The Star Wars Franchise and Consumer Sovereignty – Ryan McMaken (07/11/2018)

I won’t bore you with many details but the context here is an ongoing war between so-called Social Justice Warriors and many rabid Star Wars fans. The SJWs like the recent Star Wars movies, which clearly have adopted a certain lefty tone and flair since Disney bought Lucasfilm. Because of their political leanings, these leftists tend to defend these movies no matter what, even though the new movies are rather boring and forgettable. Meanwhile, many other fans of the franchise hate the politics of the new movies and blame the ideological posturing in the films for the fact that the films are so mediocre. They claim that Lucasfilm had better start paying more attention to these more tradition-minded fans, or the franchise will fail.

So, when “Geek Girl Diva” chimes in to say that people who watch the movies aren’t really customers, what she’s trying to say is people who don’t like the movies should just shut up and accept whatever Lucasfilm wants to dish out.

Now, I don’t know who “Geek Girl Diva” is, but economics is apparently not her strong suit. Obviously, a person who buys a ticket to a movie is indeed a customer of the company that created the movie. Tickets sold at theaters are an important source of revenue for movie production companies, and every ticket purchase is a voluntary exchange between the people who made the movie, and the person watching the movie. Certainly, other parties are involved also, such as the theater owners. But the people who made the movie are clearly part of the exchange.

Only in a case where a person bought a movie ticket at a theater — and was completely indifferent to which movie he or she ended up seeing there — would that person in a sense not be a customer of the movie-production company. In that case, the customer would be buying a ticket only to have the general experience of being at a movie theater. Any movie would suffice.

But of course, this never happens since anyone who buys a ticket has to chose which movie to watch. As soon as he or she makes that decision — Bam! He or she has become a customer of the people who made that movie.

So, the first part of Geek Girl Diva’s “argument” fails utterly.

Consumer Sovereignty vs. Producer Sovereignty

But, with her last sentence, in which she states “You do not own [Lucasfilm] or the [Star Wars] Franchise,” she has a point. She’s reminding fans that they don’t actually have any claim of ownership over the films.

Indeed, we’ve been hearing this erroneous claim of fan ownership for years — ever since George Lucas modified his original Star Wars trilogy with new CGI sequences and added dialogue. Many fans hated the changes. Lucas then made things even worse by saying he would never again make the original trilogy available in its original form. At this, many fans howled that Lucas owed it to the fans to release the un-altered versions. Some even claimed that the films in some way “belong to all of us” and that Lucas has no right to change something that is allegedly part or “our” heritage.

In this case, it is obviously the customers — some of them, at least — who are wrong. They don’t own Lucasfilm or Star Wars and the owners of those films don’t have to do what the customers want.

At the heart of the debate, therefore is the topic of “consumer sovereignty.” As Ludwig von Mises explained:

The capitalists, the enterprisers, and the farmers are instrumental in the conduct of economic affairs. They are at the helm and steer the ship. But they are not free to shape its course. They are not supreme, they are steersmen only, bound to obey unconditionally the captain’s orders. The captain is the consumer.

In other words, the consumers have quite a bit of influence over what gets produced and what does not.

But, as Bob Murphy has explained here and here, this argument can be taken too far.

Generally speaking, it is of course true that if a producer wishes to make money, he needs to pay attention to what the consumers want. But, producers also have sovereignty and are also free to provide goods and services in a way that, to a certain extent, suits the producers. Murray Rothbard states:

The producer, and the producer alone, decides whether or not he will keep his property (including his own person) idle or sell it on the market for money, the results of his production then going to the consumers in exchange for their money. This decision—concerning how much to allocate to the market and how much to withhold—is the decision of the individual producer and of him alone.

Moreover, a producer may not decide to target all consumers with his product. As Rothbard notes:

[S]uppose producer A withholds his labor or land or capital service from the market. For whatever reason, he is exercising his sovereignty over his person and property. On the other hand, if he supplies them to the market, he is, to the extent that he aims at monetary return, submitting himself to the demands of the consumers. In the aforementioned general sense, “consumption” rules in any case. But the critical question is: which “consumer”?

