Risk Aversion and Large Companies

(Serdar, one of our regular posters, noted once that Hollywood isn't in the creativity business – it's in the risk management business.  He directed me to this article here: http://www.nytimes.com/2011/03/13/movies/manohla-dargis-and-a-o-scott-on-hollywoods-crisis.html?_r=1&hpw, which got me thinking.)

The state of Hollywood fascinates me, both due to my interest in cultural issues and the fact that it is part of the Geekonomy.  I do see some innovative films peaking through, but I also see plenty of dreck.  The sheer amounts of remakes in the queue tells me that Hollywood certainly is aiming at reducing risk in many cases (not that risk-taking has always been weird in hollywood).  I look at the amount of reality television out there and shake my head – even the good stuff doesn't make up for the repetitious crap.

In many ways, too many media endeavors are simply extraction industries – extracting the most amount safely from whatever resources are there with least  risk, and often little concern for the future. Though this may be understandable, it's really not good in the long or even medium-term.

If you think about it, your average huge media company may have many, many advantages, but also needs to pay for all that entails (lawyers, marketing, etc.). The efforts they engage in, large mega–million-dollar efforts, also have the ability to screw up beyond belief. Let's face it, putting out a big movie or video game is a great way to lose money if you do it wrong.

Now, throwing globalization. Now any company has the ability to create a colossal failure in front of the entire world. Sure they could recover their losses if they get the right international market, but if you're already planning to do that and botch it . . .

So, the frustrated by unoriginality and the lack of risk–taking, it may be a bit understandable because of the risks involved, and the fact that global markets are incredibly confusing. Oh, I don't like it–I just have a grasp of why it may have happened.

That being said I wonder if the risk–aversion so many big media company show is actually an advantage for smaller companies and independent media producers.

Think what it's like to indulge in a large media venture, say a big–budget film or AAA videogame. You have to line up the money, the publicity, the talent, the lawyers, and so. It takes time to ramp things up, and when you do, everyone's got a finger in your pie so they get their share, and the project in many ways isn't yours.  The time to rampup can be prohibitive, and the project probably isn't going to be what you want.

Sure the risk may be managed in the large scale, but it may be a pain for so many people – and it's hard to get in.

Now, let's look at how things are changing for small-scale media production. There are many distribution services up there, and they’re evolving.  There are freelancing services to find people.  There are fund-raising services like Kickstarter.  There are tools and people are out there to get your product out – take it from me, I've done it with my books.

There is also a market out there for things that are new, different, and innovative–and the Internet lets you reach them. There are marketing tools, events, services, and social media to let you reach the right people. Judging by the complaining I hear about Hollywood, the right people certainly want to see something different.

Now, of course a person doing a smaller independent media venture has a chance to screw up and ruin their lives and the lives of their close friends and family.  But they can minimize risk with all the opportunities there, they don't need to pass their plans through a lot of risk-adverse processes, and if they mess up the damage is minimal overall (except to them, as opposed to destroying a company or a larger film project).

This has made me wonder about the future of independent media ventures. In a strange way despite the lack of wealthy backers, large studios, and huge publishers, if these small and even private ventures have the advantage of being able to take risks.  Yes the risk may be extremely concentrated, and indeed life–ruining that the payoffs are high as well, and that's not counting people that make a good living even when not famous or fabulously successful.  In a way, the small people can now take the big risks easier – and certainly larger companies who are risk-adverse are ceding that territory.

I'm thinking this is the near future of media; a time of larger companies taking less and less risks and individuals in smaller companies taking more. I think this may actually be a good time for those of you with independent plans and unusual ventures to give them a try (I can't imagine it's going to get much better for the next five years). The payoff can be quite, especially if you truly understand your resources leverage or opportunities.

In the long-term? I'm still speculating on that, because large companies who want to make money may be playing it too safe, and if the smaller and more independent efforts keep doing well because they take risks, what happens?

Sounds like I have to keep an eye on this and write more in the future.

Steven Savage