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The New York Times ran an article this morning entitled “Movies Try to Escape Cultural Irrelevance”. I had to smile because I have been thinking for a while about what is going on culturally in our entertainment universe and trying to ponder how the economics of various distribution platforms determine the daringness of what gets produced. It is clear that the cultural conversation today is around TV and not the movies. The movie business has long since surrendered to producing cartoon fantasies (Spider Man, X Men, etc) for teenagers while the TV business seems to thrive on serious dramas that plumb the depths of character in dramatically satisfying ways (Mad Men, The Good Wife, Breaking Bad, etc). The Movie industry thinks they have a PR problem, when they really have a content problem.

Several industry groups, including the Academy of Motion Picture Arts and Sciences, which awards the Oscars, and the nonprofit American Film Institute, which supports cinema, are privately brainstorming about starting public campaigns to convince people that movies still matter.

You wouldn’t have to convince people that movies mattered in 1975, because every week there was a movie that mattered. So what is it about the platform that determines this differential? To begin with, TV still has a business model that works, unlike either the film business or the Broadband Internet distribution business. TV works because it has a limited supply of commercial spots per hour. With increasing demand from advertisers, the price for each spot rises and so production costs can be covered and a profit can be made. Contrast this to the Internet advertising platform. Here you have an infinite number of ad units so that prices never rise even if demand rises.

Google is in essence trying to repeal the laws of supply and demand, which is why their recent financial results disappointed analysts.

Analysts focused on the amount that advertisers pay for clicks on Google ads, a metric called cost-per-click, which dropped 8 percent over both last quarter and last year. Susan Wojcicki, Google’s senior vice president of advertising, told analysts that a drop in average cost-per-click often accompanied an increase in the number of paid clicks on ads, which rose 34 percent over last year.

In contrast, even though TV viewership is down, ad rates have stayed high because of supply constraints. Which leads us to the movie business model.  Unlike TV, movies are a total crapshoot. Each film is a one off product, almost impossible to predict demand. The only possible indicator is sales of a very similar product—thus the sequel. It’s hard to imagine, but the sequel is a relatively new phenomena. No one suggested a Gone with the Wind II or a Casablanca II. But once Star Wars II made more money than the first one, the die was cast and now Hollywood is a crackhead chasing sequels. Of course the agents know this, so the price for talent soars as the number after the title rises. Now a rational business would look for metrics such as return on investment to determine whether spending $200 million on Tron Legacy was a good idea. In that world, Bob Zemekis’ new film Flight, made for $30 million, may seem like the best investment of the year. Whether Hollywood will be able to kick it’s sequel habit is a question, but in the mean time the movies will continue to suffer from a kind of cultural irrelevance and TV will continue to thrive.

When months ago Mitt Romney’s spokesman suggested he could Etch a Sketch his way back to the political center, I expected the Convention to be the venue for this makeover. But that was not to be, as a hall full of Tea Party fanatics would have actively booed a moderate acceptance speech from Romney. So they waited until the debates which had an additional benefit of catching Obama flat-footed in responding to Moderate Mitt.

The third debate last night was the most amazing part of the Etch a Sketch strategy. Since the beginning of the campaign, Romney has surrounded himself with George Bush’s most aggressive Neocon foreign policy experts, like John Bolton and Dan Senor. I would have given a lot to watch John Bolton observing Romney twist and sweat himself last night into the ultimate peacenik in his closing statement, “I want to see peace. I want to see growing peace in this country. It’s our objective.” But of course, just like all of Romney’s instant transformations, this one is not credible.

I’m convinced the Kumbaya routine from Romney comes from his pollsters who are telling him that America is tired of fighting wars in the Mideast and Romney’s bellicose rhetoric towards Iran is scaring voters. Obama needs to drive this home just the way LBJ used the famous daisy bomb ad to scare voters about Goldwater’s finger on the nuclear trigger. Obama already has an ad that makes this point. He should put it up nationally this week.

George Will said on ABC that last night’s debate was the best he has seen in his lifetime and I agree. He also said Obama won–and I agree. Determined to erase the memory of his poor performance two weeks ago, the President turned the first question of the night (on jobs) into a good right jab to Romney’s chin–”when Governor Romney said we should let Detroit go Bankrupt”–and never let up for the rest of the night.

