Why Has TV Replaced Movies as Elite Entertainment?

by on October 19, 2010 at 7:30 am in Economics, Film, Television | Permalink

Edward Jay Epstein, The Hollywood Economist, has a good post on the economics of movies and television and how this has contributed to a role reversal:

TV-MicroeconomicsOnce upon a time, over a generation ago, The television set was commonly called the “boob tube” and looked down on by elites as a purveyors of mind-numbing entertainment. Movie theaters, on the other hand, were con sidered a venue for, if not art, more sophisticated dramas and comedies. Not any more. The multiplexes are now primarily a venue for comic-book inspired action and fantasy movies, whereas television, especially the pay and cable channels, is increasingly becoming a venue for character-driven adult programs, such as The Wire, Mad Men, and Boardwalk Empire.

Why?  Epstein’s explanation is the rise of Pay-TV.  You can understand what has happened with some microeconomics.  Advertising supported television wants to maximize the number of eyeballs but that often means appealing to the lowest common denominator (this is especially true when there are just three television stations).  The programming that maximizes eyeballs does not necessarily maximize consumer surplus.

See the diagram.

Pay-TV changes the economics by encouraging the production of high consumer-surplus television because with Pay-TV there is at least some potential for trading off eyeballs for greater revenue.  In addition, as more channels become available, lowest common denominator television is eaten away by targetted skimming.  Thus, in one way or another, Pay-TV has come to dominate television.

The movies, however, have become more reliant on large audiences–at least relative to television.  Note that even though the movies are not free, a large chunk of the revenue is generated by concessions–thus the movie model is actually closer to a maximizing mouths model than it might first appear (see also my brother’s comments on how flat movie pricing makes it difficult for indie films to compete).  Finally, the rise of international audiences for movies has fed a lowest common denominator strategy (everyone appreciates when stuffs blows up real good). As a result, the movies have moved down the quality chain and television has moved up.

Hat tip: Tyler.

1 Trevor Jacobs October 19, 2010 at 4:18 am

It would be interesting to see how the diagram changes for state-sponsored TV, such as the BBC; there's no (domestic) revenue generated from content (either through adverts or subscriptions), but the BBC consistently puts out some of the world's greatest content across all genres.

2 Tomasz Wegrzanowski October 19, 2010 at 4:39 am

1.
You're overstating flat pricing issue. There is a decent range of baseline prices (premiums for 3d and imax; very different prices by date and time; better seat premiums), and on top of that there is plenty of promotions to provide cinemas with fine level of control over pricing.

Prices cannot go too low or fixed costs of cinema screen wouldn't be covered, but that's about it.

2.
Films make more from DVDs than from cinema, and there's no flat pricing or chasing broadest possible audience at all there.

It's canonical example of long tail, with most demand away from the head. Just ask Netflix.

3.
Subjectively, what I see is improved quality of both movies and television. IMDB seems to agree with me.

When was this supposed golden era of movies better than today's?

Quality of television might be indeed increasing faster, but mostly because it started so low. I see little evidence that they switched places.

4.
Even if they switched places contrary to #3, this cannot be the reason due to #1 and #2.

3 DanC October 19, 2010 at 5:01 am

Advertisers have much better data then they used to have, free TV can do a better job of segmenting the market today.

Movies are geared toward teenage boys.

Movies are about getting an experience that is difficult to duplicate at home. Just as it was when movies started.

Baby boomers went to the movies, now they stay home. TV shows that were targeted at young baby boomers are now targeting older baby boomers.

Multiple TV sets in the home allows parents and children to watch different shows without worrying about awkward moments.

T & A has always been popular, just now they often wrap more complex plots around the T & A.

DVD sales are declining.

The ability to sell TV shows in syndication, and the growth of cable channels, has allowed producers of TV shows a secondary revenue stream. In part this helps genre shows, SciFY, Law and Order, etc.

And the growth of reality shows on TV demonstrates that there is still a big market for junk TV.

4 kramer@johnsonmatic October 19, 2010 at 5:38 am

just one little dynamic in a sea of multiplicity. We had like 13 Channels, you didn't get them all, but what you did get, you made the most of the numbers. Like say 5 channels, you move the decimal point over like this see . . . . . and now! You're number cruchin'.

5 Ted Craig October 19, 2010 at 6:05 am

Actually, a lot of what we in the States think is BBC programming is actually from ITV, which is a commercial enterprise. The BBC only imports its best shows. Much of the line-up consists of documentaries, games shows, reality shows and U.S. reruns. One of the keys to success for both British TV and American pay TV is the ability to run limited seasons.

6 Ted Craig October 19, 2010 at 6:49 am

I should have said "exports."

