Introduction: Take a Look at This!
The letters T, B, and M make me smile. They represent the trillions, billions, and hundreds of millions of dollars the global entertainment and media industries generate annually. Can I have just 1/10 of 1%? I’d never work again; or at least not at some of the crazy jobs I’ve had to survive! So what are these global entertainment and media industries?
Various research companies define the global entertainment and media industries differently. As an example, PricewaterhouseCoopers (PwC) describes the industries as 13 segments: book publishing, business to business, cinema, Internet access, Internet advertising, magazine publishing, music, newspaper publishing, out-of-home advertising, radio, TV advertising, TV and video, and video games. Other research companies combine different types of industry-related businesses, making the final numbers hard to crunch. Thus, there are many ways to figure the estimated “value” of the entertainment industry. Yet, using many sources, we can still find variations in what to count as part of these industries and some rather conservative estimates of the value of different sectors. No matter what is on “the list,” it appears to represent revenue of about $1.8 trillion in 2016 with an expected increase to about $2.1 trillion by 2020.
To help us see what this looks like, I built Table I.1 from multiple sources, including PricewaterhouseCoopers (PWC), the Recording Industry Association of America (RIAA), the International Federation of Phonographic Industry (IFPI), Music Business Worldwide (MBI), Nielsen, Apple, TechCrunch, Statistica, Forbes, The Financial Times, and individual industry-related companies, such as Live Nation, Universal, Warner Bros. Entertainment & Music Groups, Sony Entertainment, and many others. Since these sources define each segment differently, more than one is needed to even get close to an accurate estimate of the relative value of each segment separately and combined. Research firms make their money by selling information to companies that want to market products that will be successful in the related entertainment and media industries to their customer base. So, they routinely release various parts of the “picture” and it’s up to someone (such as me) to attempt to take the given data from a variety of sources to construct a reasonable “financial snapshot” of its value. Government sources from the U.S. Census and Economic Index also provide some validity to published resources. However we paint it, the entertainment and media (both traditional and social) generate about $1.8 trillion annually. I personally like the way the “t” rolls off the tongue. All the segments on a global scale generate revenues in the billions of dollars, and when we break it down into additional subsections we’ll often find the numbers in the hundreds of millions of dollars. Want to be part of this show-me-the-money world?
PricewaterhouseCoopers (PwC) (2016) claims publishing revenues (defined as all types of consumer and educational printed books and e-books) total about $147 billion annually. It also estimates the publishing segment will slow for printed books, but because of the 11.7% increase expected in the revenues of e-books, the entire publishing industry will increase about 1.7% until 2020. The popular media has been saying for years books are dying—that seems not to be the case. What is important is that the delivery method for reading is changing and e-books, considered “new” a few years ago, have stabilized as an entertainment media revenue source in more ways than you probably knew.
Cinema is defined somewhat narrowly by PwC (2016) as box office and advertising gross revenues. Cinema revenue has a global impact of about $26 billion. And if we add in subscription TV (in many countries of the world TV broadcast is licensed), plus production, video-on-demand, and many other film-based or related sources for entertainment, the value of the cinema business jumps to about $564 billion.
The music industry is the first of the entertainment segments to suffer the financial slide of the creative destruction process caused by the advances in technology, negative consumer behaviors, and the lack of enforcement of the copyright laws. These three factors have damaged the overall value and potential value of the music industry as the sale of recorded products (CDs, etc.) has lost about 70% of its revenues over the last few years. Published sources claim the revenues have been dropping steadily from about $16 billion to less than $5 billion. Safe harbors and the unwillingness of the court system to actually support copyright holders as the owners of entertainment products have placed the “value” of the industry into question and forced labels more into marketing, branding, and promotion business models instead of the recording companies trying to sell CDs. Still, as consumers shift away from stealing music online to streaming it, the industry has been able to generate hundreds of millions of dollars from the streaming companies. These alternative revenue sources are just starting to cover the losses from album sales and other dormant revenue streams. When we combine digital streaming with live music ticket sales, sponsorships, CD, digital downloads, and music publishing royalties the industry generates about $54 billion, with a predicted increase of 2.1% to about $59 billion in 2020.
