The entertainment sector inherently sets itself apart from other businesses in that it offers a service that cannot be replicated in the finance or e-commerce sectors. This comes in the form of an emotional experience that offers users leisure while capturing their attention and driving culture. In comparison, other businesses are profit-driven, offering tangible products or services, which is why entertainment ventures stand out. It begs the question of what the distinct characteristics are that set them apart, and how they act as key drivers.
Case Study: The iGaming Model
One great business venture to use as a case study would be the iGaming model and how it sets itself apart as a distinct enterprise. For one, the product is pure chance and heavily depends on a customer’s adrenaline and psychological engagement, as opposed to them buying a physical product. Remember, the more a customer enjoys themselves on a platform, the chances of them playing for longer or becoming a recurring customer increase. Additionally, accessibility and convenience play a huge role in this model, as these platforms are generally available at your fingertips with the best casino apps and mobile sites.
Android and iOS are privy to quick and easy sign-ups, massive bonuses, simple one-tap deposits and withdrawals, and hundreds of real-money games. The strategic use of these perks helps in fuelling their unique monetization model, where the focus is on micro-transactions, lifetime customer value, and high volume. Beyond this, operators also need to achieve regulatory mastery to be able to successfully operate across different jurisdictions. As such, it is easy to see how much planning goes into such a business type, with success requiring more than just great supply chain management.
The Intangible Product and Emotional Value
As mentioned, entertainment businesses are providing consumers with something normal businesses cannot: emotional impact and novelty. Following the “Hit” phenomenon (blockbuster culture), a huge investment is made into a project, and the revenue turnover is skewed. The film industry is a good example of this, where a major film is released, which pulls in 90% of its revenue, and the other 10% is generated from selling merchandise. Although consumers already paid for the intangible experience, they now also want a tangible product as a reminder of this memory.
An instance of this would be K-Pop Demon Hunters, a straight-to-Netflix film release that blew up and broke a number of records. It delivered Netflix its first box office hit, with many estimating the film to have made between $16 to $20 million in ticket sales (this in addition to the 236 million streams it got on Netflix). Whereas traditional businesses are aiming for steady and consistent growth, the entertainment sector thrives on explosive spikes with a mass impact.
Broad Functional Differences from Traditional Businesses
Looking at the differences between traditional business models and the entertainment core strategies can further speak to the distinction. One element is marketing and virality, something that does very well in the entertainment sector. Traditional businesses will follow the standard practice of taking action that leads to rational benefits and a quantifiable ROI (Return-On-Investment). In turn, entertainment businesses take risks and rely on cultural drivers such as organic virality (how K-pop Demon Hunters blew up, for example) and FOMO (Fear Of Missing Out). Market budgets are huge, campaigns are aggressive, and the goal is to get as much attention on the specific event or product as possible.
For traditional businesses, their biggest assets are inventories, equipment, and physical plants, as these elements drive the company’s growth. However, entertainment ventures bank on IP (Intellectual Property) as a key driver, with these providing cross-platform monetization. Take the Harry Potter franchise as an example: the characters, houses, and uniforms (all IP) result in the mass sale of merchandise, sequels, and games. As such, there are various streams of revenue coming in from different sectors, all through the strategic use of IP to generate profit.
This bleeds into the idea of the entertainment sector being risk-takers, as large capital is often invested in huge projects with no guarantee for success. A film or album could be a huge hit, or it could be a massive flop (think Mortal Engines, The Marvels, The 13th Warrior). Of course, a certain level of risk mitigation needs to be discussed with investors, but it vastly differs from how traditional businesses function. With standard business models, it is uncommon to see such an investment made without a certain roadmap on where this might end up. Additionally, inventory and contract diversification are made to further navigate or eliminate even smaller risks.
The Challenge of Sustained Engagement
The entertainment sector also faces unique challenges that traditional businesses generally won’t experience. Attention and engagement are the core currencies entertainment enterprises run on, meaning obtaining economic attention is crucial. Naturally, in such a convoluted market, this can prove difficult as they are not only competing against one rival company, but rather every entertainment service in existence. As such, the need for constant innovation and adaptation is vital in ensuring consumers are constantly receiving new content they are actually interested in seeing.
