Smoke and Mirrors

“When a judge walks into the room, and everybody stands up, you’re not standing up to that guy, you’re standing up to the robe that he’s wearing and the role that he’s going to play. What makes him worthy of that role is his integrity, as a representative of the principles of that role, and not some group of prejudices of his own. So what you’re standing up to is a mythological character. I imagine some kings and queens are the most stupid, absurd, banal people you could run into, probably interested only in horses and women, you know. But you’re not responding to them as personalities, you’re responding to them in their mythological roles. When someone becomes a judge, or President of the United States, the man is no longer that man, he’s the representative of an eternal office; he has to sacrifice his personal desires and even life possibilities to the role that he now signifies.”

Joseph Campbell and Bill Moyers' The Power of Myth

When I think of Netflix's originals taking the leap to that level of professional craftsmanship that put them in that tier considered "premium video," for however long that term endures, the show that leaps to mind is The Crown, one of my favorite of their homegrown series. House of Cards came earlier, and landing that Fincher production with that cast was a massive coup, but The Crown, with its focus on the English monarchy, carries that air of gentrified prestige that seems apt in a discussion of what qualifies as professional film and television.

The Crown is comfort food for those who prize a level of tightly structured scripts, lavish production design that likely broke out a line item for brocade, precise diction from the school of classical acting that could wouldn’t feel out of place on the stage at the Old Vic, upper lips as stiff as the creases in the tailored English suits on display, long glances freighted with import...in other words, all the trappings of aristocratic melodrama. The portentous theme song by Hans Zimmer is one that, like the theme to Game of Thrones, I won't skip, just so I can wrap it around me like a gravity blanket in anticipation for the theatrics to come. The entire affect of the show dances on that fine line between spectacle and farce; rarely has a program treated a group of people who do so little with such gravitas.

But, and I cannot stress this enough, that is the point.

Why do we treat the Royal Family with such reverence? Because ceremony demands it. Sometimes status is a closed circle, and if you trace it you end up where you started. The very act of walking in that circle, though, closes it. The Royal Family has whatever power the people grant them.

The very existence of The Crown, the white velvet gloves with which the show handles its subject, enacts, in televisual form, the act of veneration upon which the Royal Family depends for its status. The show bends the knee, and so do we.

No episode better reflects the way in which our construction of royalty and celebrity rhyme than season 1, episode 5 of The Crown, titled "Smoke and Mirrors." This episode is about the covenant between the famous and those who grant them that fame. It's figuratively, and sometimes literally, smoke and mirrors which turn a plain English woman into a queen. In an age where the internet has once again reshaped the distribution topology of moving images, and given that the Crown returns for its third season this Sunday, it seemed the right time to do a walkthrough of this, an episodes of TV I’ve seen many times and which never ceases to move me.

Episode SPOILERS ahead, obviously, though this is one of those programs where spoilers don't mean much. The journey of watching this show is the experience. I encourage you to grab your remote, fire up Netflix, and follow along. Honestly, if you haven't watched episodes 1 through 4 of season one, it's still fine, but if you want, binge those and then follow along here. I haven’t done an episode walkthrough on my blog before, and honestly this would be better as a video essay, but good luck with that given all the legal hurdles. As it is, Netflix makes it so difficult to grab screenshots of their content that I could only grab so many before losing patience, but I'll drop in some relevant shots from time to time to help you follow along (Netflix, make it easier to grab and share screenshots of your stuff, your whole competitive advantage is economies of scale, you want to overwhelm the competition with your digital footprint in the cultural conversation).

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The episode begins with a flashback to May 11, 1937. Young Elizabeth is summoned, by her father, on the cusp of becoming King George VI, played by the always magisterial Jared Harris. He'd like her to play the role of Archbishop as he prepares for his own coronation. As she reads over the script of the coronation oath, her father explains the significance of the words. She stumbles over a word she doesn't recognize.

Her father pronounces it for her. "Inviolably. It means, to make a promise you can never break. A very sacred promise indeed." He is instilling in her a sense of the heavy obligations transferred in this ceremony, ones which form the foundation of the power of the throne.

They're interrupted by Private Secretary Tommy Lascelles telling George it's time to go try on the crown. George asks for a bit more time with Elizabeth. "We haven't even reached the anointing!"

George turns to his daughter.

"You have to anoint me, otherwise I can't be King. Do you understand? When the holy oil touches me, I am transformed. Brought into direct contact with the divine. <cue the track “The Anointing” by Rupert Gregson-Williams> Forever changed. Bound to god. It is the most important part of the entire ceremony."