Advertising is the big enchilada, with revenue in the neighborhood of $600 billion in 2016. Entertainment advertising on TV, radio, the Internet, print, and other types of social and traditional media currently grosses about $272 billion. The figure is estimated to rise significantly to over $350 billion by 2020.
Computer and digital games account for about $52.4 billion now but revenues are expected to rise to over $66 billion by 2020. The global Internet access market rocks at about $510 billion being generated now and around $634 billion in 2020. The growth in revenue appears to correlate with the improvement in the availability of faster downloading speeds, which will also help the streaming of movies, music, and games. The North American (U.S. and Canada) professional sports market totals about $67 billion currently from ticket sales, media rights licensing, sponsorship, and merchandise receipts. The world market tops out at about $145 billion with the addition of football (soccer), the Olympics, and other types of professional sports. Table I.1 provides some insight into the size of the global entertainment and media markets.
Technological Revolutions
The surprise to many consumers, students, and even career professionals (in the industry) is the degree to which different segments of the industry must work together if any are to be financially successful. Without the great songwriters, the musicians, artists, labels, radio, and other forms of media, entertainment ventures are dead in the water. On the other hand, without initial and long-term financial support and industry connections, songwriters and their music publishers usually fail to sell or license any of their material. Thus, if you really want a great gig in this business, you need to start by understanding the big picture of how it all works together. On top of that, we are living in a time when the status quo is being disrupted on a daily basis. According to Bothun and Sviokia in their article “You’re a Media Company. Now What?” (2016),
Nowhere are these porous and evolving borders more evident than in the entertainment and media (E&M) industry. The past 20 years have brought a wave of disruptions to distribution, formats, technologies, and consumption patterns … There has always been an intimate and complex relationship among consumer and industrial companies … The 1950s-era daytime serials were known as “soap operas” because they were sponsored by the companies that made soap. In 1940, at the dawn of the radio era, listeners tuned in to the Texaco Metropolitan Opera broadcasts. The Wonderful World of Disney, the television show that debuted in 1969, integrated media, experience, entertainment, and merchandising. Hello Kitty was born in Japan in 1975 as a way to cute-ify merchandise, and then developed into television series, comics, and video games. Still, through the 20th century, most brands relied on the creativity and expertise of the media, advertising, and entertainment companies to create content and deliver audiences.1
But now consumers using digital devices can avoid buying entertainment products in various platforms at retail stores (e.g., DVDs and CDs) and just stream free or steal it outright. Say good-bye to retail brick-and-mortar stores. Entertainment has always been an “experience” we’d have to acquire by buying a copy, such as piano rolls for the player piano (look it up), vinyl records, cassettes, CDs, or tickets to the local theater to watch the latest Hollywood movie. TV changed some of that by allowing us to see visual programs in our homes, but we still have to tolerate those darn boring commercials. Radio did the same thing for music in our cars. Therefore, Netflix, Spotify, e-books, and all the other Internet-based programing are just the next step in the technical digital delivery revolution for acquiring information and entertainment products that started well over 600 years ago. Welcome to the Age of Enlightenment and the Gutenberg printing press with movable type. Let’s pause and consider the impact the work of one inventor had in revolutionizing access to both educational and entertainment products with moveable type:
He who first shortened the labor of copyists by device of movable types was disbanding hired armies, and cashiering most kings and senates, and creating a whole new democratic world: he had invented the art of printing. (Thomas Carlyle, Sartor Resartus, 1833) … The first man to demonstrate the practicability of movable type was Johannes Gutenberg (1398–1468), the son of a noble family of Mainz, Germany. A former stonecutter and goldsmith, Gutenberg devised an alloy of lead, tin and antinomy that would melt at low temperature, cast well in the die, and be durable in the press. It was then possible to use and reuse the separate pieces of type, as long as the metal in which they were cast did not wear down, simply by arranging them in the desired order. The mirror image of each letter (rather than entire words or phrases), was carved in relief on a small block. Individual letters, easily movable, were put together to form words; words separated by blank spaces formed lines of type; and lines of type were brought together to make up a page. Since letters could be arranged into any format, an infinite variety of texts could be printed by reusing and resetting the type.2
So, that is how books and newspapers eventually made it into every home. Now, let’s look at another common source of entertainment, and one we think of as free, in our homes and in cars. The word “radio” can be either the device we use to capture and hear a radio signal or the content of the signal being broadcast. The invention of radio is closely related to the invention of the telephone by Alexander Graham Bell (1847–1922), and the telegraph by Samuel Morse (1791–1872).
