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Introduction to the Definitive Guide to Entertainment Marketing

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The world might have changed, but one constant remains: We, as a people, want more entertainment. For entertainment marketers, it’s a huge opportunity. Al Lieberman and Pat Esgate explain how to take advantage of it.
This chapter is from the book

In the decade since The Entertainment Marketing Revolution was published, the impact of new technologies has been such that we might as well have chiseled our first book in stone and sent it out on dinosaur-back.

A little over ten years ago, the Internet was primarily used for email and very limited information search. Going on the Web at home meant tying up your phone line, as cable modems—very expensive—were only just appearing. “Mobile” was a word used primarily with transportation. “Google” was a funny little word associated with a cartoon character from the 1920s. And AOL and Time Warner were basking in the rays of their earth-shattering merger.

People were still replacing their vinyl or cassette music collections with CD versions, and the majority of people who cared about such things still owned collections of VHS tapes but were switching over to DVD. Downloading a song took 3.5 hours. A movie took 28 hours. Broadcast networks were TV royalty, surrounded by the serfdom of cable, which lived off of broadcast re-runs.

The only people who were digitally recording anything were the people who were inventing the technology. There was no HDTV, HD video, HDMI—no high-definition anything. Neither the product nor the technology existed in commercial form.

Print media—newspapers, magazines, books—was healthy. A struggling startup called Amazon tried to convince traditional booksellers that it was the World’s Largest Bookstore. The only form of texting was a service called instant messaging. That was tied to your computer screen—which most likely was a large box that sat on your desk. Without an Ethernet cable (or a telephone line) to anchor you to the World Wide Web, you had to resort to a phone call, or—get this—a face-to-face conversation.

The death knell of movies was predicted. Again.

Flash forward to today. We are surrounded by innovative, mobile technology: smartphones, tablets, laptops. Every small device is now a center of the entertainment universe, bringing all the platforms—movies, publishing, music, sports, television—into the palms of the public, who wants it all, NOW—and gets it. Entertainment is streamed everywhere, at any time, pushed onward by the consumer, who burns with a desire to know more and have more, faster.

The opportunities for entertainment, and entertainment marketing, seem endless. But traditional business models are morphing daily.

The music industry writhes, as digital downloads become the norm. The entire concept of albums—compilations of several songs being sold in a package—is disappearing rapidly. New platforms threaten the very idea of music ownership. The Internet allows for self-distribution, allowing greater freedom for musicians and new approaches for labels.

Newspapers and magazines both strive to find ways to monetize what’s been posted for free for nearly a decade, reversing a slide in advertising and subscriptions dollars. The book business wrestles with digital readers. Traditional distributors seemed destined to fail, while mighty Amazon has become a publisher.

The revenue from electronic gaming is now far greater than that of the theatrical box office and continues to grow, though primarily through mobile and social gaming. Game consoles seek to become the sole set-top box, while over-the-top distribution drains viewers from cable TV. Broadcast networks fight for relevance as the consumer finds great original content on 900 channels, more and more of it mobile.

But movies? Please. Did anyone really expect them to die? Movies are still the root of the entertainment industry. This platform is not simply about box office. Movies provide a marketing dream, with licensing, merchandising, sponsorship, and retail creating billions in revenue, across all platforms. And now, with mobile the new mantra, movies are always with us, digitally downloadable on every tablet, smartphone, laptop, gaming console, smart TV Internet, and pretty soon, your sunglasses.

Beyond the platforms, there’s the growth of social networking, possibly the biggest harnessing of word-of-mouth ever. A marketer’s dream, the proliferation of Facebook, Twitter, YouTube, Pinterest—and whatever’s next—has connected consumers like never before. With the good comes the challenge: keeping control when bad buzz goes viral. Now more than ever, speed thrills... and kills.

So the world might have changed, but one constant remains: We, as a people, want more entertainment. We want escape, respite, drama, laughs, learning, and sometimes, simply something to blank out on. And now we have it all, everywhere, from big screen to small.

For entertainment marketers, it’s a huge opportunity.

The Market for Marketing—and Marketing Professionals

Ten years ago, entertainment marketing was a relatively tiny, but growing, niche. At that time, consumer spending on entertainment was pegged at $150 billion, with additional revenue from associated advertising.