The coup de grace came in the final exchange. Just like in a great prize fight I could see in slow motion that Romney had left himself open to a knockout when he began his final statement by saying, “I care about 100% of the people.” I said to the people in the room I was watching with ,”here comes the 47%”, and Obama did not disappoint.

I believe Governor Romney is a good man. Loves his family, cares about his faith. But I also believe that when he said behind closed doors that 47 percent of the country considered themselves victims who refuse personal responsibility, think about who he was talking about.

Folks on Social Security who’ve worked all their lives. Veterans who’ve sacrificed for this country. Students who are out there trying to hopefully advance their own dreams, but also this country’s dreams. Soldiers who are overseas fighting for us right now. People who are working hard every day, paying payroll tax, gas taxes, but don’t make enough income.

And I want to fight for them. That’s what I’ve been doing for the last four years. Because if they succeed, I believe the country succeeds.

When my grandfather fought in World War II and he came back and he got a G.I. Bill and that allowed him to go to college, that wasn’t a handout. That was something that advanced the entire country. And I want to make sure that the next generation has those same opportunities. That’s why I’m asking for your vote and that’s why I’m asking for another four years.

That was the closing line of the debate. Romney was on the canvas. The Governor had tried to work the ref all night, but in the end he was outclassed. This was the comparison I had been waiting for. This is still going to be a very tight race, but I’m pretty sure Obama has stopped Romney’s move up. The instant polls all showed Obama winning the night, but Karl Rove and company are about to unleash a tsunami of advertising in the swing states. My guess is that the number of undecideds (who are these people?) is very small, so that November 6 will be all about enthusiasm and turnout. In that game, Obama just fired up his troops.

President Obama was caught off guard in the first debate by Mitt Romney’s pivot to the center and his embrace of the Compassionate Conservative position. That Obama allowed Romney to blur their differences on healthcare, social security and even taxes was distressing for Democrats and clearly has shaken up the race. Tonight the President has an opportunity to draw a bright line between his foreign policy and that advocated by Romney. Failing to do that would probably lead to Obama’s defeat in November.

Two weeks ago Mitt Romney’s Foreign Policy Director Alex Wong told reporters that a President Romney would ensure “the restoration of a strategy that served us well for 70 years.” Here is what that 70-year strategy looks like in terms of money spent. That much of the world has been free riding on our blood and treasure is the issue of the moment.

 Romney assumes that the aggressive military strategy of the George Bush administration still enjoys the support of the American public. He surrounds himself with Bush Neocons like Dan Senor and John Bolton who recently stated that America should “not grant any validity to international law” because it will be “used by those who want to constrict the United States.” But the country has turned away from the preemptive war strategies of the Bush era. The Libertarian wing of the Republican party (estimated to represent almost 24% of the voting public by a recent Reason-Rupe Poll) is staunchly anti-war, calling for a pullback of American forces stationed abroad. Even the Republican Realists like former National Security Director Brent Scowcroft have acknowledged that, “the decision (by Bush 43) to …..try to deal with those problems (terrorism and the empowerment of non-state actors) as a unilateral nation-state using traditional military power, is what brought America to the point of crisis.”

President Eisenhower warned the country in his Farewell Address that, “we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists, and will persist.” But he would have been shocked to see how far that power has been extended. A view of our current budget priorities tells the tale.

What is really remarkable is that Congress has already passed laws (the Budget Control Act of 2011 and the Sequester) that reverse the 70-year policy of continuous increases in the Military budget. For the Pentagon, the Sequester would mean about $50 billion a year in less defense spending from fiscal year 2013 to FY2021, on top of the roughly $450 billion in reduced defense outlays from the Budget Control Act according to the Congressional Budget Office. And while the Corporate Welfare crowd like Senator Lindsay Graham vow “that I will fight this with every ounce of my being”, he is on the losing side of the political argument. As an April 2012 ABC News Washington Post Poll found “two-thirds of Americans now say the War in Afghanistan has not been worth fighting.”

As Gary Wills pointed out in an important essay, President Obama came in to office trapped by the facts on the ground of the National Security State–what Wills calls “the Entangled Giant.”

