How would most parents react to the following product? If they buy a DVD and show it to their babies, the babies will get smarter, raising their chances of getting into Medical School.
If that seems too good to be true, then perhaps you never have heard of the Baby Einstein Company. I am exaggerating their claims, but their products have attracted attention from consumer protection groups.
Believe it or not, the observation has something to do with high tech.
Baby Einstein’s tale illustrates how markets quickly develop new opportunities opened by scientific research, even when the research has a flimsy foundation. Market behavior cannot be described as “Steady, aim, fire.” It is more like “Fire, aim, steady.”
More to the point, this episode illustrates a tendency of markets to introduce new innovative products that take advantage of ambiguous scientific discovery. The phenomenon is pervasive in pharmaceuticals, biotech, and genetically modified organisms, not to mention many other medical device markets. Baby Einstein just happens to be easier to understand, so it makes for a great illustration of the process.
In case you missed it, here is the news (or look here). On the surface it does not look like much. Through March of next year Baby Einstein will honor a new and improved money back guarantee. A customer can return up to four videos, bought between 2004 and now. No receipt required. This contrasts with their old guarantee, which held for only 60 days after purchase, and required a receipt.
News sources are interpreting the new guarantee as a way to take care of some uncomfortable issues.What are those uncomfortable issues? Baby Einstein has been threatened with a class action law suit for false claims. These follow after many years of fighting advocacy parent groups who went after them.
What is the precise false claim? Well, I am not a lawyer, so I am not going to be precise about it. The videos never claimed they would make your baby smart, but they did claim to have educational content. And, well, that probably is not so. Pediatricians are firm on this point: screen time before the age of two does not help a child’s cognitive development.
Before we go any further, I find this mildly amusing. It is hard to read about this suit with a straight face.
I will admit that my wife and I bought some of these products, and used them. In saying that I am not endorsing them for educational purposes or for any other (I do not endorse products, period). Rather, my wife and I used the videos for one primary purpose, to help us get the babies to sleep. They were a more reliable pacifier for a crying baby than a thumb, back rub, and (after some practice) even a bottle.
But we never had any illusions that the videos would help the kids get smarter, much less pass a standardized exam, or raise their chances of getting into medical school. But apparently others did, and that is where the issues arose.
BTW, we also are not alone in making the purchase (though I am not sure what attitude others brought with them). According to one news article, more than a third of US households with a child in 2003 had one video from this franchise.
And, in case you were wondering, apparently the company does pay a license fee to Albert’s estate for use of the name.
In the beginning there was the Mozart effect
Where are the scientific debates? They are in the background, though most of the news articles lost sight of that. Actually, that is a key point, and motivated this post. Market events took advantage of the ambiguity in the scientific debate, eventually overwhelming it.
The science relates to the so-called Mozart effect. Apparently, if someone listens to Mozart for a while they perform better on spatial-tests than if they listened to silence or other activities. Apparently the effect lasts for about 15 minutes, but fades pretty fast. (I went online a bit to verify this, and that seems to be the consensus).
It has been repeated on other music as well, but there is considerable debate about what this effetc measures. Does the effect arise as a result of calming down? Or is it artificial? Is it just Mozart? Ask a child development specialist to find out. Like most of science, this one is a partial finding. There is room for the knowledge to evolve.
Ah, but that really misses the key part of the story. Baby Einstein was always taking advantage of some popular misconceptions of some serious scientific investigations, but far before any of the definitive findings were settled. They were commercializing in the face of ambiguity, and the ambiguity did not stop anybody with a good story.
The scientists never claimed that the music would make the baby smarter. But others did. The 1997 book by Don Campbell really did it. He popularized this research with the following book, “The Mozart Effect: Tapping the Power of Music to Heal the Body, Strengthen the Mind, and Unlock the Creative Spirit.” He later wrote a book called “The Mozart effect for children.”
Campbell went further than the scientists he cited. He recommended listening to specific concerts by Mozart, and he claimed it could help IQ.
I remember this stuff well. It all blew into popular discussion around the arrival of my first child, around 1997.