George refers both to the ceremony by which he becomes King but also the power of film itself. We as the audience anoint movie stars, musicians, and athletes, and by our adulation, they are forever changed. Fame and status are a covenant between gods and their disciples, just as brands exist in the covenant between companies and their customers.

Elizabeth follow her father to the fitting for the crown.

As George lifts the crown over, he notes, "Goodness, it's very heavy indeed."

"Five pounds," says the attendant.

"Not to mention the symbolic weight, hmm?" replies George. Heavy is the head that wears the crown, in every sense.

He looks at himself in the mirror, then turns to look at his daughter, who gazes back.

He returns her gaze.

Match cut to the present day, where 25 year old Elizabeth places the crown on her head (she is played to perfection by Claire Foy, whose massive shoes Olivia Colman will have to fill in season three). The now grown Elizabeth is standing in the exact spot where she once stood and watched her father don the crown, such that her eyeline matches that of her father's in the past.

They cut back to George in the past one last time, giving a wry smile to his daughter across 17 years. Soon she will shared the burden of the titular crown.

"It's not as easy as it looks," says Elizabeth, trying to balance the crown on her head.

"That's exactly what the King said," replies the very same attendant who had been at that shared moment in the past, bridging another generation of royalty.

"I remember," says Elizabeth.

It's the type of meticulously composed shot sequence typical of the series, and this scene always gives me all the feels upon rewatch.

That evening, Elizabeth approaches her husband Philip (played with smarmy charisma by Matt Smith; seriously, this entire cast knocks it out of the park) as they dress in their finest for the ballet. She announces that she'd like him to take over as chairman of her coronation committee.

"I want to make a public declaration of my trust in you," she says to her husband. Everything they do has symbolic value, and she understands the importance of her every act in the eyes of the public.

"There's no need to matronize me," he retorts, using the feminist form of the more common "patronize." An ongoing storyline the first two seasons is Philip's discomfort with standing behind his more powerful wife. Behind every great woman is a jealous man yearning for a return of the patriarchy?

At the ballet, Philip, having mulled it over, gives in. However, he has a request. "Total control or nothing at all. Those are my terms."

"All right. But don't go mad," says Elizabeth.

"What does that mean?" he asks.

"It means just don't go mad. It's a coronation. A service that goes back a thousand years. Some things can't be changed," she says.

The immutability and consistency of tradition and ritual reflects but also reinforces power. As Stewart Brand once wrote of government buildings, there's a reason they are constructed of marble and stone, often in the style of ancient Greek or Roman architecture. The unchanging nature of the building is meant to convey the durability of the institution.

"Yes, yes, all right," says Philip, but his sentiments will soon change.

Now we cut to Paris, where the ingenious construction of this episode begins to reveal itself. Not only is this episode about the very act of television and its ability as a medium to grant power, but the writer embeds a commentary on the coronation within the episode itself. Or commentator, to be precise, and his name is Edward, Duke of Windsor, or David. He was forced to abdicate the throne in 1936 for marrying Wallis Simpson, an American woman twice divorced, and his eviction still stings. Throughout this episode, David Windsor serves as a proxy for how non-royalty view the coronation. Asked by the royal family to not attend the ceremony given what they perceive as his shameful abdication, he will be forced to watch from a viewing party he hosts from his home of exile in Paris.

David and his wife Wallis sit for a magazine profile, posing in a variety of foppish outfits. They may not be tip top royalty anymore, but they're not paupers. Still, as status is relative, and he since he once reached the footstep to the throne, he struggles to find contentment in his current lot in life. The episode traces the very specific nature of his jealousy and resentment, but the general contour of his longing matches that of status-seekers everywhere.

David and Wallis lead the reporter to a private attic room where he keeps mementos of his past glory.

"Goodness. Bagpipes, too," says the reporter, glancing at all the memorabilia filling the room.

"Yes, I play," says David.

"When he gets homesick," adds his wife.

"And all these photographs of you as King," asks the reporter. "There are none with the crown. Why is that?"

"I never made it that far. I never had a coronation." This isn't fear of missing out; he just plain missed out.

Back in England, Elizabeth announces to her staff that she has decided her husband will be chairman of her coronation committee. Her Private Secretary Tommy says that's impossible as it's the job of the Duke of Norfolk, the chief butler of England. "Running the coronation, that's what the Norfolks do," says Tommy. That's why we call it tradition, girlie.

