Month / July 1999

by Clay Shirky

The Internet and Hit-driven Industries

Why Hollywood is really going to hate the Web.

First published on SAR, 07/99.

ALERT! New community-based email virus on the loose!

This virus, called the “DON’T GO” virus, primarily targets major Hollywood studios, and is known to proliferate within 24 hours of the release of a mediocre movie. If you receive a piece of email from a friend with a subject line like “Notting Hill: Don’t Go”, do not open it! Its contents can cause part of your memory to be erased, replacing expensive marketing hype with actual information from movie-goers. If this virus is allowed to spread, it can cause millions of dollars of damage to a Hollywood studio in a single weekend.

Hit-driven industries (movies, books, music, et al.) are being radically transformed by Internet communities, because the way these industries make money is directly threatened by what Internet communities do best – move word of mouth at the speed of light. Internet communities are putting so much information in the hands of the audience so quickly that the ability of studios, publishing houses, and record labels to boost sales with pre-release hype are diminishing even as the costs of that hype are rising.

Consider Hollywood, the classic hit-driven industry. The financial realities can be summed up thusly:

Every year, there are several major flops. There are a horde of movies that range from mildly unprofitable to mildly profitable. There are a tiny core of wildly profitable hits. The hits are what pays for everything else.

This is true of all hit-driven businesses – Stephen King’s books more than earn back what Marcia Clark lost, the computer game Half-Life sells enough to pay for flops like Dominion, Boyzone recoups The Spice Girls latest album, and so on. Many individual works lose money, but the studios, publishers, or labels overall turn a profit. Obviously, the best thing Hollywood could do in this case would be to make all the movies worth watching, but as the perennial black joke goes, “There are three simple rules for making a successful movie, but unfortunately nobody knows what they are.” Thus the industry is stuck managing a product whose popularity they can’t predict in advance, and they’ve responded by creating a market where the hits more than pay for the flops.

For Hollywood, this all hinges on the moment when a movie’s quality is revealed: opening weekend. Once a movie is in the theaters, the audience weighs in and its fate is largely sealed. Opening weekend is the one time when the producers know more about the product than the audience — it isn’t until Monday morning water cooler talk begins that a general sense of “thumbs up” or “thumbs down” becomes widespread. Almost everything movie marketers do is to try to use the media they do control — magazine ads, press releases, commercials, talk show spots — to manipulate the medium they don’t control — word of mouth. The last thing a studio executive wants is to allow a movie to be judged on its merits — they’ve spent too much money to leave things like that to the fickle reaction of the actual audience. The best weapon they have in this fight is that advertising spreads quickly while word of mouth spreads slowly.

Enter the Internet. A movie audience is kind of loose community, but the way information is passed — phone calls, chance encounters at the mall, conversations in the office — makes it a community where news travels slow. No so with email, news groups, fan web pages — news that a movie isn’t worth the price of admission can spread through an Internet community in hours. Waiting til Monday morning to know about a movie’s fate now seems positively sluggish — a single piece of email can be forwarded 10 times, a newsgroup can reach hundreds or even thousands, a popular web site can reach tens of thousands, and before you know it, it’s Saturday afternoon and the people are staying away in droves.

This threat — that after many months and many millions of dollars the fate of a movie can be controlled by actual fan’s actual reactions — is Hollywood’s worst nightmare. There are two scenarios that can unfold in the wake of this increased community power: The first scenario (call it “Status Quo Plus”) is that the studios can do more of everything they’re already doing: more secrecy about the product, more pre-release hype, more marketing tie-ins, more theaters showing the movie on opening weekend. This has the effect of maximising revenues before people talk to their friends and neighbors about the film. This is Hollywood’s current strategy, having hit its current high-water mark with the marketing juggernaut of The Phantom Menace. The advantage of this strategy is that it plays to the strengths of the existing Hollywood marketing machine. The disadvantage of this strategy is that it won’t work.

Power has moved from the marketer to the audience, and there is no way to reverse that trend, because nothing is faster than the Internet. The Internet creates communities of affinity without regard to geography, and if you want the judgement of your peers you can now get it instantly. (Star Wars fan sites were posting reactions to “The Phantom Menace” within minutes of the end of the first showing.) Furthermore, this is only going to get worse, both because the Internet population is still rising rapidly and because Internet users are increasingly willing to use community recommendations in place of the views of the experts, and while experts can be bought, communities can’t be. This leaves the other scenario, the one that actually leverages the power of Internet communities: let the artists and the fans have more direct contact. If the audience knows instantly whats good and what isn’t, let the creators take their products directly to the audience. Since the creators are the ones making the work, and the community is where the work stands or falls, much of what the studio does only adds needless expense while inhibiting the more direct feedback that might help shape future work. Businesses that halve the marketing budget and double the community outreach will find that costs go down while profits from successful work goes up. The terrible price of this scenario, though, is that flops will fail faster, and the studio will have to share more revenue with the artist in return for asking them to take on more risk.

