Office: SM 3.801
Hours: R. 3-5 or by appointment
The Business of Entertainment
This is a course that analyzes the entertainment industry using the tools of economics. It will be useful if you have had microeconomics sometime in your life although you can take the course without it if you pay close attention during the first few lectures when we will review the material. The entertainment industries we will examine are music, movies, radio and television, videogames, and books. Entertainment industries tend to follow similar patterns to one another although the current switch to digital formats is causing a great deal of upheaval in these industries. We will examine how entertainment products differ from regular goods, the nature of competition in these markets, how these goods should be priced, how these goods are distributed, how these markets have evolved and what might lie ahead, the nature of the contracts within these industries and the role of copyright. A topic of particular interest will be the impact of the Internet and file-sharing on these industries.
The material we will cover is not fully represented in any text, unfortunately. The closest thing to a text is Entertainment Industry Economics by Harold Vogel (Cambridge University Press, 6th edition). He provides a good deal of information about many industries. He provides much data but less analysis that I would like. The lectures, slides, and readings should help fill in the gaps. The price is about $30.
There are two types of articles on the reading list, some more important than others. The articles marked with an asterisk are more important than others.
Promises to Keep by William Fisher is an interesting book with which I have some important disagreements but which does a good job of presenting much of the current controversies surrounding these industries. It would make a useful second text. You should be able to get it for about $20.
Additional material: I have two books that discuss some of the issues that will arise in this course. “Rethinking the Network Economy” published by Amacom ($20) is the one I would suggest although “Winners, Losers, and Microsoft” published by the Independent Institute would work for anyone interested in the Microsoft case. Another book containing some useful information is Information Rules by Shapiro and Varian.
There are several other texts on ‘media economics’ that you might find useful. One is Media Economics: Theory and Practice edited by Alison Alexander et. al., and published by Lawrence Erlbaum Associates. Media Economics by Alan Albarran is another. Neither is particularly good. All these books are much less expensive than the typical textbook so you can easily get several and still stay within you budget.
Finally, if you have had microeconomics I hope you still have your textbook (for example, Landsburg's Price Theory and Applications), since it will have useful background material.
The Wall Street Journal has news about these industries every day or two. I am requiring that you obtain access these articles. You can subscribe ($32 for 15 weeks; it is a great newspaper) or you can use the library “factiva” service on the Internet to find the articles which are online.
Exams: 30% for the midterm, 50% for the final
Paper: 20%. Pick a market in transition—movies, television, music. Write a paper predicting what will happen in the next ten years. Use economic analysis as much as possible. Don’t just listen to the pundits. Be very critical of them.
PowerPoint slides exist for this class but they are always changing. The current PowerPoint slides are available here.
Practice Questions here.
*Material in your old micro text (such as Landsburg) that talks about elasticity, monopoly, and price discrimination
*Chapter 1 in Vogel
Alexander et. al. Chapter 1
Shapiro and Varian, Chapter 3.
Stigler, G. "A note on block booking", The Supreme Court Review, 1963.
*Movies May Hit DVD, Cable Simultaneously By Sarah Mcbride, Peter Grant and Merissa Marr; The Wall Street Journal, January 4, 2006; Page B1
*Will 'Bubble' Burst the Movie Business? Mark Cuban's Plans to Send Films To Theaters and DVD Simultaneously Are Making Some People Nervous, Anthony Kaufman, Wall Street Journal Online December 3, 2005
*Rethinking the Network Economy: Chapters 1, 2, 3
*W. Brian Arthur, “Positive Feedbacks in the Economy,” Scientific American, Feb. 1990 at:along with other Arthur papers.
*“Economists Decide to Challenge Facts of the QWERTY Story” Lee Gomes, Wall Street Journal, February 25, 1998
*“So Long , Supply and Demand: There's a new economy out there -- and it
looks nothing like the old one”, by Thomas Petzinger Jr.,
*The Rise and Fall of Beta by Marc Wielage with Rod Woodcock
Winners, Losers and Microsoft: Chapters 2-5
David, Paul. A. 1985. "Clio and the Economics of QWERTY", 75 American Economic Review, 332-7 (May).
Liebowitz, S. J. and Margolis, S. E. "The Fable of the Keys," JLE, April 1990, pp. 1-26. Click Here.
