If you’re like many people today, you’ve probably played online games at one point or another. If you’ve done so in the past 12 years, you might have even played a little game called Starcraft, a strategy game where you control one of three competing alien races. If you happen to live (or were willing to move) to South Korea, though, you could have made a career of playing and competing against other players.
I’ll give you a moment to read all about the players, their groupies, and their (six figure) salaries (including the fact that the tournaments are attended by more people than the Superbowl). I’ll give you a few more moments to shake your head in disbelief and contemplate the unfairness of life. Ready to go on?
As crazy as it is for the players of a computer game to make so much money, it’s really not that unprecedented for the top performers in certain fields to make incredible profits. Is it really that different (or more bizarre) for players in physical sports (football, baseball, soccer, etc.) to earn multi-million dollar salaries? Or for top movie actors to have earn millions per movie, while the average actor has to get a side job as a waiter/waitress just to pay the bills? In all these cases, the top performers benefit from the Superstar Effect.
The Superstar Effect
The Superstar Effect is the economic term for when the top performers in some fields are able to get phenomenally large salaries. In order for you to be a superstar, your field needs to meet three criteria:
- The market must be fairly large; if only a few hundred people are interested in your field, you’re not going to become a superstar, regardless of how good you are. (This is why there are superstar singers, but no superstar nose flutists.)
- Everyone in the market wants the good provided by the top performer. This is usually not an issue; if all other things are equal, the average person is going to want the goods or services that are the best.
- The good is provided with technology that enables everyone to enjoy the services of the top producer. (This is why there aren’t any superstar plumbers, but there are superstar singers; wide distribution of songs allows everyone to enjoy the performance of, say, Katy Perry, but plumbers can only fix so many sinks during the week.)
These characteristics mean that the easiest fields in which to become a superstar are those that involve performing in one method or another. It’s easy to record something like a a movie (or a professionally played Starcraft game) and distribute it as widely as needed. The costs of adding one more copy to the number already being produced (the marginal cost of increasing the distribution) is relatively small, meaning that it’s easy to expand the number of people who watch (or play, or otherwise enjoy the product). The same logic holds for some physical goods, as well; more people want to read the latest book by Stephanie Meyers than alternative books, and so she becomes ever wealthier.
Of course, it’s not possible for every profession to develop superstars; for fields where you need to be there in person (everything from plumbers to doctors to lawyers), it’s impossible to reach true superstar status (at least with our economics-provided definition). While the market might be large for their skills, and everyone wants service from the top performer, it’s usually not possible for doctors or lawyers to provide service to everyone who wants their help.
The Downsides of the Superstar Effect
In the modern age, though, there are some downsides to meeting the qualifications for being a superstar. Everyone wanting to enjoy your products, cheap and easy methods of distribution and lots of fans are a recipe for both superstardom and widespread pirating. It shouldn’t be a surprise that the fields where most superstars develop (music, movies, and other recorded performing arts) are also the fields most afflicted by piracy.
Unfortunately, there’s a tricky balance that needs to be struck. Too much effort put into making it impossible for pirates to to copy your work can also make it harder for legitimate users to access your products; too little effort can result in your product being rampantly pirated, decreasing your profit. Finding a balance between these two extremes can be tricky, and you can see how various groups have run into trouble going to one or the other extreme (The RIAA, the Record Industry Association of America, is (in)famous for their prosecution of people who download music from illicit websites; they’re also the butt of numerous jokes and snide comments as a result.) All of that said, though, it’s the sort of problem I’m sure most of us would like to have; figuring out how to make some money off the incredible throng of people eager to enjoy our products.
That’s the Superstar Effect in a nutshell; the explanation for how superstars can develop in every field from movies to music to yes, playing a decade-old video game really, really well. Next time someone starts to complain about the outrageous salaries commanded by professional athletes, feel free to point out the salaries commanded by professional Starcraft players and the universal tendency to (over)pay people who play games.