Marketing Opportunities for the Entertainment Industry - Report Example

An analysis of marketing opportunities for the entertainment industry Table of Contents Introduction 3 Economic Environment of the Entertainment Industry 3 Trends in the Industry (2010-2014) 5 Analysis of the Marketing Opportunities in the Entertainment Industry 5 Comparison of the Entertainment Industry with two other sectors 9 Conclusion 9 References 10 Introduction The entertainment industry has gained tremendous impetus in the last few years. Recently the industry has been reshaped by the influx of technology, the effect oh which are conspicuous in the industry’s products, services, cost structures and distribution. According to the recent reports, China is considered to have achieved the fastest growth in the global context. The global entertainment industry is also expected to achieve a growth rate of 10% in the next four years. This growth is likely to be most significant in China. This growth is however not independent and is influenced by other factors which are associated with the industry like distribution, intellectual property, licensing, contracts and investments. The growth of the Chinese entertainment industry can be attributed to the popularity of Chinese movies in the country and across the globe (BNET, 2007). The report tries to make an analysis of the current entertainment industry of the world and the economic environment in which the industry operates. It identifies and analyses the probable competitors of the industry. It also makes a comparison of this sector with other two sectors of the economy. Economic Environment of the Entertainment Industry The entertainment industry has to face serious implications with regard to changes in consumer behaviour and market fluctuations. The sector would also have to cope up with the rapid technological changes that have moved the world. “The highly anticipated annual report pegs global compound annual growth rate (CAGR) at 6.6% for the sector, anticipating it reaching $2.2 trillion in 2012” (Media Newsline, 2010). Researches have anticipated that the industry would have to deal with a number of competitors in near future and that it would have to struggle hard to make its presence more conspicuous. In fact the new economic environment of the industry has given rise to a new business model. Critical technologies also play an influential role in determining the direction and pace of the media in the next few years. The most prominent areas which would require additional attention from the perspective of the entertainment industry is as follows. Broadband has penetrated every nook and corner of the world. Mobile has also been gaining ground. Cellular network has been upgrading its infrastructure and adding to the number of subscribers to enable and encourage mobile expansion. This expansion is attained via the internet and through advertising and media. Upcoming movie houses, 3-D cinemas and digital cinemas have improved the “cinema going experience” (Media Newsline, 2010). Apart from that, the market has also been witnessing the arrival of high definition televisions and DVD formats. The technological boom is complimented by these newly established companies. The broadband is said to be rapidly expanding its operations and catalysing the overall growth of the industry. It is expected to be “doubling again to 661 million households in 2012, a 16.4% compound annual increase” (Media Newsline, 2010). While the mobile and the digital segment is driving force in the economy, it is complimented by the expansion of traditional and established businesses as well. These would continue to dominate in generating high revenues, with exceptions like recorded music, where the digital distribution would surpass the levels of physical distribution. These two sectors would earn high revenues although the spending on the two sectors is quite nominal. The internet would continue playing an important role in changing the pace of entertainment world and driving business models thereby revolutionizing the existing relationships between companies and their customers (Media Newsline, 2010). Trends in the Industry (2010-2014) The media and entertainment professionals in Price Water House Coopers have commented on the changes that would be apparent in the industry in the next few years. It is obvious that the structural change would continue to manifest itself through three dimensions, namely, advertising, economic and consumer behaviour. The economic conditions and advertising trends keep fluctuating with time. So the only reliable guide to know the viability of the services is consumer behaviour and service usage. Thus the evolution of consumer behaviour and the trend of digital consumption would be the most prominent determinants of the development of the industry. The changing trends in consumer behaviour is reflected through, 1. Increase in mobility and devices; 2. Dominance of the internet in comparison to other consumptions; and 3. Increasing engagement and readiness for payment of content, driven by improvement in convenience and consumption experiences (PWC, 2010). Analysis of the Marketing Opportunities in the Entertainment Industry The marketing opportunities are predominantly dependent on the presence of competitors. The entertainment industry is strongly driven by competition. Competition would arise from family outings, theme parks, food and drink, sports, culture, games and gambling, and other household activities. An analysis has been presented to highlight the growth of those sectors which could pose competition for the entertainment industry. The following figure shows the consumer spending on leisure goods and activities since 2002 till 2007. Consumer Spending in Leisure Goods and activities, 2002- 2007 2002 2003 2004 2005 2006 2007 (est) £m £m £m £m £m £m Family outings / holidays Holidays (domestic and overseas)** 26,729 28,707 30,642 31,816 32,939 35,005 Theme