Elizabeth cuts the debate short. "The chairmanship with full autonomy is what he wants. Therefore it is what I want. Norfolk can be vice-chair." You want zee duck? You cannot have zee duck. You can have zee chicken.

David returns to London to visit his ailing mother Mary, and while there Private Secretary Tommy and the Archbishop deliver the bad news: the Duke of Windsor and his wife aren't welcome at the coronation. David goes on an extended diatribe, calling the Archbishop "Auld Lang Swine," and he quips, in a letter to his wife, that his mother, who passes away while he is England, had blood that ran as "icy cold when she was alive as it does now she's dead." No one bitch slaps as poetically as the English.

In the same letter, as we see a shot of David talking to Elizabeth, we hear him refer to the incoming Queen as "Shirley Temple" and his other family members as "desiccated hyenas." This club was dead anyway, says the guy turned away at the door, through his tears.

At Mary's funeral service, Philip notes to Elizabeth that this ceremony is exactly like her father's funeral service. Tradition is so rigid in English corridors of power that nothing changes. He vows her coronation will be different, to reflect her, a young woman, and the "fast-changing, modern world."

At his first coronation committee meeting, Philip presents his thoughts.

"The eyes of the world will be on us. Britain will be on show, and we must put our best foot forward. In such circumstances, the temptation is to roll out the red carpet and follow the precedent set by the grand and successful coronations of the past. But looking to the past for our inspiration would be a mistake in my view."

Philip recognizes that when it comes to the power of his wife’s throne, ritual and reality are in many ways inseparable, and the only way to alter the nature of her power is to adapt the ceremonies that construct it.

He continues. "Make it less ostentatious, more egalitarian, show more respect and sensitivity to the real world. We have a new sovereign, young, and a woman. Let us give her a coronation that is befitting of the wind of change that she represents, modern and forward-looking at a moment in time where exciting technological developments are making things possible we never dreamt of which brings me to my next point..."

And what, pray tell, is that technology? Television. Of course, we are watching him talk about this on a television series streamed through an application called Netflix that is itself an adaptation of television itself, and you’re reading about my discussion of this episode through the internet. Also, later David Windsor will describe the coronation ceremony to an audience viewing the coronation on a television at his house in Paris. This episode is thematic Inception and I am here for it, every bit.

The committee is horrified by Philip’s plan. At Westminster Abbey, where preparations are underway, one committee member examines a television camera with apprehension and disgust and asks Philip, "No close-ups, huh? Zoom lenses?" In the aristocracy’s classical conception of power, physical distance is how status gaps are both constructed and measured. Normal people aren't allowed in to see the coronation because they are meant to feel every bit of the expanse between them and the throne.

Coronation committee members gaze through a TV camera at Westminster Abbey during preparations for the ceremony. Meanwhile we look at them through the gaze of a camera that was pointed at them on set.

But film is its own medium, with its own peculiar powers, and one of those is its ability to alter our spatial reality. When the close-up was invented in film, it unlocked a unique advantage of cinema over theater, the ability to bring us closer to a person than we'd be even in real life. If you were to put your face up against someone so that their face filled your field-of-view as much as a film close-up, you'd be arrested for assaulting their personal space. But in film, we can be simultaneously abstracted from the characters on screen yet halfway up their nostrils.

The craft of acting changed with the advent of the close-up. No longer was it necessary to act in so broad a style ("Why I oughta smack you in the kisser!" overacts the old black and white film cowboy). Now, the most subtle of facial expressions, the tiniest crease of one's brow, could register several feet high on the silver screen.

But more than that, the close-up, in closing distances, offered an alternative to spatially remote constructions of power in favor of a new relationship between star and audience, that of emotional intimacy. The Crown is emblematic of this quality of the film and television medium, spending its long story arc humanizing the Queen of England, transforming her from a remote caricature into a three-dimensional human with a rich and legible inner life. Prior to seeing The Crown, my regard for the Royal Family was, at best, dismissive. They still are. However, my feelings towards the fictional character Elizabeth from The Crown, the one played by Claire Foy, is one of deep sympathy. It's not that film can't do shock and awe but that other mediums struggle to match the moving picture for emotional intimacy.

In a way, the hidebound coronation committee is right to be concerned over Philip’s plan. Television as a medium did reconfigure the modern world, and it continues to hold the power to topple established power structures. Winston Churchill (John Lithgow) brings the concerns of the committee to Elizabeth.

