Posted by James Lawler
There’s been a great deal of breathless chatter recently about comedian Louis CK’s online sale of his comedy show, which, at the risk of dredging up what is old news at today’s pace, is as good a starting point as any for this post.
Some of the latest praise came from Fred Wilson, the founder of Union Square Ventures, who doffed his hat in a recent post to the power of direct-to-fans sales, repeating a familiar refrain that a bracing new age of unbridled creative genius is upon us. In this brave new world, the Artist finally invents and fully controls her own destiny.
The narrative goes something like this:
Venus begins her rise at the age of 11, from the humble beginnings of her first Kickstarter campaign. Re-Tweeting and Liking her way to her first 100 followers and $100 in donations, she makes an incredibly moving 2-minute short film on her iPhone. She uploads that gem to YouTube. From there, her creative brilliance pulses forth in waves of ones and zeros, spreading like digital Ebola via Tumblr, Twitter, and Facebook profiles, populating millions of Newsfeeds, pulling in tens of millions of clicks, Followers, and Friends.
At age 13, she blossoms with a foray into feature-length films, which she finances from hundreds of thousands of micro-donations on her own website. Each new release causes riots in areas with limited Internet access (such as most parts of America and some third world countries). Her parents have begun alerting heads of state whenever their daughter approaches any internet-enabled device. Venus soon breaches 200 million Followers on Twitter (a woman from a rural village in China dies from anaphylactic shock when she learns she’s #200,000,000).
By the age of 20, with a single Tweet (“$1 pls: bt.ly/d8L11d”), she crowd-funds an epic outer-space post-singularity fantasy 3-D transmedia extravaganza in your basic iMovie —Family Edition. The production is crowd-produced with the help of graphic artists worldwide, who give Venus their few spare minutes for a chance to make meaningful work and see their names in the credits (!). Venus, (who has been told by Google that if she is a good person, she will understand that Information is Free) turns down lucrative offers from studios and puts the work on YouTube.
A few of her fans give another dollar each on her website via PayPal, and, with $20,000,000 in the bank, she has made it big. She gives half of that money away to save starving children. Google, whose executives have begun naming their own children Venus and are now rolling in hundreds of millions of dollars from ad sales around her content, happily matches her donation.
The VC community, which owns 20% of the free tools and platforms Venus has used to build her superstardom, sell their stakes for 500x their initial investment. The new valuations have been spurred by the hundreds of millions of Venus fans, who throw their personal information like it’s last week’s garbage at whoever offers them a chance to see their idol’s latest creation (we are what we WANT in this new age — and everyone’s cool with that).
Her unpaid collaborators, seeing their names in the credits of her mega-hits, get a warm fuzzy feeling inside, which they distinguish from hunger (they haven’t been able to buy food in years for all the free stuff they’ve been making for everyone), and they feel really good about that. Venus herself, who only cares about the happiness of her fans and the quality of her work, takes a glorious digital bow. Everyone is happy and rich!
Does the Venus myth really make any sense?
We might take the phenomena of Susan Boyle, Lady Gaga, the crowd-funded film “The Tunnel”, or Louis CK and his online video sale, as evidence of the new world order — of the possibility of the little artist making it big under his own steam. But doing so would obscure the essential realities that buttress the careers these artists have built, and the careers others like them will probably build in the future.
To understand how a handful of artists (or movies) have succeeded in the marketplace, we should look at the big picture, which is far less glorious than the story of any individual Venus. As those of us in the creative community know (but may not enjoy thinking about), for every Justin Bieber or Avatar movie, there are at least tens of thousands of other artists and movies that don’t make it, and a significant number that lose lots of money.
There is actually a class of mathematical relationships between the level of success and incidence of success in certain areas called power laws that characterize this phenomenon. Things like wealth, earthquake intensity, blog traffic, popularity in high school, Hollywood movie box office, or connectivity in social networks, vary more or less as inverted exponentials to the number of people or nodes with such attributes. The shape looks like this, with intensity of the attribute along the Y-axis, and frequency along the X-axis:
This graph could apply to Hollywood movie box office — very few films make a lot of money, and the majority of films lose a lot of money (but the big wins support the losers). It could also apply to the success of Hollywood producers or artists. There are a mere handful of top filmmakers who can find a way to make most projects they are interested in; the rest have a much harder time.
