Sunday, February 12, 2006

Paying for Serenity

Last night we watched the DVD of Serenity, the movie/next episode of the Firefly television series. That series was cancelled after just 13 episodes but has been a big seller itself on DVD. But the movie was a surprise hit as well. And it was excellent by the way (well above average for an already good series).

What is interesting about this is that Firefly has been able to do what few before it have done: fail on free to air television and make money from a pay per view model. Of course, the biggest prior success for this model was Star Trek (and by this I mean the original series; also cancelled and later making a comeback at the movies).

With the cancellation of The West Wing, fans are lobbying for a similar move to pay per view. Their rationale is based on a simple back of the envelope calculation. It currently costs about $6 million to make a West Wing episode. That means that if you charged $1.99 per episode (as on iTunes) then you could break even with 2 million viewers (downloads). At the time of its cancellation there were an estimated 8 million viewers in the US alone, so the economics seem to stack up. (See this article in Slate for a discussion). Change the cast and use some bargaining power and you lower the costs making the case stronger.

Sadly, however, while this logic seems compelling, there is a really big difference between 8 million viewers who don't have to pay and 2 million viewers who do. Let's imagine that there is a price to be paid to watch a program on television (say a generous 20 cents). Then for a 1000 percent increase in price, demand would only have to fall by less than three quarters to make the economics worse. In a crude calculation, that translates to a price elasticity of demand of the order of 0.075; making it one of the most inelastic goods pretty much ever. This seems pretty implausible.

Now, I for one would be happy to pay $1.99 or more to watch the West Wing. But I am not sure the market will. But a West Wing movie, that is perhaps another matter. We will need to wait and see.

1 comment:

Anonymous said...

"Sadly?" Frack West Wing. Bring back Firefly!