"What is the purpose of the Crown? What is the purpose of the monarchy? Does the crown bend to the will of the people to be audited and accountable? Or should it remain above temporal matters?"

When the dominant medium of an age shifts, the nature of power shifts with it. Churchill is asking Elizabeth, but also asking himself, whether the advent of television means the two of them must change the means by which they relate to the people they govern.

Ultimately, he leaves the decision in her hands. She visits Philip at the Abbey where they debate his proposed changes.

She confronts him, "Trade unionists and businessmen? In the Abbey?"

"If you want to stay on the throne, yes," he replies.

"In a trimmed-down televised coronation?"

"If you want to avoid a revolution, yes. You forget, I have seen first-hand what it is like for a royal family to be overthrown because they were out of step with the people. I left Greece in an orange crate. My father would have been killed. My grandfather was. I'm just trying to protect you."

"From whom? The British people? You have no idea who they are or what they want." She continues, "If the people are hungry, they want something that lifts them up."

"And how do you propose lifting them if they cannot see it?" he fires back.

"The people look to the monarchy for something bigger than themselves. An inspiration. A higher ideal. If you put it in their homes, allow them to watch it with their dinner on their laps..."

"It will democratize it, make them feel hat they share in it. Understand it." Rewatching this episode today, I can’t help but think of AOC live streaming on Instagram Stories from Washington DC, explaining arcane Congressional procedures in the newest of mediums.

Elizabeth sees the determination in Philip's face, and she caves. She agrees to televising the coronation.

But then she turns the tables on him. He's not the only one who understands the significance of the coronation ceremony and she has a change in mind as well. She has heard of one of his proposed changes to the ceremony that she is not budging on.

"But on one condition," she explains. "That you kneel." Eat your heart out Danaerys, you weren't the first TV queen to ask her man to bend the knee.

Now it's Philip's turn to protest.

"I merely asked the question whether in this day and age it was right that the Queen's consort, her husband, should kneel to her rather than stand beside her," he explains.

"You won't be kneeling to me," she replies.

"It will feel like a eunuch, an amoeba, is kneeling before his wife."

"You'll be kneeling before God and the Crown as we all do."

"I don't see you kneeling before anyone," snaps Philip.

"I'm not kneeling because I'm already flattened under the weight of this thing."

The duel of words continues. Philip accuses her of becoming entitled and power-hungry. She says he's acting weak and insecure.

"I want to be married to my wife," he says, trying another tack.

"I am both and a strong man would be able to kneel to both." Oh snap.

"I will not kneel before my wife."

"Your wife is not asking you to."

"But my Queen commands me?"

"Yes."

Oh you gonna bend that knee Philip. Nothing but respect for my Queen.

On the day of the coronation, David Windsor is back at home in Paris, providing a running commentary on the ceremony to the audience gathered in front of the television at his viewing party in Paris. He mocks the uncomfortable Gold Coach carrying the Queen to Westminster Abbey, but we see him seated in the front row of his gathering, leaning in to catch every detail of the ceremony he yearns to attend.

David Windsor and his wife Wallis Simpson seated front and center at their coronation viewing party at their home in Paris.

At Westminster Abbey, the television producer constructs the telecast, choosing from a series of camera angles projected on a bank of televisions in the production area. This is the new choreography of power, the assembly of moving images. We see the procession on small black and white television screens, first in the home of David Windsor, then in video village where the television producer is calling out shot. The ceremony seems inconsequential, almost squalid, seen on such poor monitors, but the power of the medium lies in the millions of people watching it for the first time in homes around England and across the globe.

David Windsor’s television set. Probably lavish for its time, but I’m guessing some of his guests complained about not being able to see anything like we all complained about that super dark battle scene in Game of Thrones that final season.

The new masters of the grand narrative, deciding what series of moving images would define the coronation for millions of viewers

David Windsor fields questions at his party, describing each stage of a coronation ceremony he knows by heart.

The golden canopy being carried over Elizabeth so prying eyes won’t see the anointing.

Then, just as Elizabeth prepares to be anointed, the television broadcast cuts away to a static shot.

Viewers at home weren’t allowed to view the anointing, instead hearing just the audio running over this static shot.

"Where'd she go?" asks a guest at the party.

"And now we come to the anointing," explains David. "The single most holy, most solemn, most sacred moment of the entire service."

