You Can’t Kill Demand for a Product by Giving It to More People

Dwyane Wade © 2008 David Giard, used under a Creative Commons Attribution-NonCommercial-NoDerivs license.

Dwyane Wade of Miami Heat © 2008 David Giard, used under a Creative Commons Attribution-NonCommercial-NoDerivs license.

Imagine professional basketball as a business that’s exactly the same as it is now, except that you couldn’t watch a game if you weren’t in the stadium when the game happened.

Would it make the live product more valuable? Would the teams suddenly make a fortune charging for tickets, merchandise, food and beverages? Or, would it be a business constantly flirting with financial disaster, looking for ways to “build its audience”?

Bet on the latter. With live competition alone, the NBA would be a smaller, poorer, less culturally relevant institution. Chances are, many of the arenas they currently play in wouldn’t exist at all. Why would you build a STAPLES Center for something a few thousand people turn up to see a few dozen times a year?

If the NBA only had live revenue, it would be a marginal business instead of a multibillion-dollar enterprise. Not only would it be smaller with just the live product, but the live product would be smaller than it is now.

What makes me think that? Because every other way in which the NBA can be consumed drives interest in the live product — both in terms of value and consumption. How do I know I want to be in the arena for Game 7 of the finals? Because I see so much great basketball on TV that I want to get the premium version of that experience whenever I can.

Let’s talk about the furtive moves being made in the direction of broadcasting plays and shows. There’s a fear that by doing so the value of the live experience will be lessened.

History does not suggest that this will be the case. At one time, musicians thought records would destroy the value of live performance. Record makers thought radio would destroy the value of records. Movie theaters thought VCRs would destroy movie sales. In all of these cases, and many others, greater and more freely available access to these products made people want these products more.

If the NBA didn’t yet exist — and it was being started today — would TV be an important part of the business plan? How about downloadable content on the internet? I ask because the ability to provide multiple ways for people to get access to the same content has two magical benefits:

• The extra revenue means you can invest more in the product and the people making the product.

• More people, maybe millions more, become aware of how great your product is.

In my view, starting now but developing in years to come, theater and performing arts venues should find ways of making the content available in multiple forms. Forget about “protecting the business model.” The history of business shows us that the main danger is in missing opportunities by protecting the business model too much. The recorded music business finally did lose value because instead of finding a way to use and profit from file sharing, they fought it. The result was Napster, and the legacy of Napster is that it’s hard to sell recorded music.

Is there a Napster lurking in theater’s future? Is there some innovation so profound it can rip out the economic foundation on which the industry is built in mere weeks or months?

I don’t think so. The dynamics are different. There really is some importance and value that comes from an event happening in a time and place. It’s part of why people care to be there and pay more for the privilege. In that sense, the walls of the building protect some of the core value.

On the other hand, walls can be a prison as well as a fortress, and that’s as much a threat to the future of theater and the performing arts as anything outside those walls. Imprisoning content may preserve some value but, in the end, could create a permanent dance with irrelevance, insolvency and decline.

Here’s the challenge to a generation of entrepreneurs in theater and the performing arts: Find ways to distribute the content to as many people as possible, as easily as possible. Build that fan base. Create those secondary revenue streams to create the profit that allows a cycle of building on success.

It can be done. The NBA wasn’t always the NBA as we know it now. As late as 1980, some playoff games had no TV broadcast at all. Wilt Chamberlain’s 100 point-scoring game wasn’t even filmed. And it’s still happening, all over the country, with all sorts of great live performances and memorable moments lost forever.

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