Entertainment spending now reaches into every corner of the developed world. Revenue growth is aided by new technologies, delivering content to the furthest corners of the world, not to mention every public space in America—including the back seat of taxicabs and restaurant booths, grocery stores, and gas pumps.

The consumption of entertainment creates huge streams of revenue. One source1 pegs total global entertainment expenditures for 2012 as follows:

TV Subscriptions / Licensing:

$85 Billion

Music:

$17 Billion

Consumer Magazines:

$21 Billion

Video Games:

$15 Billion

Radio:

$22 Billion

Consumer and Educational Book Publishing

$32 Billion

Cinema (Box Office Only)

$34 Billion

This adds up to a whopping $226 billion. Keep in mind that these figures—with the exception of television—do not include the licensing, sponsorship, and merchandising that flows from the multi-billion-dollar monetization of content, revenue streams that we will discuss in later chapters. It also does not include the marketing spend associated with these platforms, a figure that, according to the same source, exceeded $165 billion all on its own.

By the time we add in similar ticketing, licensing, and merchandising revenues from sports (estimated at $464 billion2), we’re exceeding $1 trillion in entertainment spending around the globe. But more than simply a huge stream of revenue, the business of entertainment—specifically, movies and television—is a significant contributor to the economy.

As the Motion Picture Association of America (MPAA) reports3:

The production and distribution of motion pictures and television programs is one of the nation’s most valuable cultural and economic resources.

The industry is a major private sector employer, supporting 2.1 million jobs, and nearly $143 billion in total wages in 2010:

  • Direct industry jobs generated $42.1 billion in wages, and an average salary 32% higher than the national average:

    • There were nearly 282,000 jobs in the core business of producing, marketing, manufacturing, and distributing motion pictures and television shows. These are high-quality jobs, with an average salary of nearly $82,000, 74% higher than the average salary nationwide.
    • Additionally, there were over 400,000 jobs in related businesses that distribute motion pictures and television shows to consumers.
    • The industry also supports indirect jobs and wages in thousands of companies with which it does business, such as caterers, dry cleaners, florists, hardware and lumber suppliers, and jobs in other companies doing business with consumers, such as DVD retailers, theme parks, and tourist attractions.

The industry is a nationwide network of small businesses:

  • The industry is comprised of nearly 95,000 businesses in total, located in every state in the country.
  • The industry made $37.4 billion in payments to nearly 278,000 businesses around the country in 2010.

The industry increases the tax base:

  • The industry generated $15.6 billion in public revenues in 2010 from federal income taxes, including unemployment, Medicare and Social Security, state income taxes, and sales taxes on goods.

The industry is one of the most highly competitive around the world—one of the few that consistently generates a positive balance of trade, in virtually every country in which it does business:

  • There were $13.5 billion in film and television services exports in 2010, down 2% from 2009, and up 6% over 2006.
  • The industry had a positive services trade surplus of $11.9 billion in 2010, or 7% of the total U.S. private-sector trade surplus in services.
  • The motion picture and television services surplus was larger than each of the surpluses in the telecommunications, management and consulting, legal, medical, computer, and insurance services sectors.

As entertainment reaches further into the global marketplace, its moguls continue to focus on issues of fair trade, including NAFTA, the European Union, and China’s continuing impact in the World Trade Organization. And with information literally moving at the speed of light—bounced off satellites and fed along fiber optic cables—both domestic and international distribution are critical, and marketing even more so.

As all of this continues to morph, opportunities for marketing professionals continue to grow. Both the entertainment business and the marketing of it are the focus of course offerings at over 50 of the top U.S. universities and colleges, including New York University, Wharton, Columbia, Yale Management, UCLA, and USC. Some of these institutions offer Entertainment and Media majors or specializations with courses offered at both the undergraduate and graduate levels.

You, as one of these future marketing professionals, have picked up this book not because you want to know how movies are made—you want to know how money is made. In entertainment marketing, we do not make the original content; we leverage the original content through any number of products, experiences, sponsorships, licenses, concepts, and opportunities. In this new edition we discuss how each of the entertainment platforms addresses that concept.

But before we do that, let’s take a broad look at this amazing business and the challenges you will face.

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