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WANT THE REAL SECRET OF HARRY POTTER'S SUCCESS?

The Bible is regularly the most popular book in the United States, selling about 25-million copies in 2005, according to one recent estimate. Past Potter books have sold 325-million copies worldwide. Harry Potter and the Deathly Hallows, the latest and last installment of the series, could easily surpass Bible sales this year.

But book sales are hardly the only measure of the success of author J.K. Rowling's creation. Advertising Age recently tallied up all the sales of Potter-related products and found the total was likely in excess of $15-billion.

Book sales accounted for the largest fraction of that, coming in at a whopping $9-billion. Yet movie revenue ($4.4-billion), DVD sales (more than $1-billion) and television revenue (up to $495-million) were equally startling.

To put the movie revenue in perspective, it is possible the Harry Potter series will surpass Star Wars and James Bond and become the highest-grossing movie franchise in history. And Potter has two more movies to go.

There are many works of art that are equally as entertaining as the Harry Potter books.

But Potter scored the big prize. Why? Clearly, the artistry of Rowling is an important element explaining Potter's success, but the changing economics of the "new" economy clearly plays a role.

Books and movies are different from other products that we consume in that the quality of our experience depends in part on whether others experience the product as well. When I eat an apple, my pleasure doesn't depend on whether my coworker eats an apple, too. But when both of us have seen the same movie or read the same book, we can delight in conversation about it.

Economists call such interactions "network externalities." When network externalities are present, the success of a product can snowball once sales have crossed a tipping point.

Why did Harry Potter become the focal point? It is likely the answer is partly quality, and partly the luck of good timing.

Externalities are clearly much more powerful in the Internet age. Potter Web sites, online chat rooms and video games let fans extend their enjoyment and magnify the network long after the book has been read.

The Internet magnifies the benefits of collective interaction and rewards the winners in a manner disproportionate to their relative quality. The Harry Potter series has ended, but something else will surely replace it, and soon.

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