"So how come we don't get to see it?" asks that same guest.

"Because we are mortals," replies David.

“So let's set the world on fire…we can burn brighter…than the suuuuuuuun”

But at that moment, the TV show The Crown cuts to a shot from the interior of Westminster Abbey, the camera dollies in towards Elizabeth under the golden canopy held over her head. We, the viewers of The Crown, do get to see the anointing. A TV camera will take us there. Because we are modern TV viewers, and we are not mortals, we are now gods. The actual broadcast, in 1953 (still available on YouTube), preserved the sacred nature of the anointing, shielding it from mortal eyes. The Crown, a television show in the 21st century, has a different goal.

The Archbishop begins the oath. "Will you maintain and preserve..." He pauses, tripping on on his memory. He did not stumble during the actual coronation, but showrunner Peter Morgan adds this moment in order to tie the episode back to the opening of the episode when a young Elizabeth rehearsed the ceremony with her father. It's a bit of dramatic license that pays for itself with the emotional round-trip.

Elizabeth realizes the Archbishop's predicament and steps in to complete the Oath for him. "Inviolably?" she says. Her father taught her the meaning of the word when they rehearsed the oath some 17 years prior, and in reciting it once again, she has now finally internalized the weight of the office, as her father did before her. She bonds across time with her deceased father, one more time.

"I will," she proceeds, completing the oath.

Next we see product-commercial-grade closeups of the holy oil, backlit as if it were the nectar of the gods, and effectively it is. Water into wine, wine into blood.

The Archbishop anoints her hands, her breast, and finally her head with the oil.

Morgan leaves the next part of the oath unchanged, and why not? The words are majestic even today.

"As Kings, priests, and prophets were anointed, and as Solomon was anointed King by Zadok the priest and Nathan the prophet, so be thou anointed, blessed, and consecrated Queen over the peoples whom the Lord they God hath given thee to rule and govern, in the name of the Father, and of the Son, and of the Holy Ghost. Amen."

But also, we, as viewers, in this moment, and all the episodes before and after, anoint Claire Foy, actress, with our full adoration. She is our Queen Elizabeth in this television series. It's the same covenant we make with Robert Downey Jr. when we anoint him our Iron Man, or Chris Evans our Captain America, or Mark Hamill our Luke Skywalker. The Archbishop anoints Elizabeth Queen with oil and oaths and incantations, while the entire cast and crew of The Crown transform Claire Foy into the fictional Queen Elizabeth through the act of filmmaking, transmitted to us through the medium of television, so that we the audience may crown her.

In Paris, David Windsor soaks in the moment. He is our guide to the alchemic power of the coronation, but also to that of television. He stands in for the people of England, and television audiences everywhere.

"Oils and oaths. Orbs and scepters. Symbol upon symbol. An unfathomable web of arcane mystery and liturgy. Blurring so many lines no clergyman or historian or lawyer could ever untangle any of it." He stops just short of tossing in the title of the episode, "smoke and mirrors."

"It's crazy," says that same talkative house guest. "Smoke and mirrors" are commonly used as a term of derision. As viewers of this episode, we're watching a bunch of actors in makeup play-acting. Crazy indeed.

But Windsor understands the mythic power of the ritual, and we, in our emotional absorption in this moment, feel the power of the medium of television. Whereas earlier Windsor mocked his family, dismissed the Queen, and punctured the pomp with sarcastic quips, now he can't help but be spellbound by the symbolic force of it all. In a beautiful shot, we see his face, full of yearning, reflected in his TV screen, his niece, now his Queen, on screen.

Almost King, now gazing at his niece, now his Queen, through a TV screen.

David corrects his guest. "On the contrary. it's perfectly sane. Who wants transparency when you can have magic. Who wants prose when you can have poetry? Pull away the veil and what are you left with? An ordinary young woman of modest ability and little imagination. But wrap her up like this anoint her with oil, and hey, presto, what do you have? "

He pauses.

"A goddess."

I sometimes watch videos of YouTube vloggers greeting throngs of young fans at conferences around the world. Like that guest at David Windsor's viewing party, many see this and dismiss it as crazy. To do so is to misunderstand the nature of adulation and how a new generation of celebrity use new mediums like YouTube to their full effect, to create their own covenants with their own band of pilgrims.

Back at Westminster Abbey, one step remains. Philip, time to bend the knee bitch! With great reluctance, he shuffles to the throne, removes his crown, and drops to one knee before his wife, and his Queen.

