Time Warner Shouldn't Give Up On Blockbusters Yet

from the oh-it's-different-this-time dept

In an intriguing piece, Business2.0's Erick Schonfeld offers his prescription for what's been ailing his employer, Time Warner. One of his suggestions is that the company reduce its dependence on high-cost blockbuster films, and instead focus on, in his term, nichebusters -- small, cheaper products that target fans devoted to a certain area. The case for niches has been bandied about for a while, particularly since the term "long tail" has been popularized. But does this strategy make sense for Time Warner? Schonfeld argues that media can no longer depend on megahits, a statement that is probably based on recent weak ticket sales. But due to the nature of the industry (the economics of which are similar to pharmaceuticals and venture capital), profit outcomes are highly variable. Looking at a few years of data and drawing a conclusion is like rolling three sevens in a row in craps and declaring that the dice must be loaded. Even if low-cost, niche content will be big (and the popularity of Youtube, et. al. suggests it will), there's a fundamental reason Time Warner shouldn't alter their strategy: they have no competitive advantage in this area. What a company like Time Warner has is its ability to marshal the hundreds of millions it dollars it takes to make blockbusters these days. This is a great barrier to entry, one of the few advantages of mammoth size, and not something they should forfeit too readily. While the big media companies have a lot of adapting to do, if they're going to thrive in the digital age, quitting production of popular movies wouldn't be a wise strategy.