Tuesday, October 11, 2011


When one hears of fragmentation, one usually thinks of market fragmentation. But which market? A cursory search of IDEAS indicates that economists have focused more on production fragmentation as it relates to outsourcing in the production of goods.

The other markets are of course labor markets or consumer goods market. The latter is probably closely related to product differentiation. It is unclear to me why the research on fragmentation seems to have become really a strand of outsourcing and its effects because there seem to be other more interesting questions in the labor markets.

For instance, the fragmentation of entertainment into the Internet, cable, and regular broadcast TV has provided possibly new labor markets.

From the BBC:
.. online video has become a career for thousands of video creators, with some making hundreds of thousands of dollars each year.

And in an uncertain job market, many are finding ways to cash in on the opportunities afforded by web video.
In 2010, the number of YouTube partners making over $1,000 (£600) per month from advertising revenue went up 300%, the company said.
The company declined to release specific figures, but Mr Sly said "hundreds" of video creators make more than $100,000 a year and "thousands" make more than $10,000 a year.
Mike Michaud, who started online production company Channel Awesome after being losing a job at an electronics retailer, says the revenue he earns from host Blip.tv has enabled him to hire six full-time and two part-time staff members.
"I don't have the daily grind that a nine-to-five usually entails," Mr Michaud said.
"I wouldn't say I'm living comfortably just yet, but I am living much better than before."

"I see this becoming the new television, but a place where the average person has a much better chance of getting noticed and making money than if they were to go the traditional route via Hollywood," Mr Michaud said.

Alan Lastufka, author of YouTube: An Insider's Guide to Climbing the Charts, said: "The money may not always be headline-worthy, but it's enough to quit your day job, stay in the basement on your computer and spend your time connecting with fans."

Likewise, the fragmentation of cable TV into multiple specialized channels has created new markets for actors that may have been unemployed or underemployed in the days when broadcast TV or cinema were the only options for many of these aspiring actors.YouTube has also allowed some to venture into Internet only broadcast - perhaps hoping to one day be noticed and become popular as in Justin Bieber. Make no mistake that the argument here is not that these new fragments have supplanted the traditional entertainment markets like TV or cinema but have become an avenue to the traditional markets much like minor leagues are a way into major league baseball.

One possible research avenue that I would be curious about is the effects of fragmentation on wages in the these markets. Has the creation of the Internet entertainment channel or the increase in specialized cable channels compressed the wage distribution of actors’ salaries? Has it provided more employment - perhaps the unemployment rate is lower, but has this also drawn more people into the labor pool so perhaps unemployment has not changed as much?

What would I want the message to be? New markets creates new jobs, yes - but are these good jobs as in higher wage jobs? Do these new entertainment markets have any “creative class” effect in the places where they live and work?

No comments: