crimetime" procedurals with a strong White Male lead in charge. The terminally PC "Knight Rider" is probably a good example of this, well matched in the ratings with the equally PC-lecturing "Life on Mars" from ABC. [It's interesting that the same show on NBC, "Medium" does about 2 million viewers less, than the same show on CBS "Ghost Whisperer" in the much less desirable Friday time slot, suggesting that "Chuck" if shown on CBS would pull in about 2 million more viewers, but still rate only about 9 million viewers or so, about half of the traditional male roles of the "Mentalist" and "NCIS".]

The two shows that skew male (and older) for the CW, "Smallville" and "Supernatural" significantly outperform the teen girl oriented "Gossip Girl" which if one judged only by the amount of hype and publicity, would be the top rated show instead of 2.4 million viewers. Others such as "Privileged" gather only 1.4 million viewers, which is infomercial time. There just are not that many teen girls, given the birth dearth. Too bad the people running the CW don't look at demographics.

Dollhouse of course runs closer to uber-PC (and thus low-rated) "Life on Mars" and "Knight Rider" than it does say, "Fringe," or "Lie to Me" with traditional male leads on the same network. A commenter on Television Without Pity summed up Dollhouse's approach as being feminist, with lots of cheesecake or half-naked shots of Eliza Dushku, and with nearly all the men being nasty, unlikeable pieces of work. Clearly the intent is to "square the circle," but within PC constraints, having action and "hot chicks" that appeal to men and a heavy dose of feminism, along with status-mongering and disagreeable to repulsive male characters filled with Yuppie status angst and self-loathing.This brings to mind what the REAL Lieutenant Starbuck, Dirk Benedict, had to say about the remake of Battle Star Galactica, and specifically the inability to portray non-Angsty, fun, male characters in Sci-Fi or genre TV. A profile of Benedict at National Review has much of the same sentiments.

Benedict's larger point, that TV and film refuse to allow male characters, who are not angst-ridden and self-loathing, to kick ass and take a strong moral stand, instead demanding that this be done by stick-figure women, who haven't eaten since the Clinton Administration, is well taken. Hollywood keeps pushing that "solution" to it's reluctance to allow traditional men a role in TV and movies, be it Ron Moore's "Battle Star Galactica" or the Terminator series on Fox (not listed in the table above) which is near cancellation, averaging only 3.8 million viewers, or thereabouts. Viewers are not interested in seeing women in these types of shows, particularly not the waify kinds seen on "Dollhouse" or various model types on "Battle Star Galactica." Indeed traditional female soap operas far out-draw these types of shows ("Terminator," "Dollhouse," etc.) along with the terminally PC male-oriented shows ("Life on Mars," "Knight Rider") that also refuse to take strong moral stands and provide viewers with relatively un-conflicted, upbeat and optimistic male heroes.

Clearly, Hollywood's attempt to "square the PC circle" with women kicking ass, and men angst-ridden and disagreeable, has passed. These shows found some success and advertiser dollars in the go-go status-obsessed 1990's, where the only problem was where to put all the money people were making, but far less in the recessionary and terrorist-threat (of the nuclear kind) decade of the 2000's, ten years later. Niche cultures just are not making money.

What sells, clearly, besides a remake of "Major Bowes Amateur Hour" or "the Ed Sullivan Show" ("American Idol") is the traditional White Male, leading a team, with a White female as the second lead. Sometimes the female lead is the gun-play expert to the "smart" male lead (CSI's Marg Helgenberger, Chuck's Yvonne Strahowski, the Mentalist's Robin Tunney, and Eleventh Hour's Marley Shelton), keeping expensive and difficult to portray fight scenes to a minimum and making violence on-screen short and to the point, also more realistic. Since tiny, waifish models do not throw hulking men around. But the shows are just as importantly, generally free from excessive PC lecturing, at least, and generally take a positive attitude (professionalism, duty, loyalty, family) that is the antithesis of the dark, angsty world-view of the 1990's shows such as "the X Files."

Broadly appealing shows are what advertisers are paying for, as well, and it's unlikely to change even if/when the economy recovers, because it's unlikely we will see consumer spending at the levels of the 1990's as uncertainty about employment and wages remain, perhaps for years to come. This means a lot more shows like the "Mentalist" and a lot fewer ones like "Dollhouse."

This is mostly a good thing. Popular culture, as Andrew Breitbart noted, shapes politics. A culture which believes and responds to the values of team work, professionalism, loyalty, optimism, problem solving, family, and moral conservatism is one that is vastly different from the status-driven angst fests of the current "Battle Star Galactica" or "Dollhouse." In many ways, the start of the Obama Presidency coincides with an upsurge of conservative feeling in popular culture. Not because millions of people read Hayek's "Road to Serfdom" but because people under stress respond to entertainment that is both fun and stresses positive social and cultural messages to provide a sense of self-control in rapidly changing, and unfriendly economic and political-social climates.