This problem of deciding which consumer to cater to is relevant to the case of Star Wars. There is no doubt that many Star Wars fans didn’t like the way the prequels turned out, or the way the new Disney-era movies are turning out. Those who dislike these movies often assume that the producer must therefore be ignoring the customers.

It is entirely possible, however, that Lucasfilm is only ignoring some of the consumers. Lucasfilm may be banking on the theory that there’s a larger audience for the new style of movies than for the old style. In that case, they are indeed catering to the consumers — just not the consumers who disliked the newer movies.

In any case, Lucasfilm is merely exercising its own producer sovereignty over the product, which is the company’s prerogative since the customers do not own the franchise.

Some might retort that Lucasfilm would make more money if it catered more to the “traditional” fan case. That’s possible, but it’s impossible to know since we can’t release a more “traditional” version of the films in a controlled experiment. Moreover, even if the management at Lucasfilm somehow knew that different, less ideological movies would bring in more money, they might still elect to make movies that better fit their own personal politics. That is, Lucasfilm’s management might prefer the psychic profit of making a movie they find ideologically agreeable over the money prophets of making a movie more popular with customers.

This might annoy the stockholders if they could somehow prove this was going on, but even then, the new politically-motivated movies might still make enough money to keep turning a profit for years and years. It might be a smaller profit than what might have been otherwise possible, but it’s a profit nonetheless.

And why shouldn’t they think that they can continue to turn a profit? Based on their own commentary, it seems even the Angry Fan Boys who claim to hate the new movies continue to slavishly buy tickets to them. Many continue to buy the toys. And given the number of man-children in public who continue to wear Star Wars t-shirts, Lucasfilm is still making plenty of money off apparel.

Sure, the new Solo movie lost money, but that may have been more of a problem of a bloated production budget. Had Lucasfilm been smart and made the movie for 80 million dollars, it would likely have turned a respectable profit.

The Problem of Intellectual Property

Some readers at this point might correctly observe that the Star Wars franchise benefits immensely from its ability to monopolize the Star Wars characters through intellectual property laws. This, of course, makes it a lot easier for the owners of Star Wars to keep making money off the franchise. They are able to legally prevent anyone else from making toys, films, or other products that are “too similar” to the official products. In other words, intellectual property laws limit the potential competition.

But, our analysis holds even in the absence of intellectual property laws. Let’s consider, for example, the case of “New Coke.” Back in 1985, the Coca-Cola company removed all “traditional” Coca-Cola from the market and replaced it with “New Coke.”

Those who preferred the taste of the old Coke were now suddenly unable to buy it — outside some private high-price stockpiles that still existed.

This was not because of intellectual property laws, however. The traditional Coca-Cola formula was (and is) a trade secret.

Thus, the Coca-Cola company, exercising its producer sovereignty, was able to withdraw one product that many people liked, and replace it with another new product that many people did not like.

What followed is a famous case study in botched marketing. New Coke proved to be unpopular, and the Coca-Cola company ended up bringing back the old cola, calling it “Coca-Cola Classic.”

In this case, it appears that the Coca-Cola company was unwilling to stick to its new formula, and producer sovereignty bowed to consumer sovereignty.

It didn’t have to go this way, though.

Say, for instance, that a number of owners and managers of the Coca-Cola company all suddenly converted to an ideology or religion that mandated the non-use of certain ingredients in Coca-Cola beverages. As a result, Coca-Cola withdrew old Coke, introduced New Coke, and never looked back. Because of their new ideological/religious convictions, the owners and managers of Coca-Cola never relented, and clung to the new formula. They lost market share, but found enough new fans of New Coke to keep the company profitable in the long term. In this version of reality, we’d still be living in a world of New Coke, with Coca-Cola Classic still unavailable in the market.

This would be a case of producer sovereignty winning out over consumer sovereignty. Similar to the Star Wars franchise, the consumers of Coca-Cola beverages do not own the product, and thus are, to an extent, at the mercy of the producers themselves. Fortunately, in both movies and beverages, there are — in a relatively free market — many, many similar products that can be substituted.

Ultimately, the new Star Wars movies may be the “New Coke” of the entertainment world. But in this case, maybe the owners of the franchise are willing to die on their swords to push through their new product. It may cost them market share or profits, but if it’s profitable enough, we’ll continue to see new, uninspiring Star Wars movies for many years to come.