Entertainment Industry Economics | Harold L. Vogel

Summary of: Entertainment Industry Economics: A Guide for Financial Analysis
By: Harold L. Vogel


Embark on a journey through the captivating world of the entertainment industry, a thriving and lucrative business that generates billions of dollars in the US alone. This summary of Harold L. Vogel’s Entertainment Industry Economics: A Guide for Financial Analysis unveils the critical aspects governing this sector, from films and music to casinos and theme parks. Delve into the different types of market structures, such as monopolies, oligopolies, and competitive monopolies, to learn how the entertainment industry functions. Furthermore, explore how technology has shaped this ever-growing domain and its impact in varying sectors like movies, broadcasting, and music.

The Economics of Entertainment

The entertainment industry is a $250 billion industry in the US alone, consisting of various industries like films, music, and gambling. The industry’s profitability is decreasing, but it remains an essential aspect of people’s lives. The economics of entertainment is mainly influenced by the public’s available free time and disposable income, and a strong economy equals healthy industry revenue. Various entertainment industries fall into three categories: monopolies, oligopolies, and competitive monopolies. However, entertainment is much more than mere diversion as it moves people emotionally. The development of technology has greatly affected the entertainment industry’s economics, altering the industry’s economic landscape. The entertainment industry is still one of the US’s leading exports, topping $6 billion in 2000.

The Business of Show Business

The movie industry is a high-risk, high-reward business that requires creative financing for the development, production, and distribution of expensive products with no guarantee of public appeal. With the rise of the internet, the entertainment industry is seemingly well-positioned to benefit from expansion, particularly through the growth of music. However, the film business remains capitalistic and entrepreneurial, requiring studios to control distribution from the early stages of a film’s planning and financing. Various forms of financing include step deals, presales, packages/negative pickups, and private funding. Studios face further problems with distribution at theaters, such as bicycling, ticket palming, switching out ticket rolls, and illegal reproduction of the negative. Despite the difficult nature of the film industry, successful movies can bring in tremendous profits, and there is always the potential for innovation and growth with evolving technology.

Broadcasting’s Evolution

Broadcasting began as a laboratory experiment and has now become a $50 billion industry. Although the economics of broadcasting have fluctuated over time, the networks still function as audience assemblers. The mid-1980s saw industry restructuring following deregulation. Several mergers and acquisitions took place, resulting in the creation of new networks and the blurring of network distinctions in the 1990s. The rise of cable and satellite television led to a decline in network viewing, but the increase in TV households sustained the industry. Despite the challenges it faces, broadcasting continues to offer higher than average profit margins and high cash generation. At its core, broadcasting’s success lies in its ability to engage the audience’s fantasies through simple yet addictive content, be it a game or a TV show.

The Internet’s Impact on Entertainment

The Internet evolved from a government project to become a $300 billion industry in 2000. Its ability to share images transformed the entertainment industry by allowing film companies to download their movies online. The music industry was also disrupted by the ease of downloading songs. The Internet’s impact is comparable to television’s in the 1920s and 1930s. It has enabled the modern sports business to depend on broadcasting and cable industry revenue growth. People gamble not just for money but for entertainment. The effect extends to every entertainment sector.

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