Angst-A-Rama, it seems, is out.
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Death of the Niche Market

The death of the niche market is upon us. This has profound implications for our cultural life, which had been on a twenty year slide towards ever-greater fragmentation.

First, the background. Ever since the 1980's, American cultural life has been fragmenting. First, with the growth of technology allowing catering to diverse and discrete tastes in television and music. Cable and later Satellite TV allowed television watchers to follow Golf, or Motorsports, or Women's programming exclusively. Not to mention upscale pay channels like HBO or Showtime, home of Tony Soprano and "Weeds" respectively. Music too, particularly popular music, became fragmented, with Punk, Alternative, and Rap forming myriad sub-genres and cultures oriented around them. Everything from Christian Punk to "clean" Rap have fans and a following and of course, fashion and rules for belonging. The internet of course intensified this fragmentation, with first newsgroups, then forums and blogs for the like minded to discuss, say the latest obscure Manga comics, or dance bands from the UK. But all this started back in the 1980's, as anyone who watched the interplay between Goth fans of say, the Cure, and Rockabilly fans of LA based X can attest.

Nor was this phenomena limited to the entertainment sphere. The phenomenal growth of niche retailers like Sharper Image, or Steve & Barry's attests to both the opportunity to cater to consumers demand for unique retail institutions and consumer's willingness to pay top dollar at such places. The growth of the mega-mall, with many small retail spaces expecting lots of passers by and traffic (generated by "anchor" department stores and/or other big draws) allowed retailers the opportunity to reach enough customers without massive advertising and marketing expenditures. Consumers, with rising wages, and lowered costs for food and energy (in real, inflation adjusted terms) were willing to pay extra to possess goods that differentiated them from everyone else.

This had an effect on advertising, much of which supports popular culture, particularly television. NBC built it's whole strategy from the 1980's onward towards appealing to a more wealthy audience, even if that meant sacrificing the size of the audience. Shows such as "Hill Street Blues," "St. Elsewhere," and "Homicide: Life on the Street," may not have garnered great ratings, but the critical acclaim and halo effect of the "snob appeal" helped cement NBC as the network for wealthy, status-conscious yuppies in the 1980's and 1990's. A tradition carried on with such shows as "My Name Is Earl," whose premise is amusing wealthy urbanites with the foibles of rural, "white trash" working class people. Think of it as a reverse "Beverly Hillbillies" where it's Mr. Drysdale laughing at Jed Clampett.

Most of popular culture has been aimed at ever more "selective" fanbases, to paraphrase the movie "Spinal Tap." Advertisers would pay money to reach selected demographics, mostly young people, and consumers were eager and able to pay money to listen to niche music, watch niche television, and buy niche products. All in an effort in a mass-consumer society to maintain a distinct and individual identity. Which ironically of course was itself a product of the mass-consumer society.

All of this process however, required money. Not just consumer niche spending, driving advertising spending on niche outlets, but investment capital as well. The print version of the Wall Street Journal, July 14, 2008, has a front page story on how retailer Steve & Barry relied on payments from mall owners desperate to replace absent Department Store anchors (closure of the former anchors a product of consolidation brought on by ... yes you guessed it, fragmentation of consumer retail spending). It was these payments, not continuing retail operations, that fueled the company's growth. Mall owners, heavily leveraged and victims of the ongoing credit crises, were unable to keep up the payments and Steve & Barry's filed for bankruptcy on Wed, July 9, 2008.

Just as in my post, Gossip Girl and the Aging of America, niche plays for audience or shoppers don't work in economic downturns. America has had an extraordinary run of more than twenty years of continuing economic growth, wage growth, low fuel and food prices, all allowing consumers spare money to spend on creating or maintaining a "niche" identity. That's coming to an end.

The print edition of the Wall Street Journal on Friday, July 11, 2008 reports that consumers are changing their spending habits radically, altering profoundly the retail landscape. Fair use excerpt below:

"There has been a major shift in thinking by shoppers," says Thom Blischok, head of consulting at Information Resources Inc., which tracks spending on consumer goods. "Consumers are moving away from availability to affordability."

Wal-Mart reported it's best monthly sales gain in four years, benefiting from bargain hunting. Coupon redemptions have increased, halting a 15 year slide. The Toyota Corolla has displaced the Ford F-150 as America's best selling vehicle. Consumer confidence has dropped 38% from January 2007. Borders and Circuit City are reporting large sales declines as consumers, pressed by spiraling gas/energy and food prices, curtail all but essential spending. Consultants studies suggest that vitamin water, 100-calorie snack packages, and children's lunches in a tray are being replaced by tap water, value packed snacks, and home-made lunches respectively.

Retailers and manufacturers are weeding out niche products that don't have mass appeal. Some retailers are already dropping suppliers and products that don't generate big sales.

OK, what does this all mean?

