The "Superstar Effect"?

[HTMD]

Here's something interesting from the world of photography that caused me to wonder if there might be a similar trend at work in the world of custom & handmade knives.

"In the past 10 years the advances in technology and the resurrection of 1970's era photo enthusiasm has created a huge talent pool and along with it a huge new marketplace of new pro photographers. The demand however for pro photo services has only grown incrementally. So now there is a huge supply competing for a very small demand. This causes several market changes.

First, the increased competition causes rates or labor charges as an average to decline.

Second, the quality of work has gone up because the marketplace can choose from a larger talent pool and eliminate the wanna-bes and not-good-enough pros. Additionally, more competition between photographers causes innovation, propelling some photographers forward and leaving others behind.

Thirdly, an interesting phenomena called the "superstar effect" kicks in as the gap between supply and demand widen -- the rates for the most popular photographers will go up exponentially while the number able to charge high rates will go down exponentially.

This "superstar effect" happens in industries where there is a lot of consumer hobby activity or interest and is best explained by the golf analogy: There are probably 50 million golf enthusiasts world wide, and probably 200 A-list pro golfers. That means that out of a talent pool of 50 million, the market generates about 200 that are good enough for people to pay to watch. The other 49,999,980 golfers may be extremely good, but few are willing to pay to watch them play when they can do it themselves."

I raise the question out of curiosity and have no hidden agenda or point to make. I'm not an expert in the area of business trends or related phenomena of any kind. I do read with interest the many comments on this forum about the 'business' aspects of knife making/collecting and undoubtedly many of you know more about this subject than I know. Hopefully those that have opinions and/or experience to share, and those that have questions to ask will post. It'd be nice if we could have a meaningful discussion without a brawl breaking out.
:thumbup:

 

[Joss]

Buddy,

This is very interesting, thanks for posting your thoughts.

I think this is largely true, but the effects - at least short term - might be different.

First, the top 20 makers only get a portion of the money they generate. Their 1st hand customers will get a big portion f that too. It's hard to assess who gets the most.

Second, the market is somewhat fickle, and so the shifts (maybe not in the top 20) happen frequently and are difficult to predict, whereas in a sport the shifts happen more rarely and can be predicted to some extent.

Third, our exposure as collectors is mostly to American makers (US in particular), and to a small extent to Western Europe. The US market has started to attract top makers from all over the world, but it's still pretty limited. A good example of that is the relatively recent discovery in the last few years on this forum of the top Russian makers. Who would have thought that they existed? One wonders what might be existing in China, India, Japan, & the Middle-East.

So I think we will see a different evolution, where in the short term, dealers and entrepreneurs will seek out top-notch talent outside the US. Anyone who follows some of the top sites will have see it happen already. Second, there's a need for a clearer objective identification of top makers, and I predict that this will happen too.

 

[Stephen F]

Interesting, and gives credence to the comments heard about the quality and talent seen emerging as competition and technology develops. My personal view is that whilst the above theory can explain the evolution of supply, it suggests little in the way of demand ...... it would be my proposal that the "superstar" effect is actually a by product of the high speed "informational cascading" made possible by modern technology, and the subsequent "Herding" behavior that results.

Stephen

 

[Wulf]

If you walk into the average American household, how many cameras do you think you'd find?

How many custom knives would you find?

I think that the custom knife market still has enormous growth potential, which, if harnessed, can support an ever increasing number of makers for a long time to come.

 

[Keith Montgomery]

To me, what they call the superstar effect is just a natural way for things to work. In any industry that has a large amount of consumer hobbyist activity, and where supply is greater than demand, those that are the best, or have been promoted by fans into a superstar role, will be able to charge high amounts for their product. Unlike the superstars, those that aren't as popular will find themselves in the pool where supply greatly outstrips demand. Though there will be different levels within this group, those that are in it will be forced to be more competitive and will thus be unable to charge as much.

In the custom knife industry, the superstars are in very high demand. They can not make as many knives as they could sell. That means that they can charge as much as the market will bear. Those that are not stars can also charge what the market will bear, but will not see the same demand for the knives they make. This can mean that at the very least the prices they can attain will remain at stagnant levels, and as the number of makers increases, the prices they can get for their knives may actually go down. I have seen a great many knives being sold at prices that have to represent a loss to the maker.