Bend the knee old chap

The expressions Matt Smith and Claire Foy trade tell us all we need to follow the inner struggle in their hearts, and again, we register all these micro-expressions through the magic of the close-up, the liturgy of film. Shot, reverse shot, shot, reverse shot. A wordless conversation of images.

The episode concludes back in Paris, with David Windsor. As the sun sets, he pulls out his bagpipes and plays in his yard. As his wife noted earlier in the episode, he plays when he's homesick (there is barely a single line in this episode that doesn't come back to pay off like Chekhov's gun, the script is that tightly wound). The camera pulls back and up into the sky behind him, framing a beautiful lens flare the color of holy oil, as if Elizabeth's royal presence is shining down on him from above England itself.

We end on a shot from the other direction, a medium shot of Windsor from head-on. HIs eyes are filled with tears.

Oh, to be King, if only for a day

Elmo's arrival points to HBO's future

Sesame Street announced a new five season deal with HBO. The seasons will be available exclusively on HBO for nine months before dropping at PBS.

This is HBO pursuing the Netflix, Amazon Video, and Hulu strategy instead of the reverse, the latter three all offer or plan to offer original children's programming. HBO has never had kids programming, and this move is a clear acknowledgment that they view themselves as a mini-bundle in and of themselves, more so than a channel carried by the traditional cable bundle.

HBO was once content to be a brand that stood for movie titles from the Warner Bros. catalog and boxing. Then it offered some comedy, and then original series, most of it targeted towards an adult demographic. HBO has had some great original series over the years, but it's fair to characterize their house style as having a fair bit of sex and nudity along with a fair dose of profanity and violence. They told us “It's not TV. It's HBO.” but if you watched any of their series you weren't likely to confuse the two.

What they didn't offer was family or children's programming. The money was coming in by the truckload, especially during the heyday of DVD, so it wasn't as if HBO felt a great sense of urgency to diversify its subscriber base.

Then came Netflix, which doesn't have a house style. Rather, they have more of a technology companies approach to content and growth: why put artificial limits on your own growth? The limit on entertainment subscription service growth is a function of the diversity and quality of their content portfolio. To acquire a subscriber, you need enough content to entice that person to become a subscriber. Then you need enough interesting content each month to keep them from canceling (that's the main reason subscription services like HBO don't release all their series at the same time of the year).

Once you have enough content to acquire and keep one type of subscriber, the marginal return on your next dollar of content is higher if you produce content that appeals to another type of subscriber. That's the Netflix strategy. If you look at all their original series, they are all over the map in genre, style, tone. They want to offer something for everyone so their subscriber base can include anyone.

[Amazon Prime is an even more bizarre subscription because it includes not just video but free expedited shipping, Amazon music, unlimited photo storage, e-book lending libraries, Amazon-branded everyday essentials, cheaper shipping on groceries, and a personal drone for dropping your kids off at school. I made one of those up, but it might be part of Prime next year.]

And now HBO is following suit. The next step for HBO is to let its original series spill out from Sunday night. If you read the Hollywood Reporter or another industry rag, you'll no doubt have heard of HBO passing on quite a few original series recently. Some of that could be creative differences, but if any of it is HBO limiting themselves to what they can fit in their Sunday night time slots, they're imposing yet another artificial limit on themselves that makes no sense in this streaming, time-shifted age. If HBO Now is the future, at some point it shouldn't even matter if some content on HBO Now never airs on their cable channel, especially if it's something like Sesame Street which would seem out of place on a cable channel chock full of mature content. The MSO's wouldn't love that, and perhaps HBO would just tack on another channel like HBO Family, but they should be willing to consider any concessions to their linear channel to be a strategy tax.

...

Since Twitter has largely replaced late-night talk-show monologues as the joke factory on the day's news, I enjoyed this roundup of humorous tweets riffing off of the HBO and Sesame Street deal.

Chelsea Peretti: One of the Greats

Jonah Peretti is doing some great things at Buzzed, but his sister Chelsea ended 2014 strong too with this brilliant standup special for Netflix. I saw her perform as an opener for Sarah Silverman a few times at the Largo in Los Angeles when I lived there. She was good then, but this act showcases her after some level ups.

I think all the talk of House of Cards being based on proprietary Netflix viewing habit data is vastly overblown, but I do wonder if all the standup Netflix has funded is based on empirical proof of the repeat viewability of standup comedy (not to mention its relative low cost versus a TV series.