7 Steve C. October 19, 2010 at 7:32 am

It's the impact of demographics. Most baby boomers adopted cable early because it provided enhanced choices. And in the past 10 or 15 years we've been abandoned by network TV. Despite what some say, we are a generation of readers, so we are accustomed to long form story telling and complex plots/characters. And we grew up as the first video generation. For HBO et al to transition from selling movies to series TV, shows they are adapting their business model to fulfill a customer demand. And they have the good fortune to need to fill 24/7 bandwidth with something. Plus, successful series (Sopranos/Band of Brothers etc) can be released on video providing a supplementary revenue stream. We have the time. We have the interest and we have the resources.

8 Donald A. Coffin October 19, 2010 at 7:48 am

Note that (as is implicit in many of the earlier comments) neither producers of programming for TV nor producers of movies are much concerned with consumer surplus; their concern is with producer surplus. This makes a focus on the (marginal) costs of production somewhat more relevant than is implied by Alex's post and will make the discussion much more complicated.

Further, in considering broadcast (and, for that matter, cable) TV, a recognition that much of the revenue comes not directly from viewers, but from payments from advertisers also introduces complications that a simple focus on consumer surplus does not address.

Finally, this does not address the fact that cable TV fees arise from an environment in which channels are bundled, so that the revenue truly attributable to viewers of s single cable channel (or a single program) is hard to disentangle from total cable revenues. That is, what we observe is the demand for *cable TV*, not the demand for "The Sopranos."

9 Trevor Jacobs October 19, 2010 at 12:00 pm

Responding to earlier posts:

I'm from the UK so very interested to hear from the American posters above:
1) what ITV shows get to the US?
2) what US re-runs feature on the BBC?
3) what is the 'worst' content from the BBC

They do have a lot of documentaries (excellent, especially natural history), gameshows (mostly bad, but only early evening), reality (mixed bag), but their real strength is current affairs, world news, politics and new comedy (although the US taste for comedy is very different). HBO is still the king for drama, get it on DVD in the UK

10 ei3eiei October 19, 2010 at 2:26 pm

Simple answer: The premise is wrong, both parts.

TV is big, obviously they have something for everyone. Also, even the elites are much more likely to do non elite things than elite niche things. A member of the elite is more likely to read a big tabloid or to watch a daily soap opera with a very low average social status demography than to watch the wire, go to the theater or read the New York Times.

The right way to consider how elitary someting should is should not based on the percentage of the elite that uses that form of entertainment, but on the percentage of those that use a certain type of entertaiment that are part of the elite. My hunch: Disneyland, noteriously bashed by large parts of the elite will beat Boardwalk empire, Mad men and The Wire easily based on those criteria.

Most viewers of those series watch them via torrent by the way, not through expensive pay tv.

11 Ben Ho October 19, 2010 at 6:34 pm

Heh, I have been using the same graph in my MBA Microeconomics class every year.

12 Steve Sailer October 19, 2010 at 11:28 pm

Back in the late 1990s, HBO had a comedy about a sports agent, Arli$$, that, while crass, was probably the most insightful show ever done about pro sports in modern America (it was a lot better than Aaron Sorkin's "Sports Night," for example). It got very poor ratings, but it survived for about a half dozen seasons because whenever HBO was serious about canceling it, big shots like Tom Brokaw would call up the head of HBO and say they would drop their subscription if Arliss wasn't renewed.

13 thehova October 19, 2010 at 11:58 pm

Just want to add, I think a lot of Americans love British comedies. They are often shown on public television here. My parents were big fans of "Yes Minister". I watch a lot on Netflix.

14 thehova October 20, 2010 at 2:42 am

Can't wait to read that.

I'm fascinated by the BBC. Libertarian Americans like myself look at it and imagine that it couldn't possibly work.

And yet it does work amazingly well. I've read that most British don't mind the tax. And the content is great, despite facing much less direct financial incentives than commercial stations.

15 Ted Craig October 20, 2010 at 9:06 am

Trevor,

1. ITV would be just about anything shown on PBS Mystery.

2. Heroes, The Wire, Mad Men, Friends, The Simpsons, Cagney and Lacey….

That said, BBC is first-rate, with few puppet news shows. But it may be the exception rather than the rule for state TV.

16 Trevor Jacobs October 21, 2010 at 1:27 am

Ted Craig,

The BBC did show Heroes in prime time, The Wire very late at night (sadly). Mad Men was on BBC4 (a long way down the list). I'd never heard of Cagney and Lacey; turns out it aired in the 80s. They do air Family Guy on BBC3 late night. But not much more that comes to mind…

The commercial Channel 4 carried the Simpsons and Friends, along with South Park, Lost, Ugly Betty, Desperate Housewives, ER, My Name is Earl, Stargate, Star Trek etc

So not as much Americana on the BBC as you might think, and certainly not on the main BBC channels during prime-time.

17 Dermatal October 26, 2010 at 4:49 am

Even I prefer to watch movies in theaters only because that experience is really unique.

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