During the 1860s, Scottish physicist, James Clerk Maxwell (1831–1889), predicted the existence of radio waves; and in 1886, German physicist Heinrich Rudolph Hertz (1851–1894) demonstrated that rapid variations of electric current could be projected into space in the form of radio waves similar to those of light and heat … In 1866, Mahlon Loomis, (1826–1886), an American dentist, successfully demonstrated “wireless telegraphy.” Loomis was able to make a meter connected to one kite cause another one to move, marking the first known instance of wireless aerial communication … Guglielmo Marconi (1874–1937), an Italian inventor, … sent and received his first radio signal in Italy in 1895 … By 1899 he flashed the first wireless signal across the English Channel … Nikola Tesla (1856–1943) is now credited with being the first person to patent radio technology; the Supreme Court overturned Marconi’s patent in 1943 in favor of Tesla.3
World War II brought us the atom bomb, but it also created the first serious opportunity for electronic computers.
The earliest electronic computers were not “personal” in any way: They were enormous and hugely expensive, and they required a team of engineers and other specialists to keep them running. One of the first and most famous of these, the Electronic Numerical Integrator Analyzer and Computer (ENIAC), was built at the University of Pennsylvania to do ballistics calculations for the U.S. military during World War II. ENIAC cost $500,000, weighed 30 tons and took up nearly 2,000 square feet of floor space. On the outside, ENIAC was covered in a tangle of cables, hundreds of blinking lights and nearly 6,000 mechanical switches that its operators used to tell it what to do. On the inside, almost 18,000 vacuum tubes carried electrical signals from one part of the machine to another.4
The personal computer was developed with the inventions of transistors, integrated circuits, and microprocessors.
In 1948, Bell Labs introduced the transistor, an electronic device that carried and amplified electrical current but was much smaller than the cumbersome vacuum tube. Ten years later, scientists at Texas Instruments and Fairchild Semiconductor came up with the integrated circuit, an invention that incorporated all of the computer’s electrical parts—transistors, capacitors, resistors and diodes—into a single silicon chip … But one of the most significant of the inventions that paved the way for the PC revolution was the microprocessor … They could run the computer’s programs, remember information and manage data all by themselves.5
Former vice president Al Gore did not invent the Internet. This is how it really happened:
The first workable prototype of the Internet came in the late 1960s with the creation of ARPANET, or the Advanced Research Projects Agency Network. Originally funded by the U.S. Department of Defense, ARPANET used packet switching to allow multiple computers to communicate on a single network. The technology continued to grow in the 1970s after scientists Robert Kahn and Vinton Cerf developed Transmission Control Protocol and Internet Protocol, or TCP/IP, a communications model that set standards for how data could be transmitted between multiple networks. ARPANET adopted TCP/IP on January 1, 1983, and from there researchers began to assemble the “network of networks” that became the modern Internet. The online world then took on a more recognizable form in 1990, when computer scientist Tim Berners-Lee invented the World Wide Web. While it’s often confused with the Internet itself, the web is actually just the most common means of accessing data online in the form of websites and hyperlinks.6
The bottom line is that now many nonentertainment product (shoes to the kitchen sink) companies have expanded into entertainment; the older traditional industry–related companies and media have had to reinvent their business models. Again, according to Bothun and Sviokia (2016),
The evidence is ubiquitous. Nike has become a major presence in social media, digital video, mobile apps, and e-commerce—witness the company’s recently launched YouTube miniseries focusing on a fitness bet between two sisters. ANZ Bank, one of Australia’s largest financial institutions, has built a finance news portal, BlueNotes, which is staffed by well-known business journalists. Marriott has created a content studio, supported by Hollywood talent, to develop videos for distribution in social media and elsewhere, all with the business objective of increasing the hotel brand’s appeal to millennials. FairPrice, a Singapore-based supermarket, maintains the highly popular food content platform Food for Life, which hosts 2,000 video assets in a range of languages. And the list goes on.7