The technical issues of entertainment on the Internet are a sideshow compared to community involvement — the rise of downloadable video, MP3 or electronic books will have a smaller long-term effect on restructuring hit-driven industries than the fact that there’s no bullshitting the audience anymore, not even for as long as a weekend. We will doubtless witness an orgy of new marketing strategies in the face of this awful truth — coupons for everything a given movie studio or record label produces in a season, discounts for repeat viewings, Frequent Buyer Miles, on and on — but in the end, hit driven businesses will have to restructure themselves around the idea that Internet communities will sort the good from the bad at lightning speed, and only businesses that embrace that fact and work with word of mouth rather than against it will thrive in the long run.

by Clay Shirky

Language Networks

On the net, two countries border each other only if they share a language.

7/7/1999

The 21st Century is going to look a lot like the 19th century, thanks to the internet.
A recent study in the aftermath of the Asian financial storm (“Beyond The Crisis –
Asia’s Challenge for Recovery,” Dentsu Institute for Human Studies) found that citizens of Asian countries who speak English are far more likely to be online than those who don’t. The study, conducted in Tokyo, Beijing, Seoul, Bangkok, Singapore, and Jakarta, found that English speakers were between two and four times as likely to use the internet as their non-English speaking fellow citizens. Within each country, this is a familiar story of haves and have-nots, but in the connections between countries something altogether different is happening — the internet is creating an American version of the British Empire, with the English language playing the role of the Royal Navy.

This isn’t about TCP/IP — in an information economy the vital protocol is language,
written and spoken language. In this century, trade agreements have tended to revolve around moving physical goods across geographical borders: ASEAN, EU, OAS, NAFTA. In the next century, as countries increasingly trade more in information than hard goods, the definition of proximity changes from geographic to linguistic: two countries border one another if and only if they have a language they can use in common. The map of the world is being redrawn along these axes: traders in London are closer to their counterparts in New York than in Frankfurt, programmers in Sydney are closer to their colleagues in Vancouver than in Taipei. This isn’t an entirely English phenomenon: on the internet, Lisbon is closer to Rio than to Vienna, Dakar is closer to Paris than to Nairobi.

This linguistic map is vitally important for the wealth of nations — as the Dentsu
study suggests, the degree to which a country can plug into a “language network,”
especially the English network, will have much to do with its place in the 21st century
economy. These language networks won’t just build new connections, they’ll tear at
existing ones as well. Germany becomes a linguistic island despite its powerhouse
economy. Belgium will be rent in two as its French- and Flemish-speaking halves link
with French and Dutch networks. The Muslim world will see increasing connection among its Arabic-speaking nations — Iraq, Syria, Egypt — and decreasing connections with its non-Arabic-speaking members. (Even the translation software being developed reflects this bias: given the expense of developing translation software, only languages with millions of users — standard versions of English, French, Portuguese, Spanish, Italian, German — will make the cut.) And as we would expect of networks with different standards, gateways will arise; places where multi-lingual populations will smooth the transition between language networks. These gateways — Hong Kong, Brussels, New York, Delhi — will become economic centers in the 21st century because they were places where languages overlapped in the 19th.

There are all sorts of reasons why none of this should happen — why the Age of Empire shouldn’t be resurrected, why countries that didn’t export their language by force should suffer, why English shouldn’t become the Official Second Language of the 21st century — but none of those reasons will matter. We know from the 30-year history of the internet that when a new protocol is needed to continue internet growth, it’ll be acquired at any expense. What the internet economy demands more than anything right now is common linguistic standards. In the next 10 years, we will see the world’s languages sorted into two categories — those that form part of language networks will grow, and those that don’t will shrink, as the export of languages in the last century reshapes the map of the next one.

by Clay Shirky

Language, The Internet, and the Next Century

Human language is the next great challenge for the world’s networks.

Published in ACM, 12/1999.

The 21st Century is going to look a lot like the 19th century, thanks to the internet. A recent study in the aftermath of the Asian financial storm (“Beyond The Crisis – Asia’s Challenge for Recovery,” Dentsu Institute for Human Studies) found that citizens of Asian countries who speak English are far more likely to be online than those who don’t. The study, conducted in Tokyo, Beijing, Seoul, Bangkok, Singapore, and Jakarta, found that English speakers were between two and four times as likely to use the internet as their non-English speaking fellow citizens. Within each country, this is a familiar story of haves and have-nots, but in the connections between countries something altogether different is happening — the internet is creating an American version of the British Empire, with the English language playing the role of the Royal Navy.

