The $650bn binge
Creative destruction in the entertainment business has had blockbuster results
America has seen some spectacular investment booms: think of the railways in the 1860s, Detroit’s car industry in the 1940s or the fracking frenzy in this century. Today the latest bonanza is in full swing, but instead of steel and sand it involves scripts, sounds, screens and celebrities. This week Disney launched a streaming service which offers “Star Wars” and other hits from its vast catalogue for $6.99 a month, less than the cost of a DVD. As the business model pioneered by Netflix is copied by dozens of rivals, over 700m subscribers are now streaming video across the planet. Roughly as much cash—over $100bn this year—is being invested in content as it is in America’s oil industry. In total the entertainment business has spent at least $650bn on acquisitions and programming in the past five years.
This binge is the culmination of 20 years of creative destruction. New technologies and ideas have shaken up music, gaming and now television. Today many people associate economic change with deteriorating living standards: job losses, being ripped-off, or living under virtual monopolies in search and social networks. But this business blockbuster is a reminder that dynamic markets can benefit consumers with lower prices and better quality. Government has so far had little to do with the boom, but when it inevitably peaks the state will have a part to play, by ensuring that the market stays open and vibrant.