This trillion-dollar industry has changed. Do you see how the parts both naturally and intentionally were made to work together? Adapting Bothun and Sviokia’s (2016) unique concept for analyzing business models, I’ve revised it to fit the entertainment and media industry. The following combines the separate industries into four types of business models based on how they contribute to the system and the processes of creating, licensing, promoting, marketing, distribution, and sales of various entertainment products acquired through retail or streaming, and the theft associated with illegal downloads (which take away from the entire industry’s bottom line as well as yours as a creative).
Entertainment production businesses create entertainment products based on intellectual properties they buy or license from the original owners. As an example, songs come from songwriters and music publishers license the rights to make a recorded copy of the song. Film companies purchase or lease the book rights from major authors and publishing companies to turn a popular book, and it does not have to be bestseller, into a movie. In the case of the book into film, the industry executives recognize how the storyline will connect emotionally with the movie goers they want to reach. The movie companies then hire scriptwriters to remake the book into a movie script that directors can follow to bring the book to life as a film with actors. See how this is all connected? Do you want a career in one of these parts of the entertainment development and delivery process? Part of this section of businesses, beyond the major labels and studios, are the entrepreneurial creative writers, authors, songwriters, painters, and others, who own (copyright) their own original creative works once they are placed in a tangible form (known as real property). Either they or an entertainment-based representation company can sell or license the creative works to the major production companies, which moves the creative work from a pleasing idea to a monetizable consumer product.
Distribution and marketing businesses are the companies that often distribute the creative products to consumers through purchase, subscription, licensing, or streaming. The distribution is either part of a production company, with a separate purpose (business model), or a totally separate company that releases entertainment products and provides promotion and publicity to consumers. The distributors usually have to obtain products by buying them wholesale or through licenses, for which they pay a percentage of the profits to the label or the studios, as examples. Examples include retail chain store outlets, everything from Target to Kroger. The disadvantage of retail brick-and-mortar stores is that they have to get the customers to come to the stores. That costs money in building, heating, lighting, employees, advertising, and so forth. Find many record stores around anymore? Not when consumers can acquire their music much cheaper online or by streaming.
The marketing of entertainment products includes the promotion and publicity that is used in both traditional media and social media. Advertisements for movie trailers, free clips on iTunes, and stories based on acts’ images are used to alert potential consumers about new entertainment product releases. Promotion gives consumers a chance to “discover” the entertainment product while publicity provides the backstory of the act tied to their image. Both are very important as consumer acceptance of new entertainment products leads to the production companies’ use of branding to increase profits. You will learn more about this in the chapters on record labels.
Representation is the term used to describe the companies that offer special technical types of products that require very little direct connection to consumers. Their clients are the businesses who need audio installations, video production studios, websites, and many different types of products that will help other businesses (business to business) improve their operations and increase revenues. These are talent agencies, personal management companies, and licensing companies, such as ASCAP, BMI, SESAC, Harry Fox, SoundExchange, and others discussed later in the book in the chapters on artist management and touring. You might find yourself working for one of these important entertainment industry businesses, giving career advice to artists, finding jobs for film, stage, and tours, or analyzing the finances, paying all the bills and taxes, and contributing to the success of both your company and the industry overall.