This isn’t about TCP/IP — in an information economy the vital protocol is language, written and spoken language. In this century, trade agreements have tended to revolve around moving physical goods across geographical borders: ASEAN, EU, OAS, NAFTA. In the next century, as countries increasingly trade more in information than hard goods, the definition of proximity changes from geographic to linguistic: two countries border one another if and only if they have a language they can use in common. The map of the world is being redrawn along these axes: traders in London are closer to their counterparts in New York than in Frankfurt, programmers in Sydney are closer to their colleagues in Vancouver than in Taipei. This isn’t an entirely English phenomenon: on the internet, Lisbon is closer to Rio than to Vienna, Dakar is closer to Paris than to Nairobi.

This linguistic map is vitally important for the wealth of nations — as the Dentsu study suggests, the degree to which a country can plug into a “language network,” especially the English network, will have much to do with its place in the 21st century economy. These language networks won’t just build new connections, they’ll tear at existing ones as well. Germany becomes a linguistic island despite its powerhouse economy. Belgium will be rent in two as its French- and Flemish-speaking halves link with French and Dutch networks. The Muslim world will see increasing connection among its Arabic-speaking nations — Iraq, Syria, Egypt — and decreasing connections with its non-Arabic-speaking members. (Even the translation software being developed reflects
this bias: given the expense of developing translation software, only languages with millions of users — standard versions of English, French, Portuguese, Spanish, Italian, German — will make the cut.) And as we would expect of networks with different standards, gateways will arise; places where multi-lingual populations will smooth the transition between language networks. These gateways — Hong Kong, Brussels, New York, Delhi — will become economic centers in the 21st century because they were places where languages overlapped in the 19th.

There are all sorts of reasons why none of this should happen — why the Age of Empire shouldn’t be resurrected, why countries that didn’t export their language by force should suffer, why English shouldn’t become the Official Second Language of the 21st century — but none of those reasons will matter. We know from the 30-year history of the internet that when a new protocol is needed to continue internet growth, it’ll be acquired at any expense. What the internet economy demands more than anything right now is common linguistic standards. In the next 10 years, we will see the world’s languages sorted into two categories — those that form part of language networks will grow, and those that don’t will shrink, as the export of languages in the last century reshapes the map of the next one.

by Clay Shirky

Internet Use and National Identity

The effects of Internet adoption on national culture.

First published in FEED, 7/15/99.

The United Nations released its annual Human Development Report this week, including a section concerning the distribution of Internet use among the nations of the world. It painted a picture of massively unequal distribution, showing among other things that the United States has a hundred times more Internet users per capita than the Arab States, and that Europe has 70 times more users per capita than sub-Saharan Africa.
Surveying the adoption rates detailed in this report, anyone who has any contact with the Internet can only be left with one thought — “Well, duh.” There is some advantage to quantifying what is common knowledge, but the UN has muddied the issues here rather than clarifying them.

Is there really anybody who could be surprised that the country that invented the internet has more users per capita than Qatar? Is there really anyone who can work themselves up over the lack of MyYahoo accounts in nations that also lack clean water? The truth of the matter is that internet growth is not gradual, it is a phase change — when a country crosses some threshold of readiness, demand amongst its citizens explodes. Beneath that threshold, trying to introduce the internet by force is like pushing string — its is absurd to put internet access on the same plane as access to condoms and antibiotics.

Once a country reaches that threshold, though, there is one critical resource that drives internet adoption, and the UN desperately wants that resource to be money. Among the UN’s proposals is a “bit tax” (one penny per 100 emails) to build out telecommunications infrastructure in the developing world. While improving infrastructure is an admirable goal, it fudges the real issue: among countries who are ready for rapid internet adoption, the most important resource isn’t per capita income but per
capita freedom. Massive internet adoption of the sort the UN envisions will require an equally massive increase in political freedom, and the UN is in no position to say that part out loud.

The HDR report is hamstrung by the UN’s twin goals of advancing human rights and respecting national sovereignty. Where the internet is concerned, these goals are incompatible. The United Arab Emirates has a much better telecom infrastructure than Argentina, but a lower per capita use of the internet. Saudi Arabia has a higher per capita income than Spain but lower internet penetration. What Argentina has more of
than the UAE is neither infrastructure, nor money, but the right of the citizens to get information from a wide variety of sources, and their willingness to exercise that right. Among nations of relatively equal development, it will be the freer nations and not the richer ones that adopt the internet fastest.

The report addresses this issue by suggesting a toothless campaign to “…persuade national governments not to restrict access to the internet because of its tremendous potential for human development,” avoiding mentioning that the “potential for human development” is a death sentence for many of the world’s leaders. If the UN was serious
about driving internet adoption, the section on the internet would have started with the following declaration: “Attention all dictators: internet access is the last stop for your regime. You can try to pull into the station gradually, as China and Kuwait are trying to do, or you can wait to see what happens when you plow into the wall at full speed, like North Korea and Kenya, but the one thing you can’t do is keep going full steam ahead. Enjoy your ride.”