parks 250 270 257 265 274 259 Experience days out 77 85 92 90 98 104* Food / drink Eating out 24,070 25,250 26,510 28,120 29,590 30,450 Pubs 24,000 24,400 24,700 25,000 25,500 26,000* Sport Sports participation 3,578 3,483 3,629 3,759 3,993 4,250 Health & fitness clubs 1,799 1,934 2,044 2,110 2,266 2,496 Fitness classes 673 721 764 809 858 917 Culture Books***** 3,158 3,200 3,303 3,282 3,381 3,450 Pre-recorded music single and album sales 1,186 1,177 1,157 1,113 1,076 1,043 Theatre****** 328 321 344 384 396 425* Gaming / gambling Gambling**** 8,125 6,947 7,724 9,389 9,388 9,370 Spectator sports 801 809 831 889 924 963 Tenpin bowling 245 255 260 265 273 281* Household activities DIY*** 9,544 10,058 10,580 10,347 10,106 10,804 Garden products 5,650 5,890 5,410 5,180 5,150 5,140 Entertainment Pre-recorded video and DVD sales and rentals 2,372 2,694 2,939 2,716 2,501 2,456 Video and computer games 1,638 1,615 1,551 1,783 1,897 2,402* Nightclubs 1,773 1,682 1,798 1,830 1,835 1,993* Cinema 1,049 1,045 1,077 1,078 1,082 1,163 (Source: Andrews, 2005) From the above table it is apparent that consumer spending on holidays and family outings has grown substantially since 2002. It has shown an increase of 8276 £m between 2002 and 2007. The popularity of ‘experience day out’ has increased significantly, while the theme parks have maintained a constant level of popularity. This shows a steady increase in the number of holiday destinations across the world. The hospitality industry has also gained a steady momentum over the years. Thus it implies that the entertainment world would have to confront stiff competition from the hospitality industry. Consumer spending on food and drinks has also grown substantially over the years. But this would have a positive effect on the entertainment world. This is because the food and drinks sector is said to grow along with the entertainment industry. Every item of entertainment industry comes with a food and drinks stall along with it. This is apparent from the growing number of food stalls in front of malls, cinemas and theatres. Thus consumer spending on food and drinks should not be considered as a threat for the entertainment industry. Rather, the two sectors could complement each other in the growth process. The sports culture, on the other hand could have an adverse effect on the world of entertainment. People generally tend to choose between sports and entertainment. It is seen that people taking interest in sports do not show equal interest on entertainment. The opposite situation also holds truth for both the sectors. Consumer spending on this sector has also shown a steady increase in the sports sector. Consumer spending on fitness clubs and health clubs have risen from 1799£m to 2496£m from 2002 to 2007. Number of consumers participating in fitness classes has also grown largely. Consumer participation in cultural activities has also grown at a steady rate over the years. This can pose as a threat for the entertainment world, since culture and entertainment do not complement each other. The entertainment industry should keep track of the growth of cultural participants, as culture and entertainment would least likely to complement each other in the growth process. It is seen from the above table that consumer spending on household activities, gambling and games have remained steady between 2002 and 2007. The development process for the two sectors has been neither too rapid nor too gradual. Both have shown a steady pace of development over the last few years. Comparison of the Entertainment Industry with two other sectors The two most prominent sectors likely to affect the entertainment industry are sports sector and the cultural sector. Sports, culture and entertainment tend to compete with each other intensely. Both sports and cultural activities have shown rapid increase which is apparent from the above table. It is suggested that the industry should concentrate on complementing with the two sectors instead of competing with them. That is why a lot of glamour and entertainment have been injected in sports. A number of film stars are seen endorsing sports goods and various sportsmen are being brought into entertainment shows. Conclusion It is seen that the entertainment industry has stupendous growth prospects in the past few years. But it is also faced the threats from different sectors of the economy. In future, the global entertainment industry would be most prominently driven by China. The industry would also have to adjust itself along with the changes in technology and trends in consumer behaviour. It is also seen that the entertainment industry is confronted with stiff competition from cultural and sports sectors. These two sectors have been increasingly growing in terms of popularity and consumer spending. However, marketers have been increasingly trying to merge the two sectors by complementing each other. The other sectors which also need to be taken into account are the hospitality industry, the food and drinks sector and other household activities. References Andrews, R. 2005. SIRC/CGA CENTRO/SOLT Box Office Data Report 2005. Association Statistics Yearbook/BPI/BVA/MRIB/Mintel. BNET. August 20, 2007. The Global Entertainment Industry is Expected to Show an Annual Growth of 10% in the Next Four Years and That Growth Will Be Driven by China. [Online]. Available at: http://findarticles.com/p/articles/mi_m0EIN/is_2007_August_20/ai_n19452832/. [Accessed on November 17, 2010]. Media Newsline. June 21, 2008. Global Entertainment & Media Industry Growth Pegged at $ 2.2 Trillion. [Online]. Available at: http://www.medianewsline.com/news/127/ARTICLE/2517/2008-06-21.html. [Accessed on November 17, 2010]. PWC. 2010. Global entertainment and media outlook 2010-2014. [Online]. Available at: http://www.pwc.com/us/en/industry/entertainment-media/publications/global-entertainment-media-outlook.jhtml. 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