Media and Prediction Markets
jheuristic
Hi --
Noteworthy post on media and prediction markets.
Those with an interest here (media + PMs) need also to see, join the
Future of Media:
http://kmblogs.com/public/item/172177
Predicting media success, By David Pennock,
http://blog.oddhead.com/category/prediction-markets/
Often, predicting success is being a success. Witness Sequoia Capital
or Warren Buffet.
In the media industry (e.g., books, celebs, movies, music, tv, web),
predicting success largely boils down to predicting popularity.
Predicting popularity would be wonderfully easy, if it weren't for one
inconvenient truth: people herd. If only people were as fiercely
independent as they sometimes claim to be - if everyone decided what
they liked independently, without regard to what others said - then
polling would be the only technology we would need. A small audience
poll would foreshadow popularity with high accuracy.
Alas, such is not the case. No one consumes media in a vacuum. People
are persuaded by influencers and influenced by persuaders. People
respond in whole or in part to the counsel of critics, peers, viruses,
and (yes) advertisers. So, what becomes popular is not simply a matter
of what is good. What becomes popular depends on a complex dynamic
process of spreading influence that's hard to track and even harder to
predict.
Columbia sociologist (and I'm happy to note future Yahoo) Duncan Watts
and his colleagues conducted an artful study - described eloquently in
the NY Times - asking just how much of media success reflects the true
quality of the product, and how much is due to the quirks of social
influence. In a series of carefully controlled experiments, the
authors tease apart two distinct factors in a song's ultimate success:
(1) the inherent quality of the song, or the degree people like the
song if presented it in isolation, and (2) dumb luck, or the extent
the song happens by chance to get some of the best early buzz,
snowballing it to the top of the charts in a self-fulfilling prophesy.
Lo and behold, they found that, while inherent quality does matter,
the luck of the draw plays at least as big a role in determining a
song's ultimate success.
If so, Big Media might be forgiven for their notoriously poor record
of picking winners. Over and over, BM hoists on us stinkers like Gigli
and stale knockoffs like Treasure Hunters. (In prediction lingo, these
are false positives.) At the same time, BM snubbed (at least
initially) some cultural institutions like Star Wars and Seinfeld.
(False negatives.)
So, are media executives making the best of a bad situation, eking out
as much signal as possible from an inherently noisy process? Or might
some other institution yield forecasts with fewer false-atives?
I think you know where this is going. Prediction markets for media!
Media Predict is exactly that: a new prediction market aimed at
forecasting media success. I'd like to congratulate founder Brent
Stinski on a spectacular launch done right. Media Predict sprinted out
of the gates with a deal with Simon & Schuster's Touchstone Books and
a companion piece in the NY Times, spawning coverage in The Economist
and NPR. (Also congrats to Inkling Markets, the "powered by"
provider.) More importantly, the website is clean, clear, complete
(enough), and ready for launch.
I first met Brent Stinski in 2006 at Colabria's NYC Prediction Markets
Summit and his concept impressed me. Among the flury of recent play
money PM startups, Media Predict's business plan seems one of the most
credible. The site taps simultaneously into the wisdom of crowds
ethos, the user-generated content explosion, artists' anti-
establishment streak, and the public's ambivalence toward Big Media.
(The latter two factors are epitomized no more vehemently and
eloquently than in an essay by Courtney Love, and stoke the fires of
sites like Garage Band, Magnatune, Creative Commons, Lulu, Kinooga,
and even MySpace, not to mention mashup fever, open source, anti-DRM-
ism, etc.)
The New York publishing world is ridiculing Simon & Schuster for
ceding its editorial power to the crowd. (In fact, S&S reserves the
right to choose any book or none at all.)
Time will tell whether prediction markets can be better than (or at
least more cost effective than) traditional media executives. One
thing is for certain: one way or another, the power structure in the
publishing world is changing rapidly and dramatically (no one sees and
explains this better than Tim O'Reilly). My bet is that many artists
and consumers will emerge feeling better than ever.
Predicting media success, By David Pennock,
http://blog.oddhead.com/category/prediction-markets/