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The Death of the TV-Industrial Complex

Remember the much-maligned "military-industrial complex"? The idea behind it was simple. The government spent money on weapons. Companies received tax dollars to build weapons. These companies hired labor. They paid taxes. The taxes were used to buy more weapons. A virtuous cycle was created: The government got bigger, employment went up, and it appeared that everyone was a winner.

The military-industrial complex was likely responsible for many of the world's ills, but it was undeniably a symbiotic system. As one half of it grew and prospered, so did the other.

Little noticed over the past fifty years was a very different symbiotic relationship, one that arguably created far more wealth (with large side effects) than the military-industrial complex did. I call it the TV-industrial complex. The reason we need to worry about it is that it's dying. We built a huge economic engine around the idea of this system, and now it's going away. The death of the complex is responsible for much of the turmoil at our companies today.

The system was simple. Find a large market niche that's growing and not yet dolginated. Build a factory. Buy a lot of TV ads. The ads will lead to retail distribution and to sales. The sales will keep the factory busy and create profits.

Astute businesses then used all the profits to buy more ads. This led to more distribution and more factories. Soon the virtuous cycle was in place, and a large, profitable brand was built.

As the brand was built, it could command a higher price, generating larger profits and leaving more money for more TV ads. Consumers were trained to believe that "as seen on TV" was proof of product quality, so they looked for products on television. Non-advertised brands lost distribution and, ultimately, profits.

The old system worked for Revlon. Charles Revson was one of the first big TV advertisers, and advertising grew his company dramatically. Where did he spend his profits? On more TV ads.

In 1962, a smart ad agency hired Jay Ward, creator of Bullwinkle, and asked him to make a commercial. He invented Cap'n Crunch and came back with an animated commercial. Then, and only after that was done, did the cereal company go about actually making a cereal. Quaker knew that if they had a commercial, they could run enough ads to imprint the Cap'n into just about every kid in America. The cereal was secondary. You could never afford to introduce Cap'n Crunch today, regardless of who made your commercial. Kids won't listen. Neither will adults.

This tidbit is from Purple Cow from Seth Godin

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