There are a few counter-intuitive observations that emerge from shapes like this when it comes to the entertainment industry. Given more choice (i.e., more films or more musicians), one might conclude that revenue from people buying those movies and films would be more evenly distributed among all the films available — with lots of choices, and lots of easy ways for good films to be seen, shouldn’t the worthy independent films be able to take advantage of the “long tail” and make a lot of money? Similarly, we might assume that because anyone can access a microphone and camera and create a YouTube channel, shouldn’t we (i.e., the majority of us listeners/viewers) be tuning in to more than the same 5 artists all the time?
Well, we could, and there are long-tail strategies (Netflix has a long-tail strategy, to some extent, though there is evidence they may have outgrown it), but a power curve distribution implies the opposite — the greater the number of elements in the distribution, the greater the distance between the average performers and the biggest winners.
Broader networks with more and more channels feeding to every node (person), does not necessarily mean that content is more easily distributed across that network — the number of channels offers more potential opportunity but also more interference/competition.
But why is this?
A simplistic way to think about this kind of phenomena is that popularity, or box office, or wealth, or success as an entertainer, develops over time in a highly non-linear way.
In the case of movies, imagine there are 10 films at the local movie theater. Suppose each film initially has a 1/10 chance of attracting an audience member, but once that person has seen a film and has reported his review to his friends, the probabilities begin to shift. With each successful viewing, a film becomes increasingly likely to get more views; with each negative audience experience, the opposite happens.
As audience members, we don’t act autonomously, and the content we are choosing from is not all of equal quality. While each film might have an equal chance of being seen when it is first presented in theater or on VOD to the public (scaled by some factor related to marketing and the stars who are in it, perhaps), the chances of one film being seen over another can exponentially diverge.
Similar principles apply to filmmakers and other entertainers as they do to individual movies. Over time, if an entertainer is good, he will accumulate fans. But for an entertainer (or a movie) to make a LOT of money, he needs to accumulate a LOT of fans. He needs to compete for an audience’s time and money against all the other more entrenched options that are available. Getting millions of dollars to flow into an entertainer’s pocket probably requires hundreds of millions of connections made between consumers and that entertainer’s work and identity; and because the world of content discovery and consumption is defined by a power curve, it’s extremely (and increasingly) difficult to achieve that.
So how does it actually happen for those artists who really “make” it?
Well, Louis CK has been making comedy since the mid-eighties, and has built a substantial network of fans, which have probably increased significantly since Louie premiered in 2009 on the FX Network, owned by News Corp, which is broadcast to millions of people. Susan Boyle was a YouTube sensation, but she wouldn’t have attracted 100 million views in 5 days without the millions of dollars invested in building the Pop Idol/Britain’s Got Talent/American Idol fan base worldwide.
There is a reason Stefanie Germanotta walked into the office of Vincent Herbert at Interscope Records in 2007 and swore she would be the most loyal artist he would ever sign if he would help her create Lady Gaga and sell 10 million records, and why Scooter Braun felt that even with entertainment power as magnetic as Justin Bieber, he needed to partner with Usher’s label to help him reach scale.
Of course, the success of Susan Boyle, Louis CK, and Lady Gaga and Bieber made the network hubs that helped deliver them to their audience all the more powerful to do it again with someone new.
So, when it comes to selling movies and music to millions of people, there has been a need for major power centers — music labels, movie studios, etc. These entities are required to overcome the hugely daunting problem of reaching massive commercial scale by providing access to historical relationships and deals — which are then leveraged by the artist to climb the power curve.
With Constellation, we have a vision to bring the networks associated with the “hubs” together with the power of the artist. We’re brand-new, but the VIP-hosted model and other features that we are currently and will soon be offering have already attracted major studios as well as smaller companies and independents to promote and sell their work on our platform. You can have a look here: Constellation.
At the end of the day, however, age-old truths about the entertainment business hold sway over the power of any new streaming or sharing platform:
Every enterprising young Venus needs to learn how to hustle.
James Lawler has produced several feature-length films, including The Lottery, the ESPN 30-for-30 film: Fernando Nation, and the narrative films: Lovely, Still and Don’t Let Me Drown. Lawler worked as an interest rate options trader at Merrill Lynch from 2006 to 2009, and prior to that was an assistant to film producer Scott Rudin. He is co-founder and ceo of Constellation, the online movie theater. Follow Constellation on Twitter, @ConstellationTV.