Paul A. David, At last, a remedy for chronic QWERTY-skepticism! here
*RealNetworks Seeks To Unlock iPod From iTunes Nick Wingfield and Pui -Wing Tam, The Wall Street Journal, July 26, 2004; Page B1
*Apple Warns RealNetworks On iPod Access By Pui -Wing Tam And Nick Wingfield, The Wall Street Journal July 30, 2004; Page B3
Wall Street Journal “Amazon Plans Music Service To Rival iTunes” ETHAN Smith and Mylene Mangalindan February 16, 2006; Page B1
Calling All iPods By Bill Alpert 9 January 2006 Barron's
Variety “Movie biz on the 'Bubble' Pic's triple bow inconclusive” GABRIEL SNYDER, STEVEN ZEITCHIK Sun., Jan. 29, 2006, 6:52pm
*Atari Games Corp. vs. Nintendo of America Inc (just first few pages describing nature of the suit).
History of early video games: http://www.emuunlim.com/doteaters/play3sta6.htm
*Microsoft Taps Top Designer To Win Over Japan's Gamers By Phred Dvorak and Robert A. Guth, The Wall Street Journal, February 25, 2005; Page B3
Helmut M. Dietl and Susanne Royer, Intra-system competition and innovation in the international videogame industry, INNOVATION: management, policy & practice Volume 5, Issue 2–3, November/December 2003 here
Landsburg: Chapter 14.2, Public Goods
*17 Famous Economists Weigh in on Copyright: The Role of Theory, Empirics,
and Network Effects.
"Some Puzzling Behavior by the Owners of Intellectual Products," Contemporary Policy Issues, July, 1987, pp. 44-53.
Samuelson “The Copyright Grab”
Play God – determine the ideal copyright
*Rethinking the Network Economy: Chapter 7
*Hal R. Varian “Copying and Copyright” Forthcoming in Journal of Economic Perspectives, draft
Chapter 3 in Fisher Liebowitz, S. J., "Copying and Indirect Appropriability: Photocopying of Journals," Journal of Political Economy, October 1985, 945-957. Also:
Shapiro and Varian, Chapter 4
*Music Labels See New Threat From Satellite Radio Receivers That Can Record, Manage Songs Stir Concerns Over Copyrights, Royalties By Sarah Mcbride, The Wall Street Journal, December 8, 2005; Page A1
*Media Companies Go Too Far in Curbing Consumers' Activities, Walter Mossberg, Wall Street Journal, October 20, 2005; Page B1
*Tension grows between labels and digital radio, John Borland, URL: http://news.zdnet.com/2100-9595_22-6027079.html
*Chapter 5 in Vogel
*Chapter 2 in Fisher
Chapter 11 in Alexander et. al.
Music Rights Primer http://stevegordonlaw.com/MusicPrimer.doc
A Better Way Forward: Voluntary Collective Licensing of Music File Sharing "Let the Music Play" White Paper http://www.eff.org/share/collective_lic_wp.php
* Stan Liebowitz “File-Sharing: Creative Destruction or just Plain Destruction?” Journal of Law and Economics April, 2006. click here.
Stan Liebowitz “Will MP3 downloads Annihilate the Record Industry? The Evidence so Far” Advances in the Study of Entrepreneurship, Innovation, and Economic Growth, V. 15, 2004, pp. 229-260.
*Felix Oberholzer and
“Appeals Court Blocks RIAA Efforts to Identify Music Downloaders” WSJ
“How record companies could embrace Napster and maintain profits” From Linux
Story about RIAA beginning to prosecute students click here
*Vogel: Chapters 6, 7, 8, 9 (check in new edition)
Alexander et. al. Chapters 5,7,8,10,12
* Coase, Ronald (1979), “Payola in Radio and Television Broadcasting,” Journal of Law and Economics, October; 269-328.
*Stan Liebowitz “The Elusive Symbiosis: The Impact of Radio on the Record Industry” The Review of Economic Research on Copyright Issues Vol. 1, pp.93-118 2004.
Coase RH “Broadcast Spectrum and the FCC”
Nielsen, comScore, NPD, etc. People meters, surveys, software.
*Wall Street Journal “Ad Measurement Is Going High Tech” April 6, 2006; Page B4; Don Clark here
*Vogel: Chapters 2, 3, 4
Alexander Chapter 9
Orbach Barak Y. “Antitrust and Pricing In the Motion Picture Industry”
Screenwriters Press For Bigger DVD Payday By MERISSA MARR Staff Reporter of
*Vogel, chapter 10
Ads in Videogames Pose a New Threat To Media Industry, Kevin J. Delaney, The Wall Street Journal July 28, 2004; Page A1
*Chapter 6 in Fisher: http://cyber.law.harvard.edu/people/tfisher/PTKChapter6.pdf
*”Alternative Copy Systems: The Problems with a Compulsory License”, Stanley
J. Liebowitz, (Vol. 1, No. 2,
“Impose a Noncommercial Use Levy to Allow Free P2P File-Swapping and Remixing”, Neil Weinstock Netanel,