Entertainment Industry Economics | Harold L. Vogel

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

Introduction

Welcome to the realm of entertainment, a $250 billion industry in the US alone, encompassing films, music, casinos, and more. In the book ‘Entertainment Industry Economics: A Guide for Financial Analysis’ by Harold L. Vogel, you’ll dive into the captivating world of leisure and its connection with disposable income and economic growth. Vogel explores the different categories of entertainment in capitalist terms, such as monopolies, oligopolies, and competitive monopolies, and how technology has changed the landscape for various industry segments. Get ready to embark on a journey through industries that have shaped our lives and leisure time, shedding light on their hidden intricacies and financial challenges.

The Economics of Entertainment

The entertainment industry is a $250 billion industry in the US alone, but its profitability is decreasing. Entertainment is essential, ranking just behind food, shelter, and clothing in its importance to many people. The economics of entertainment are influenced by the public’s free time and disposable income. The industry can be analyzed by whether it is a monopoly, oligopoly, or competitive monopoly. However, entertainment is not just about diversion, but its purpose is to move people emotionally. Today’s technological revolution greatly affects the entertainment industry’s economics, and this development will drastically alter the industry’s economic landscape.

Financing Films and the Future of Distribution

The movie industry is known for its success stories but it’s also a high-risk entrepreneurial venture. Financing movies involves a triumph of hope over reality. The same goes for film distribution since the mid-1970s. The internet has provided a new opportunity to benefit the entertainment industry. Technology allows for more movies to be distributed widely and cheaply, but it also poses a risk for studios. Movie and TV production financing can take several forms, including presales, step deals, negative pickups, and private funding. A studio’s financial success depends on controlling distribution from the early phases of planning and financing a film. However, studios face several problems, such as bicycling, ticket palming, switching ticket rolls, and illegal reproduction. The future of music and film has never been greater with technological changes that have created new ways of production, reproduction, packaging, and distribution.

The Economics and Evolution of Broadcasting

Broadcasting has come a long way from being a mere laboratory experiment to become a $50 billion industry. The major networks function as audience assemblers, with affiliate compensation accounting for one-third of the station’s hourly rate for advertising. Deregulation in the 1980s led to industry restructuring, and major mergers and acquisitions have taken place, including ABC by The Walt Disney Company, NBC by General Electric, and CBS by Viacom. FOX emerged as a fourth network, and Time Warner (WB) and Viacom (UPN) blurred the network distinction in the 1990s, as the trend of networks losing viewers to cable and satellite television continued. Although network viewing fell from 84% of homes in 1980 to less than 50% in 2000, the simultaneous increase in TV households sustained network TV. Despite being a mature industry, broadcasting offers higher than average profit margins with high cash generation. The book also emphasizes that the success of a product will always be its ability to engage the player’s fantasies.

The Impact of the Internet

The internet is a result of scientists trying to find a way for computers with different software systems to communicate and share information. Images became key to unlocking its power and by 2000 it accounted for over $300 billion in economic activity. The internet has redefined many industries including entertainment and film companies can now download films directly to digital projectors in theaters. The impact of the internet is profound and as important as the development of television.

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