When I was in high school a long time ago, we had a basketball coach who would start to pull up his socks when things started to get weird. Then he’d jump up, prance around, and start yelling at just about everyone. By the way, he would later become a college coach and had Magic Johnson on his team when they won the Final Four!
Well, start to pull up your socks. Mash-ups are the new industry-related businesses that are driving the old established industry crazy. Many of them live in safe harbors that protect them and allow consumers to violate the copyright law all the time. You’ll read about that stuff later in the book. However, they are allowed to exist so that technology may make advances to improve the quality of human life. The hard part is twofold: copyright owners are not often paid for their creative works and investments, as sometimes the safe harbor companies tend to get away with ignoring the law, and they may also push the privacy boundaries of individual citizens past established ethical and legal limits. The upside is that now we have YouTube, computer software, and many other forms of communication; these have forced the media and entertainment companies to reinvent their business models. Examples include Amazon.com, Spotify, and many other types of entertainment-based companies that merge the functions of the creative producer models, distribution and marketing models, representation models, and mash-ups, which all provide new opportunities for individual creative artists. The great products usually come from the professional workers and artists, and the major labels, publishers, and movie studios. What comes from the efforts of these entertainment industry novices (called wannabes by insiders) are uploaded products that are usually really poor to okay, and they have the accumulated effect of simply jamming up the Internet and making it harder for truly talented or promising artists to be heard or seen. Think about what you can do in the industry and where you might fit best based on your passion and creativity. Then think about what you need to know to be successful as you read this book and how you might apply it in ways that will contribute to the entertainment industry’s growth and sustainability.
The world is quickly changing and you will hear lots of frustration from the old industry suits and creatives who are struggling to keep up with the industry to which they have given their lives. As you read through the chapters of this book, you’ll also feel my frustration at the situation. However, embrace it! It is simply a waste of time to think things are going to return to the way they were before the Internet, technology, and social media. So let’s look at the bigger picture. Honestly, the entire industry is based on the protection of creative works by copyright laws. And that is where the sock pulling, yelling, and frayed nerves are breaking out in all parts of the entertainment and media industries. What a time to have a perfect storm in the middle of a technological revolution. It’s enough to threaten an entire industry—or, at the very least, to make anyone who wants to be a part of it realize how much the changes are creating new opportunities and new models for entertainment creation, marketing, sales, and distribution by fostering new and varied revenue streams.
Notes
1.Bothun, Deborah, and John Sviokia. “You’re a Media Company. Now What?” Strategy Business. 2016. Accessed June 25, 2016. http://www.strategy-business.com/article/Youre-a-Media-Company-Now-What?gko=ac350.
2.Kreis, John S. “The Printing Press.” The History Guide, Lectures on Modern European Intellectual History. September 11, 2014. Accessed June 25, 2016. http://www.historyguide.org/intellect/press.html.
3.Bellis, Mary. “The Invention of Radio—Wireless Telegraphy.” About.com Inventors. October 21, 2015. Accessed June 25, 2016. http://inventors.about.com/od/rstartinventions/a/radio.htm.
4.History.com Staff. “Invention of the PC.” History.com. 2011. Accessed June 25, 2016. http://www.history.com/topics/inventions/invention-of-the-pc.
5.History.com Staff. “Invention of the PC.” History.com. 2011. Accessed June 25, 2016. http://www.history.com/topics/inventions/invention-of-the-pc.
6.Andrews, Evan. “Who Invented the Internet?” History.com. 2013. Accessed June 25, 2016. http://www.history.com/news/ask-history/who-invented-the-internet.
7.Bothun, Deborah, and John Sviokia. “You’re a Media Company. Now What?” Strategy Business. 2016. Accessed June 25, 2016. http://www.strategy-business.com/article/Youre-a-Media-Company-Now-What?gko=ac350.