Capitalism 2 and Capitalism Lab Forum

On the Chinese forum, I've seen some interesting post, so I decided to share one of the interesting post where the author analyzed the rare strategy of Media Empire and its effect on overall market with other AIs. The original post is here. http://tieba.baidu.com/p/3354315493. I'll not translate word by word, but just main points.

First, this analysis is done at version 2.5.14, with game setting of 4 cities with high economic simulation and reverse inflation. The author tried to see if he can influence other AIs on the market, like a visible "invisible hand" in macroeconomics, and the closest can be as governors (before city simulation expansion is out). The general idea is to have 3 media firms to each 3 media types in all cities (9 firms per city) and max-out their rating point, so no other new media can have reasonable influence on media market. I'll skip the part about how to achieve it using script and in-game strategies and focus on the analysis below.

The author said from observation, he saw when CPM is set at 2.0, AI's product with poor quality of 10 can put ads on his media empire and able to reach 100 brand rating. At CPM 4.0, only products with quality over 50 can have reasonable brand rating. At CPM 7.0, only products with high brand concern, like big 3CE/wines/etc can afford ads. Beyond CPM 8.0, only player's own ads exist. Since ads brings out brand, brand brings rating, rating influence price, and ultimately the profit, beyond CPM 7.0, if AI uses the media, almost all AIs will have negative profit.

So if using media empire as a macroeconomic controlling tool, and set the CPM to very low, there will be price war allover between AIs. Poor quality goods can compete with good quality goods, the overall total product market value suffers during price war. When set at CPM 4.0, most poor quality none-essential goods will drop out of the market. When set beyond CPM 5.0, most AI's profit will come to media ads, thus stagnate the market growth. AI's personal wealth and company market value starts to drop. However there are many factors might affect this, like current economic status or central bank policy, but this is a good start if players try to implement media focused strategies.

In my own experience, and I don't usually go for pure media empire, but interestingly, when I have more and more control over media, I find that I do tend to set CPM at about 3.0+ for high rating media (30+ rating), and at least 2.0 for new low rating media. Since this seems to be the market norm and can stay competitive in most games. Also a lot of time I find AI with media-focus strategy will open new media firm and set its CPM to 10.0 and drop back to 1.0 periodically to squeeze out profit. There are still many things we can learn from media empire strategies and explore the Capitalism Lab game with new possibilities.

When is a good time to build a new firm? I'm sure it takes a long time to become profitable because of low quality content

Personally, I rarely build new media firm, but only buy media on sale. It cost as much as to buy a media firm on sale during recession as to build a new one. This way it doesn't require spending tons of money for overhead and content investment for years to raise rating to a reasonable level. Also since the same type of media competes against each other, "growing" a new media firm decades into the game is quite difficult. It might take even a decade more after building a new media to just break even. The total cost during this period would be close to hundreds millions to billion.

However, since media focus strategy isn't quite well explored, I think it is possible to build a media empire without buying existing on sale medias, but build them on your own. The trick would be to constantly micro CPM like AI does, and make new media firms relatively profitable within reasonable time. In normal gameplay, I would say building new media firms should be the last resort when a company have massive ads expense for its brand-heavy product and no other media firms are on sale. Or you've reached a point where annual revenue is at billions, and wish to squeeze other AI's media rating. Even possibly messing with other AI's advertisement effectiveness, I haven't tried this kind of strategy before, no idea how effective it might be. Like I mentioned, there are plenty of room to explore how media related strategies could work.

TIP ONE: At a time when you already have billions of annual profits, set up a media firm and adjust to the maximum content development budget. Also set the CPM to a level same as your trusted media firm. After a few good years, your rating would have increased to high 30s; together with it are your many customers. Transfer your massive ad spending into your media firm and you will get an increase in profit with the same magnitude as your ad spending. There you go-a highly profitable media firm.

TIP TWO: Once you got the high 30s rating, the plenty customer-competitors, and your own ad expenses, you could set ALL the ad units' monthly spending to maximum, thereby increasing your brand rating, without even reducing a single cent of profit. All that would happen is a shift in margin from the retail firms into the media firm and an increase in the brand rating of your products with advertisements.