Tech tidbits

  1. Researchers have developed a type of chemical iris that could enable photographers to select apertures on really tiny cameras (think camera phones) in the future. Maybe someday we'll get to shoot wider open on camera phones, enabling us to get the type of shallow depth of field which is the one piece of a photographer's toolbox that's most noticeably absent on the most popular camera now, the smartphone.
  2. Netflix signs Chelsea Handler for a new talk show. They're going to keep re-investing their profits in original programming. Imagine if HBO didn't have one particular house style for original programming but instead tried to target programs even more segments of viewers. What number of subscribers could they sign up? That's what Netflix is setting out to do.
  3. Viacom and about 60 small cable operators representing about 900,000 households went to war over carriage fees. In what is a notable first, the two sides decided to part ways rather than settle. Supposedly most households didn't care and the cable operators lost less than 2% of subscribers, much lower than the 10% churn they were bracing for. Not entirely surprising consider Viacom's target viewership is less represented in the flyover states, and most of the generation that watches Viacom programming can likely find that stuff online. This next generation of kids have never paid for cable and probably never will. There remains just one channel that every cable operator in the country would have to suck it up and pay for just about any price, and that's ESPN, which not surprisingly demands the highest carriage fee (by a wide wide margin) in your cable channel lineup.
  4. The Oxford Mail is experimenting with letting WhatsApp users follow them to get occasional news alerts tailored to their interests. This is a small test but an important one as it may signal WhatsApp is finally moving to become a platform like its Asian peers LINE, WeChat, and KakaoTalk. Those chat services have corporate or celebrity accounts you can follow to receive broadcast text messages, much like following a celebrity or corporate account on Twitter.

Big data and price discrimination

Adam Ozimek speculates that Big Data might bring about more price discrimination.  First degree price discrimination has always been a sort of business holy grail, but it was too difficult to get enough information on the shape of the price-demand curve to make it so.

For some time now, though, this has no longer been the case for many companies, and in fact one company did try to capitalize on this: Amazon.com. I know because I was there, and the reason that was a short-lived experiment is a real world case study of how the internet both enables and then kneecaps this type of price discrimination.

Amazon, until then, had one price for all customers on books, CDs, DVDs (this was the age before those products had been digitized for retail sale). A test was undertaken to vary the discount on hot DVDs for each customer visiting the website. By varying the discount from 10% up to, say, 40%, then tracking purchase volume, you could theoretically draw the price-demand curve with beautiful empirical accuracy. 

Just one catch: some customers noticed. At that time, DVDs were immensely popular, selling like hotcakes, and the most dedicated of DVD shoppers perused all the online retail sites religiously for the best deals, posting links to hot deals on forums. One customer posted a great deal on a hot DVD on such a forum, and immediately some other respondents replied saying they weren't seeing the discount.

The internet giveth, the internet taketh away. The resulting PR firestorm resulted in the experiment being cancelled right away. Theoretically, the additional margin you could make over such price discrimination is attractive. But the idea that different customers would be charged different prices would cause such distrust in Amazon's low price promise that any such margin gains would more than offset by the volume of customers hesitating to hit the buy button.

Ozimek notes this: "The headwind leaning against this trend is fairness norms." What's key to this is that the internet is the world's most efficient transmitter of information, and while it enables a greater degree of measurement that might enable first degree price discrimination, it also enables consumers to more easily share prices with each other. This greater transparency rewards the single low price strategy.

It's not a coincidence, in my mind, that Apple fought for a standard $0.99 per track pricing scheme with the music labels while Amazon fought the publishers for a standard $9.99 pricing for Kindle ebooks. Neither Amazon or Apple was trying to profit on the actual ebooks or digital music retail sales (in fact many were likely sold at break-even or a loss), they were building businesses off of the sale of complementary goods. In the case of Amazon, which is always thinking of the very long game, there are plenty of products it does make a healthy profit off of when customers come to its site, and getting users to invest heavily into building a Kindle library acted as a mild form of system lock-in. In the case of Apple, it was profiting off of iPod sales.

In the meantime, second and third order price discrimination continues to exist and thrive even with the advent of the internet so it's not as if the pricing playbook has dried up.

A skeptic might counter: didn't Ron Johnson get fired from J. C. Penney for switching them over to an everyday low price model? Didn't their customers revolt against the switch from sales and coupons and deals you had to hunt down? 