Sure enough, soon the baby stores and baby sections of the toy stories started carrying little DVDs and CDs of Mozart music by various artists. There were a bunch of them. To be sure, it all exploited parental anxiety a tad bit more than the science justified, but it was amusing in its own way. My wife and I would notice the special displays, pick up an example, and laugh about it.
I remember Baby Einstein distinctly. Its DVD and CD’s stood out. They were bright, cheerful, simple, and elegant, with a special emphasis on primary colors and childlike images. And the box promised appropriate visuals for your baby.
We bought one. Neither my wife nor I can belt out Eine Kleine Nacht Musik, so we appreciated having a DVD that did so in soothing tones. We liked it so much for putting the kids to sleep, we bought another.
The entrepreneurs behind these videos were not shy. The lead developer was Julie Aigner-Clark. With reassurance and a soothing voice, at the end of the video she repeated her motivation for starting Baby Einstein, to help parents everywhere.
Now, look, this either appealed to you or it did not. Her husband filmed the videos with basic camera angles, and her kids (named Sierra and Aspen) starred in them, wholesomely laughing at the toys and breaking up the scenses. Some friends thought they smelled of too much new age nonsense, while others took the same approach as my wife and I, trying them out. I thought they were harmless, but not to be taken too seriously.
Whatever might be true of Aigner-Clark, she and her husband were smart entrepreneurs. It seemed as if their product line grew bigger on every trip to the baby story. My wife and I had more kids and so we expanded our collection. We bought Baby Bach, Baby Van Gogh (featuring Vincent’s paintings), and Baby Noah (featuring animals). These eventually became favorites in my household alongside Baby Mozart.
To make a long story short, then Disney came knocking in 2001. They bought the franchise, expanded distribution, and turned it into a powerhouse, as only Disney can do.
My wife and I stopped having kids, so we stopped noticing the expansion of Baby Einstein. The news reports seem to indicate that Disney has done well for itself. Indeed, these days the franchise makes available 25 different DVDs, with total sales in the neighborhood of $200 million.
The rest is, well, almost predictable in a tiresome way. After the lawyers got involved there were claims and counter-claims. Parental watchdog groups went after Baby Einstein for claiming too much. It went to the Federal Trade Commission, which ruled in favor of Baby Einstein in 2007, but the same groups threatened a class action suit, which prompted a change in the money-back guarantee. Which explains how this story made it into the general news recently.
What does this example tell us?
Back to the main point. What do we learn about markets from this episode?
Notice the sequence of events. The entrepreneurs expanded the concept well outside the original Mozart effect, however dubious the claim was to begin with. Then a major corporation bought them and further expanded the franchise. What began as a little experiment became a whole enterprise, vast and rather commercially successful.
Now, viewing on this from the lighter side, it just makes me laugh. Mozart? What Mozart? Music for babies got lost in it all.
Perhaps that is a virtue. Like most entrepreneurs, the original vision for the firm’s main products taught the founders something, and they learned, and they acted on their learning. Little books and flash cards and plenty of other toys became a focus on the franchise as much as DVDs.
But it is also symptomatic of something deeper, the hit and run exploration that characterizes many new commercial opportunities.
Let me say it broadly: Firms perceive that action needs to be taken before the science is in, so firms act. Potential buyers perceive value even though the scientific claims are ambiguous, so potential buyers pull out the wallet and actually buy. It all happens before there is any certainty about whether the science supports the premises that motivate the actions.
In this case a lot of babies saw too much screen time. If you believe the lawyers, that occurred because many parents were duped by false claims.
The economist in me is more circumspect. Did this company create anything of value? Customers bought the product, but perhaps they bought based on false promises. Is that really value creation?
But then I remember my experience as a parent: While I cannot speak for any other parent, my wife and I did know better than the lawyers. We did not take the claims with any seriousness. We were not looking for brain miracles. We were just trying to get a little sleep. At that stage in our life a little sleep was very valuable.
Oh, and in case you were curious, my kids seem to do just fine on their standardized exams today.