Market Ecology

Sargon put up an interesting post about the way the music market has segmented and there is no way for the big record labels to return to their old business model. Which reminded me of a theory I've long had and rarely explained, so I might as well throw it out there now.

It's Reagan's fault.

See, when Reagan was elected in 1980, the American economy had tanked. Years of bad economic policies had gotten worse under Carter and an entrenched Democratic majority in Congress. The combination of high taxes and stifling regulation had forced American businesses either out of the country or out of competition and struggling to catch up.

Then along came Reagan. Under his administration, taxes were slashed and regulations were reduced. Money began to flow again, and the economy started to take off. By the mid-80's business degrees were cool again.

So now it's 1987, 1988, and colleges are churning out thousands of new business grads, eager to make their fortunes in this new growing economy. And the new grad has a choice: go to work for one of the stagnant giants like GM, or else try to compete with one of the giants (not a smart idea unless you have really deep pockets), or else, ta da! find a market segment that is currently untapped!

Next thing you know, there are specialty shops everywhere, for skateboards and comic books and gourmet coffees. And with those growing market segments and new distribution chains for magazines, as well as the desktop publishing revolution sparked by the Apple Macintosh, there are specialty magazines for those specialized segments. And with the burgeoning of home video (which means home video stores desperate for product to fill shelves) and cable television (desperate for content to fill channels), that segmentation continued with entertainment being targeted at narrower and narrower audiences, and therefore advertising being targeted at narrower, more precise demographic groups as well.

But it started (I can't prove, but do believe) with that huge influx of new business grads desperately looking for niches to fill in a growing market ecology.