The economics of art?

Recently, I read Vikram Chandra's Sacred Games - a 900 page effort which, as the book blurb claimed, took 7 years to write. Like all art forms that are centered around a single individual (i.e. writing, painting etc), this makes art a highly unpredictable and fickle business - at least from the point of view of the artist. As an artist, you invest a huge amount of time and the corresponding opportunity cost of not doing a regular 9-5 job of say, accountancy. And in return, the piece of work that you produce may sink without a trace since you never really know what the market wants. And this is probably the fate of an overwhelming percentage of such artistic endeavors. Without getting to why they do it then, I am more intrigued how the publishing and music industries have evolved to manage this risk.

At the very least, it does make the case for intermediaries like publishers, who are basically the risk aggregators spreading the risk across several such potential bets. The way I suppose the publishing industry works is to place their bets (in the form of advances) on several artists with the assumption that at least some in the portfolio will return a multiplier large enough to create a reasonable return on the overall portfolio. In addition to the aggregation of risk, these intermediaries played another important role - that of connecting the artists with the consumers. With their marketing budgets they would create the buzz and then back it up with the distribution might to push the wares to the retail channels.

That at least was the theory on which the entire music and book industry has evolved with a handful of very large intermediaries. All was well - until the internet came along. The truly disruptive power of the internet was to allow the music artist to reach out her audience directly (the long tail et al) which is fast making the push strategy of the record labels increasingly out of fashion - at least the artists now have a much less expensive option for marketing their wares. And what remains now is the upfront investments (risk aggregation) that the labels used to provide - and bands are again figuring out ways around that by again leveraging the internet. A typical strategy is to upload your music on youtube and then leverage social networking as a means to create the viral marketing effect to kick-in. Then ride on the buzz to organize band gigs and concerts to start the monetization process. One critical thing that enables this in the music space is that the digital music file lends itself perfectly to such transactions. Each song is a tangible unit of output that can be downloaded, monetized (think itunes). In all this it is merely a matter of time before the record labels and retail stores with CDs etc are priced out of the market.

Back to the Vikram Chandra book: turns out that he was given a hefty advance to write this book as he was already a pretty big author who must have merited a decent advance. Which then begs the question - would anybody pay a first-time author to churn out a 900 page tome that may turn into a masterpiece or more likely end up being a dud? Probably not, in the sense that it is a highly risky venture to invest in - it is not like any startup where you can fire the members of the founding team if they are not working out. To top that, artists can be a fickle lot and may not take too kindly to an interfering VC to set timelines on inspirational activities!

So the intriguing question here is - will the book industry go the way of the music industry? The e-book industry may help this along - remains to be seen.