The permanent emergency that has melded World War II with the cold war and the cold war with the “war on terror”—all these make a vast and intricate structure that may not yield to effort at dismantling it. Sixty-eight straight years of war emergency powers (1941–2009) have made the abnormal normal, and constitutional diminishment the settled order…

Here is the irony. Reagan and the neoconservatives managed to convince their followers that the only thing the government knew how to do well was fight wars. All the rest–building the Interstate Highway System or the Internet, running Social Security and Medicare—the government must be incompetent. But it is the financing of the National Security State that prevents us from providing a world-class universal health care and K-College education system. Nothing else. And what is Mitt Romney offering us? A return to Reaganomics, with higher military budgets and lower taxes on the wealthy, leading to endless deficits. The tragedy of Ike’s warning is that both Democrats and Republicans alike have embraced the Military Keynesian model, which Romney used in his convention speech: “we can’t cut the military budget and sacrifice all those good defense industry jobs”. Even Bill Clinton, presiding after the fall of the Soviet Union, never delivered a peace dividend because his own draft record left him too vulnerable to take on the Pentagon. Now Obama has a once in a lifetime chance to do some nation building at home instead of in the Middle East. He must seize the opportunity or become a one term President.

Two of the big research themes of the USC Annenberg Innovation Lab converged in last night’s VP Debate: Social Sentiment Analytics and Transmedia Storytelling. The analytics part is fairly straightforward. For the last year in association with the Signals Analysis and Interpretation Lab, we have been recording the real time sentiment on Twitter of the Presidential Candidates. This is a huge corpus of data and during last week’s Presidential debate we were analyzing about 1400 tweets per second. Last night Joe Biden seemed to overwhelm Paul Ryan both in volume and in positive sentiment on our real time dashboard.

Which leads me to the second part of our work, Transmedia Storytelling. As our Chief Advisor Henry Jenkins has taught us, Transmedia is the art of telling a single story across multiple platforms, with each piece adding to the total narrative. The story cannot be told in a single commercial or a single debate as each piece adds to the transmedia narrative. Last night Joe Biden helped clarify the Democratic narrative that had been so muddied in the first debate by Mitt Romney’s desperate dash to the center.Two elements of the Democratic difference were hammered home relentlessly.

Clashing in a feisty, hard-edged debate, Vice President Joe Biden on Thursday night repeatedly accused challenger Paul D. Ryan and his running mate, Mitt Romney, of favoring the rich at the expense of middle-class Americans and engaging in loose talk that could lead the country to another war.

Ryan tried to put Biden on the defensive over Libya, but it didn’t work.

BIDEN: I will be very specific. Number one, the — this lecture on embassy security — the congressman here cut embassy security in his budget by $300 million below what we asked for, number one. So much for the embassy security piece. Number two, Governor Romney, before he knew the facts, before he even knew that our ambassador was killed, he was out making a political statement which was panned by the media around the world. And this talk about this — this weakness. I — I don’t understand what my friend’s talking about here. We — this is a president who’s gone out and done everything he has said he was going to do. This is a guy who’s repaired our alliances so the rest of the world follows us again.

On Tuesday Obama will have an opportunity to press this theme. Romney has surrounded himself with Bush era Neocons like John Bolton and Dan Senor, who clearly would like nothing more than to start another war in Iran (and maybe one is Syria as well). I’ll have more to say on that subject on Monday, but for now it is safe to say that Biden got the Democratic Transmedia story back on track.

For Obama the debate was an unmitigated disaster. It was a low energy performance by a man who seems to think he is sitting on a lead and has to play a conservative game. Obama kept looking to moderator Jim Leher to be the fact checker on Romney’s rather outrageous statement that his tax plan didn’t mean what it means. But Romney had already intimidated Leher, who effectively became the empty chair.

From a body language perspective, Obama seemed listless and disengaged, almost as if he didn’t want to be there. He kept looking down and seemed to be constantly on the defensive. Most of all his “no drama Obama” demeanor was the wrong tone to carry in the face of such aggressive attacks from Romney. If Axelrod and Plouffe advised him to abstain from attacking Romney (not one mention of 47%, Cayman Islands, Vouchercare) they made a terrible miscalculation. Even if that was the game plan, why didn’t Obama realize it wasn’t working and assume a more aggressive stance in the second half?

Now it will be up to Joe Biden to take Paul Ryan to the woodshed next week. And then Obama will have to drink a double espresso in two weeks and come into round two ready to confront Romney on every issue.