Friday, 27 December 2013

The economics of Game of Thrones

I'm a reader, the old-fashioned kind. The house is full of books, there's a stack of unread ones beside the bed and a Unity Books loyalty card in my wallet, I've got accounts with Amazon, and Barnes and Noble, and The Book Depository (NB no postage charges to New Zealand). I've got nine library books currently checked out, and another five books stacked up as requests on the (excellent) Auckland Library system.

And normally I wouldn't give you tuppence for the film or TV adaptation of any book I've read, as I like to think the images you create for yourself when you read are better than the ones confected for you by someone else. Especially when the confections are by the big US studios, where you're pretty much guaranteed a dumbed down slab of sugary pap.

With one big exception.

I passed on the books. And I let three and a bit seasons of the TV series go by before deciding to give it a try. And then I got hooked on - well, you saw it in the title of this post, it's Game of Thrones. I binged on the thing, two or three episodes a night till I'd done the lot.

Why, you ask, is this in an economics blog?

First up, because I was kind of intrigued by the reaction of the makers of Game of Thrones (HBO) to the news that GoT was the most pirated TV show of 2013 (ditto in 2012). Instead of the "piracy is killing Hollywood" moaning you might have expected, they were upbeat about it. In this article, for example, we got the views of the top brass:
Similar to Game of Thrones director David Petrarca, [Jeff] Bewkes [CEO of HBO's parent company, Time Warner] believes that the free word of mouth advertising eventually leads to more paying subscribers.
“Our experience is that it leads to more paying subs. I think you’re right that Game of Thrones is the most pirated show in the world. That’s better than an Emmy,” Bewkes said.
I'm aware, from expert economic evidence given in legal proceedings, that there are theoretical arguments that piracy may not in fact harm the copyright holder, though I have to say it's always looked a bit of an uphill argument when stacked against what looks like a more immediately obvious "taking the bread from our mouths" line. I suspect that economists in the expert witness game who take a benign view of piracy will be making good use of this latest GoT evidence. And I also suspect that we are in the absolute infancy of internet business strategy: when the makers of a red-hot series are relaxed about piracy, you sense that they are on to something that isn't yet in the Harvard Business Review.

And second, what's all this about piracy?

Did I go trolling through the deepest darkest internet for GoT? Visit dubious torrent sites? Set up some devious VPN workaround to convince US sites I wasn't in New Zealand?

No. I went to Polly Streaming. I've no idea who they are, and their 'About us' page is uninformative, but they offer basic free services (which include the whole of GoT) plus a premium subscription, and have a Facebook page, so they're hardly lurking in some shadowy internet lair. And they don't seem to care where in the world you are. All of which tends to suggest that the GoT folks know all about them, and either don't give a damn, or reckon it's a good thing, or are actively in on it with them. Every which way, you sense, again, that there's a cunning strategic plan behind this "piracy".

And then there are the economic lessons from GoT itself.

The big lesson from GoT is that if you're spending up big, spend the money on the right things. If the choice is (and it often seems to be), (A) spend US$20 million on the bankable name that you think will put bums on seats no matter what the movie is, or (B) spend US$20 million on sets, locations, effects, no-name but highly competent actors and a quality product, then HBO has successfully demonstrated that the second choice works better, no matter what the bean counters might advise. The more I look at successful products, the more I'm convinced that out of the SPQR mix (service, price, quality, range), quality trumps all in the longer run.

Another lesson is that the public is not made up of ninnies in a convent school. Do we want to watch only MLVS movies? No. But do we want to see sanitised, infantilised, prettified versions of MLVS issues? No we don't. GoT treats its customer base like adults. And like most business strategies that rely on people being intelligent judges of the product, it's a winner.

Another is that it made me wonder about the supposed wonderfulness of our new Ultra Fast Broadband (UFB) rollout. My copper-based ADSL internet service delivered GoT to my laptop, with completely acceptable video quality (and I'm not even getting the top end of copper-based delivery). Remind me why I need to pay more for the same experience delivered over fibre?

Finally, I was struck by the quality of the GoT opening credits. And it seemed to me that there was a good economic motivation for the high quality (as there was for the equally stunning opening credits for the Rome series). Bankers used to adopt the same strategy, and for the same reason. How do you signal to new customers of an intangible service, who know nothing of you or your reputation, that you are a quality service provider? In the case of banks, and I'm thinking here of the likes of Irving Trust and Morgan Guaranty and their erstwhile palazzi on Wall Street, by having extraordinarily opulent-looking head offices. Look how rich we are! How dependable!

And so it goes with the opening titles. Put your production values into the opening - sophisticated computer graphics, lush colouring, an original and striking theme tune, a bit of ambiguity, a hint of special effects - and before they see the rest of it, consumers are convinced that here's a quality product that's had thought and money spent on it.

Maybe, to come full circle, you can't judge a book by its cover. But you can choose a TV series by its opening.

1 comment:

  1. Great post.

    When I think "economics of Game of Thrones", I think of the internal logic of Westeros. If you have winters of long and variable length, way more tech development would have gone into canning and food preservation. Tech there looks maybe 12-14th C, but there's nothing particularly tricky about canning other than getting a decent seal on a jar; I'd have expected Westeros to have figured it out. How is it that Westeros has to import glass rather than having a huge domestic glass industry for glasshouses?

    Almost finished reading the last book now. While Winterfell has glasshouses for winter gardens, it's darned hard to find evidence of huge amounts of food storage other than some ice-house storage within the Wall for the Night's Watch. Makes no darned sense. Had a few initial thoughts on it here.


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