Yes, but everyday low pricing isn't a one-size-fits-all pricing panacea (as I wrote about in reference to the Johnson pricing debate at J.C. Penney). For one thing, there is path dependence. Once you go with a regular discount/deal scheme, customers create a mental price anchor that centers on that discount percentage and absolute price. It's hard to lift an anchor.

J. C. Penney was trying to go from a heavy sale-driven pricing scheme to an everyday low pricing model, and that's an uphill, unmarked path. Only the reverse path is paved. It's not clear whether the switch would have worked in the long run. Johnson ran out of runway from his Board soon after he made the switch and revenues declined. 

Everyday low pricing tends to work best when you're selling commodities since those items are ones your customers can purchase many places online. At Amazon we were far more interested in dominating one crucial bit of mental math: what website do I load up first if I want to buy something? We were obsessed with being the site of first resort in a consumer's mind, it was the core reason we were obsessed with being the world's most customer-centric company. Anything that might stand in the way of someone making a purchase, whether it be prices, return policy, shipping fees, speed of delivery, was an obstacle we assaulted with a relentless focus. On each of those dimensions, I don't think you'll find a company that is as customer-friendly as Amazon.com.

Ultimately, customers have a hard time figuring out intrinsic value of products, they're constantly using cues to establish a sense of what fair value is. Companies can choose to play the pricing game any number of ways, but I highly doubt Netflix and Amazon will choose to make their stand on the first order price discrimination game. There are many other ways they can win that are more suited to their brand and temperament.

Still, the peanut gallery loves to speculate that Amazon's long term plan is to take out all of its competitors and then to start jacking up prices. A flurry of speculation that the price hikes had begun spun up in July this year after an article in the NYTimes: As Competition Wanes, Amazon Cuts Back Discounts. After the NYTimes article hit, many jumped on the bandwagon with articles with titles like  Monopoly Achieved: An invincible Amazon begins raising prices.

If you read the NYTimes article, however, the author admits "It is difficult to comprehensively track the movement of prices on Amazon, so the evidence is anecdotal and fragmentary." But the article proceeds onward anyhow using exactly such anecdotal and fragmentary evidence to support its much more certain headline. 

Even back when I was at Amazon years ago we had some longer tail items discounted less heavily than bestsellers. However, pricing the long tail of books efficiently is not as easy as it sounds, there are millions of book titles, and most of the bandwidth the team had for managing prices was spent on frontlist titles where there was the most competitive pressure. All the titles listed in the NYTimes article sound to me like examples of long tail titles that were discounted too aggressively for a long period due to limited pricing management bandwidth and are finally being priced based on the real market price of such books. Where in the real world can you find scholarly titles at much of a discount?

The irony is that the authors cited in the article complain their titles aren't discounted enough, while publishers ended up in court with Amazon over Amazon discounting Kindle titles too much. This is to say nothing of the bizarre nature of book pricing in general, in which books seem to be assigned retail prices all over the map, with the most tenuous ties to any intuitive intrinsic value. The publishers set the retail price, then Amazon sets a price off of the retail price. If the publishers wants the discount on their books to be greater they could just increase the retail price and voila! The discount would be larger.

To take another category of products, DVDs, soon after we first launched the DVD store, long tail title like Criterion Collection DVDs were reduced from a 30% discount to a 10% to 15% discount. But just now, I checked Amazon, and most of its Criterion DVDs are discounted 25% or more. If I'd taken just that sample set I could easily write an article saying Amazon had generously decided to discount more heavily as part of its continued drive to return value from its supply chain to customers.

Could the net prices on Amazon be increasing across the board? I suppose it's possible, but I highly doubt that Amazon would pursue such a strategy, and any article that wanted to convince me that Amazon was seeking to boost its gross margins through systematic price hikes would need to cite more than just a few anecdotes from authors of really long tail books. 

It will remain a tempting narrative, however, because most observers think it's the only way for Amazon to turn a profit in the long run.

However, that's not to say big data hasn't benefitted them both in extraordinary ways. Companies like Amazon and Netflix know far more about each of its customers than any traditional retailer, especially offline ones, because their customers transact with them on an authenticated basis, with credit cards. Based on their customers' purchase and viewing habits, both companies recommend, better than their competitors, products their customers will want.

Offline retailers now all want the same type of data on their customers, so everyone from your local drugstore or grocery store to clothing retailers and furniture stores try to get you to sign up for an account of some sort, often by offering discounts if you carry a free membership card of some sort.