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We are now at Episode Six. It’s good to be back to the show.While technological advances have dramatically cut down the cost of producing multimedia content, Media production remains a high-risk and high-cost business. Do you know how much it costs to produce an episode of Game of Thrones? The number is 10 millions. What does the 10 millions cost entail?Well, it could include everything from script writing, content licensing, to crew selection, travel accommodations, and post-production CGI. And...plus all of the expenses on marketing and distributions. So, in a word, it is quite expensive to produce TV shows. In the movie industry, the average cost of producing a hollywood film has also gone up, from 60 millions in late 1990s to 200 millions recently.The media industry is making a big bet on all of the money spent on the things they produce. In other industries where the price of a product is governed by the invisible hand of the marketplace, that is, supply and demand. Prices go up if there are lots of demands and limited supply, and prices go down if there is an over-supply of a product with too little demand.Yet, the media industry hardly follows this rule. The thing is, it is difficult to predict demand of a media product, because tastes of audience change all the time. And, not to mention that media producers need to deal with a fluid political situation where scandals could hit at anytime.Back in 2014, House of Cards was a hit show. Everyone was talking about how it helped Netflix, and how big data analytics drive the production of the show. In 2018, its viewership hit the bottom after the airing of season six. Do you know what happened? Yes, it’s Kevin Spacey. His sexual harassment scandals cost Netflix 39 million US dollars.So, the question is, how do the industry counter the high risk and high cost? Here are several strategies.Strategy number one. Artificial scarcity. We know scarcity creates demand. If you shop on Amazon, and find your favorite product has only a few items left in stock. You probably will feel an urge to order it right away. The media industry can control the availability of information products, in the hope the demand will increase, if the product is not readily available. Such scarcity is artificial, because in theory, the industry has a theoretically limitless supply of a media product. Think about Spotify. With a free account, you can listen to music, but cannot skip songs frequently, nor can you listen to your tracks offline. These features are reserved for premium users. By creating the paywall, the media industry creates the kind of artificial scarcity that drives people to pay for content.Strategy number two. Economy of scale. This refers to the financial advantage that emerge, when the average cost of producing a good decreases, as the number of units produced increases. In the media industry, the cost of producing the original, or the first copy is higher than subsequent copies. For example, it costs about 10 millions dollar to produce an episode of Game of Throne. The 10 millions is the first-copy cost, or we can also call it sunk-cost, which is irrecoverable costs that are incurred in the production of goods and services. The good news is, once the first copy is made, the second, the third, and all subsequent copies are exponentially cheaper to make and distribute. In the digital age, this means copying digital files and making them available on cloud servers. A show may have millions of views and downloads, and each view and download bring money to the industry.Economy of scale is what drives the mass production of media products. But, what is more powerful is the third strategy, economy of scope. This is the financial advantage that emerge from producing a wide range of products, sometimes repurposing components or sharing costs of other enterprises. Have you been to The Wizarding World of Harry