Entertainment business…at the crossroad!

A new future for Entertainment industry is unfolding…

Entertainment just like travel is intrinsic to the human psyche and its safe for me to say its need is never going to go away. However, the form and shape of the businesses, whether content or its distribution can and will change. Many years the character of the business never changed but then technology specially digital transmission provided the first significant and major change in doing this business. Change did not come without warning but one does not want to change or adopt new ways unless that new way is perhaps the only way left to do business. Distribution changed character first with music, which is now completely digitised and has followed up with other content like news and now sports as well as entertainment. Mobile, anytime anywhere, customer choice are the buzzwords we have heard in the last decade or more and they have all materialised and how! The business changed leaving most of the companies in a dilemma as to what their real activity was… or where their future lay. That dilemma is real.. as the leaders in this business are beginning to find out whether they were the leaders in the print business ie the Washington Post or the New York Times or the Times group in India or now the TV conglomerates like Star, the Zee group or Disney for that matter. We need to delve a little more as the change is not over… just paused!

Business of Entertainment and Media is a relatively simple business. It’s core is the collection or production of content which the audiences across the world want to consume and pay for. Content took the shape of stories whether drama or cinema, serials,music or for that matter sporting events. The content was then distributed through newspapers, magazines,theatres, broadcast Tv, discs both video and audio and now through digital means. The revenue was largely through Advertisement (substantial percentage for print and broadcast) and to a lesser extent through subscriptions and ticket sales. The revenue profile remains largely the same and so does content production but what has changed is the distribution. There is a saying in the entertainment business that ‘Content is king and Distribution is God’. Unfortunately the God changed and how..! Predictable lines of expected revenue have vanished, choice has become more difficult to decipher as well as measure and rates for advertisement are in the form of metrics which are difficult to fathom. No wonder the dilemma continues…!!

If the change was limited to this, the Entertainment giants, who were a few, would have figured out a way to sustain the pie and that too within the cosy club. They had huge social power to dominate though not the money power. The bigger change is the entry of Big Tech in the entertainment business. They not only brought in the knowledge of pathbreaking technology for digital distribution but came equipped with Balance Sheets which far exceed any regular business and the investors judge them not for their profitability but for reach. They can not only distribute but fund content without immediate risk of acceptance or non acceptance by the consumer. Their metrics of performance is not a hit or a flop but acquiring customers on the back of which they can distribute other products besides entertainment content. In addition they have garnered a lions share of the advertisement pie that was otherwise the preserve of the entertainment companies. Big tech dominates the Wall Street as well other bourses across the world… No wonder the world has changed!

A tech company like Netflix is valued higher than the traditional giants like Disney whose brand value as well the value of its library was unparalleled. Most of the media conglomerates whether its Murdoch, Bertelsmann, Sony,Discovery/HBO,Comcast or for that matter Times Group in India are in the crossroads of their life. They are likely to be nowhere near to the market capitalisations of Google, Apple or for that matter Facebook. Can we call this the tech takeover….maybe or maybe we will let the future unfold!

Have a great week..

Published by eyeonmediablog

Professional Chartered Accountant and presently the founder and chairman of Sapphire Professional Services Pvt Ltd - a boutique advisory firm in M&A,Strategy and Structuring ( www.sapphire-pro.co.in ). Previously a senior partner with PwC and leader of the Entertainment & Media industry in India for 7 years.

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