The “Business” of Entertainment…Explained

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The raison d’etre of this website is to not just cover the business of entertainment–lots of folks do that and do that well!–but to explain the business of entertainment. Think “explainers” but the entertainment business version of that. 

Have no doubt, this can get wonky, explaining economic principles, strategic frameworks, and statistical concepts. But understanding those foundational ideas will help you much more than some article pitching the latest “disruption”. 

The one problem? To find all my articles explaining entertainment means churning through over 300 articles, including weekly columns and streaming ratings reports. To make your life easy, here’s a collection of every “Explainer” I’ve written. If you want a crash course in the business of entertainment–and kind of business in general–here you go:

Business Terminology

Value Creation – If you could only know one principle, one framework, in all of business, I recommend this one. Value Creation explains not just how firms make money, but how customers value products. It has applications for everything from antitrust to luxury goods to Disney’s business model.

Value Chains – Every business has suppliers and customers. And those suppliers have customers and suppliers. And so on. Put them in a line and you get “value chains”, a key concept for entertainment.

Porter’s Five Forces – The framework that invented modern strategy. And it’s still one of the best tools to understand the strategic landscape of any industry. 

Time Value of Money – If modern finance has one principle, it’s the time value of money. Basically, the idea is that a dollar today is worth less than a dollar tomorrow. Everything is built upon that, from stocks to the budgeting decisions of companies.

Terminal Values – Closely related to the time value of money, if you’re building a financial model, you’ll need these. Even if you aren’t, knowing terminal values explains a lot about stock prices, acquisitions and other business realities. 

POCD Framework – I love frameworks. The five forces. 3C-STP-4Ps. SCP. McKinsey 7S. And one of my favorites in POCD: People, Opportunity, Context and Deal. A great tool for analyzing new ventures and, interestingly, TV shows.

Subscription Business Models Part I and Part II – Subscriptions are one of the three business models of entertainment, affecting everything from cable to streaming to music. So here’s my quick explainer on them.

Value Over Replacement Player (VORP) – This isn’t a business framework, but a concept from statistics. Not just any statistics, but sports analytics. But every executive should understand it. Here’s my explainer for how to apply this to entertainment as well. 

Distributions – Everyone knows what averages are. But they suck. Use distributions instead. And if you don’t know what those are, read this article.

Entertainment Industry

Logarithmic Distribution of Returns. If you can only take away one thing from this article, let it be this shape, which I’ve called “The Most Important Shape in Entertainment”. Given that I still read articles and hear executives talk who don’t understand it, you should. It is what drives “winner take all” economics.

The Video Value Web – If Porter’s Five Forces and Value Chains had a baby and called it “video”, that’s this visual. One of my favorites I’ve ever made.

The Bass Diffusion Model – If the streaming wars have their own shape, it would be this one. Essentially, every company is on a quest to grab subscribers with their new products. But what does that look like?

Licensed, Co-Productions and Wholly-Owned Television Shows – Does your favorite streamer or network really own their own shows? Not really. I explain why in this one.

Economics of Blockbusters – Folks talk a lot about blockbusters. But what are they specifically? And how do they really perform?

Toy Licensing and Merchandising – If you want to know how much money you can make selling toys, t-shirts, merchandise and consumer products, this article explains how the sausage is really made.

 

The Entertainment Strategy Guy

The Entertainment Strategy Guy

Former strategy and business development guy at a major streaming company. But I like writing more than sending email, so I launched this website to share what I know.

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