Every year, American television introduces many new shows, only about one-third of which survive past their first season. The few shows that last, however, prove to be very profitable.
a. How does creative destruction explain why studios bother to make new shows if most of them will fail?
b. In the summer of 2002, American Idol premiered on television and became immensely popular. How did FOX and other networks respond to this surprise hit?
c. What happened over the next several years to profits from American Idol? You don’t need to check FOX’s financial statements to get the answer, use the elimination principle!