It means that Satellite Radio may just not be the wave of the future. Lacking enough subscribers in a recession to cover the costs of expensive contracts with the NFL or personalities like Howard Stern. Broadcast radio, free and over the airwaves, may well attract more advertisers looking to reach the masses, since the niche market simply won't exist in many cases. Morning and evening drive time radio will be filled with broader-appealing music, and sports. Niche radio stations, particularly "Alternative" or College-radio music stations, are likely to be sold or changed over to more popular formats such as all-talk, or sports, to draw better advertiser rates. Remember, the consequence of the baby bust means that there are 8 million more seniors than young people. Alternative or College-rock radio stations in small markets are particularly vulnerable.

Musically, popular bands are going to get older. Audience wise at least. There simply won't be enough disposable income to be spread over untried, unknown bands. Live music venues in the smaller range, the incubator of pop music innovation, have already been in decline since the mid 1990's, with the decline of the numbers of young people and the aging of the former youth cohorts. New bands will still exist, coming into the public view. But there won't be that many of them, and their goal will be to move towards the center where the money is, and gaining mass popularity. Likely gone are the days where cult bands could profitably cultivate a more "selective" appeal and tour across America making money. The decline of the CD and high prices relative to buying a single song on say, the Itunes store via Apple makes record sales a dicey proposition for even self-financed bands. Most bands make money touring, not by recording, and that won't change. Just the orientation of the music, to include older fans because there simply won't be enough money to support a youth-only cult band.

Movies, though not subject to the demands of advertisers, are still a mass medium. Sales at discounters like Best Buy, or even the local supermarket guarantee that reality. As do continued price pressure from brazen pirates selling DVDs at local swap meets and flea markets, often supplied by China or other places beyond the reach of US law. Film makers like Judd Apatow are likely to be successful, with more culturally conservative messages (carefully hidden behind profanity), while edgy/hip film makers like Steve Soderburgh will find that audiences are not in a mood to be shocked with edgy material, but will demand entertainment satisfaction. With discretionary income limited, a few movies will be mega-hits, the rest will have to eke out small box office receipts and DVD rentals. It's likely that DVD sales of movies (and television shows) will have to be heavily discounted, as consumers just won't spend that much money on them with essentials so pricey.

In television, the CW is doomed unless it can broaden it's appeal beyond teen age girls. Given the strong perception that the network is not testosterone friendly, this is likely to be a Sisyphean task. Other networks will face large challenges in their fall schedules. Much of their current programming, and new fall or mid-winter shows were ordered under the old economic climate, with niche programming abounding. NBC's "Heroes" is likely to show continued declines, with a convoluted storyline, and lack of central and compelling characters who provide an enjoyable escape from ordinary life. Even worse is Fox's mid-season "Dollhouse," a new offering by "Buffy the Vampire Slayer's" Joss Whedon. It would have been a tough sell in 1997, and this is not 1997. Niche, trendy-hip posturing just won't sell in a recession. Not with profound consumer shifts in spending and corresponding changes in advertiser spending.

Likely to improve in ratings are sports, including the NFL, College Sports, and Baseball, as people seek cheap and relaxing entertainment. Already TV viewership is up, according to the Wall Street Journal. Which makes sense. A night at home, in front of the TV, is cheaper than a night out at Applebee's. With gas flirting at $5 a gallon, this makes sense. Men are likely to spend more time watching TV, and shows that can capture the male audience are likely to do well. NBC's "Chuck" is likely to do quite well in this regard, as are any other show featuring an idealized "average guy" as the hero.

What is interesting is how CBS's "Moonlight" (not to be confused with the 1980's show "Moonlighting" with Cybill Shepherd and Bruce Willis) did fairly poorly this past season, and was canceled, with no pick up by any other network. A romance-novel copy of the "Buffy the Vampire Slayer" spin-off "Angel," which was in turn a copy of the Canadian series "Forever Knight," the show was too niche in it's appeal, despite all the promotion and "buzz" surrounding the show. Men, of course, hated the show with a passion.

It's quite likely that most other networks will avoid these niche shows as their fall lineup inevitably fails and pursue the "CBS formula" as epitomized by "NCIS" and the various "CSI," "NUMB3RS," and so on. A strong, forty year old plus male character leads a team that includes a strong, capable female character or characters. Fighting crime, restoring order, or something of that nature. The goal being to attract men plus women with elements that appeal to both and don't repel either. The old strategy of advertisers and creative people slicing audiences into ever smaller fragments is probably gone for a long time. It will be a major adjustment for most creative people, who grew up in a time when it was always assumed that audiences will get both richer and smaller, ever more eager to demonstrate unique individuality.

That is, quite likely, a good thing. Lack of unified and unifying culture makes bonds across divisions, racial, sexual, class, regional, and income much more difficult. A common culture, valued and defended, protects against both usurpation of power at home by unchecked elites, be they political, cultural, judicial, or corporate, as well as a stout defense of the nation and it's people abroad. When everyone has seen the game last night, or understands the catch phrases of the latest sitcom, or watches the same hour long drama on television, social bonds increase, as do the ability for ordinary people to band together to demand or force action on issues where they hold common ground.
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