Abstract
Unique characteristics of entertainment markets also determine the effectiveness of managers’ decisions, commanding adjustments of the basic marketing mix. In this chapter, we take a closer look at the two key sub-markets that exist for any form of entertainment: a market for products targeted to consumers with artistic tastes and one for commercial products targeted to the mainstream consumer. We show that entertainment markets are characterized by frequent innovations that are required to stay in business and a tendency toward concentration. The latter derives from the existence of certain strategic resources that function as high entry barriers and from direct and indirect network effects that facilitate even higher concentration levels.
Keywords
- Entertainment Marketing
- Network effectsNetwork
- Entertainment Products
- Financial resourcesFinancial Resources
- Entertainment Firms
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Please see our discussion of the long tail phenomenon as the underpinning of “niche marketing” in our chapter on integrated entertainment marketing.
- 2.
Digitalization has somewhat worked against concentration in this market, with the strong help of Amazon. See also our discussion of the book industry in our chapter on entertainment business models.
- 3.
We offer some additional perspective on Macklemore and Lewis’ hit song and the overlap between independent and commercial products when discussing distribution resources.
- 4.
Royalties are substantially lower though for handheld devices (about $100 in 2013) and mobile app stores (between $25 and an annual fee of $100 per game/app for the same time frame) (Marchand and Hennig-Thurau 2013).
- 5.
Please note that Netflix’s decision was not an unsubstantiated gamble, but was informed by the firm’s analytical insights. As Mr. Spacey recollects, Netflix had run their data, and the data told the firm that its subscribers would watch the series.
- 6.
The documentary Artifacts offers an instructive documentation of industry practices. It chronicles a $30 million lawsuit by label EMI against the band Thirty Seconds to Mars , that unfolded after the band’s decision to exit their contract because they had not received any profits from their albums, despite selling millions of them.
- 7.
For a deeper, multifaceted investigation of the multiplayer function of games and their social benefits, see the articles in Quandt and Kröger (2014).
- 8.
Do direct network effects also exist on a platform level, such as for gaming consoles? It depends—when there are proprietary modes of communication between platform users (such as the Facetime chat on Apple devices), this can be the case, but usually direct network effects are more prominent on the “application” (e.g., game) rather than the platform level. But console operators such as Sony have been making strong efforts to increase the value of their platforms by creating also direct network effects through chat functions etc.
- 9.
A number of studies have investigated the role of content for hardware/platform success, often in the context of gaming consoles. For those readers who are interested in this perspective, please see, for example, Clements and Ohashi (2005) and Binken and Stremersch (2009), who discuss whether it is the mere size of the content network (the number of titles) or mainly its quality (in terms of “superstar” products) that are responsible for the indirect network effect on the platform. Let us also note that indirect network effects on the platform level are somewhat linked with the existence of the two-sided nature of entertainment products (i.e., the existence of more than one group of customers who influence each other, as discussed later in this chapter). For the platform, the software consumers are one customer group, and the other group consists of the producers of the software which pay royalties to the platform provider. Their willingness to do so depends on the consumers’ demand for the software—in other words, positive externalities between customer groups (Marchand and Hennig-Thurau 2013).
- 10.
This “aging effect” also explains why Marchand (2016), in his analysis of console games, found a negative trend by console age on game sales while controlling for hardware sales.
- 11.
Healey and Moe’s recency factor is similar to what Marchand, in his study, names the “livelihood” of an “installed base”: the console sales that happen in the month in which a particular game is released.
- 12.
See also our overview of industry developments and our discussion of distribution configurations for entertainment products.
References
Alexander, P. J. (1994). Entry barriers, release behavior, and multi-product firms in the music recording industry. Review of Industrial Organization, 9, 85–98.
Anderson, C. (2006). The long tail: Why the future of business is selling less of more. New York: Hyperion Books.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99–120.
Beier, L.-O. (2016). Instinkt. Geschmack. Eier. Der Spiegel, February 27, https://goo.gl/r5dKPH.
Binken, J. L. G., & Stremersch, S. (2009). The effect of superstar software on hardware sales in system markets. Journal of Marketing, 73, 88–104.
Bourdieu, P. (2002). The forms of capital. In N. Woolsey Biggart (Ed.), Readings in economic sociology (pp. 280–291). Blackwell: Malden.
Brodkin, J. (2016). Netflix finishes its massive migration to the Amazon cloud, February 11, https://goo.gl/rwos6H.
Buerger, M. (2014). How Macklemore tapped major label muscle to market an indie album. The Wall Street Journal, January 28, https://goo.gl/4eHmSQ.
Catmull, Ed. (2008). How Pixar fosters collective creativity. Harvard Business Review, 86, 64–72.
Castillo, M. (2017). Disney will pull its movies from Netflix and start its own streaming services. CNBC, August 8, https://goo.gl/Egu4mZ.
Chace, Z. (2013). The real story of how Macklemore got ‘Thrift Shop’ to no. 1. NPR, February 8, https://goo.gl/9B6vx9.
Clements, M. T., & Ohashi, H. (2005). Indirect network effects and the product cycle: Video games in the U.S., 1994–2002. Journal of Industrial Economics, 53, 515–542.
D’Alessandro, A. (2016). Why ‘Boss’ is a warning sign for Melissa McCarthy’s b.o. machine, even if it taps ‘Batman V Superman’ on the chin. Deadline, April 9, https://goo.gl/U9TF6v.
Debruge, P. (2017). Why movies need directors like Phil Lord and Chris Miller more than ever. Variety, June 21, https://goo.gl/udAqYg.
Epstein, E. J. (2010). The Hollywood economist—The hidden financial reality behind the movies. Brooklyn: MelvilleHouse.
Fleming Jr., M. (2016). Big Bad Wolves helmers Aharon Keshales & Navot Papushado exit Bruce Willis Death Wish remake. Deadline, May 4, https://goo.gl/xUV3uz.
Frank, B. H. (2014). Amazon hopes to attract original video content creators by offering creative freedom. GeekWire, August 4, https://goo.gl/wKynDY.
Friend, T. (2016). The mogul of the middle. The New Yorker, January 11, https://goo.gl/8hYXxT.
Galuszka, P., & Brzozowska, B. (2016). Crowdfunding and the democratization of the music market. Media, Culture and Society, 39, 833–849.
Healey, J., & Moe, W. W. (2016). The effects of installed base innovativeness and recency on content sales in a platform-mediated market. International Journal of Research in Marketing, 33, 246–260.
Huls, A. (2013). The Jurassic Park period: How CGI dinosaurs transformed film forever. The Atlantic, April 4, https://goo.gl/2TnfcA.
Itzkoff, D. (2016a). How ‘Rogue One’ brought back familiar faces. The New York Times, December 27, https://goo.gl/JyUXBH.
Itzkoff, D. (2016b). The real message in Ang Lee’s latest? ‘It’s Just Good to Look At’. The New York Times, October 5, https://goo.gl/k56XAM.
Iyengar, S. S., & Lepper, M. R. (2000). When choice is demotivating: Can one desire too much of a good thing? Journal of Personality and Social Psychology, 79, 995–1006.
King, G. (2002). New Hollywood cinema. New York: Columbia University Press.
Kohler, C., Groen, A., & Rigney, R. (2013). The most jaw-dropping game graphics of the last 20 years. Wired, May 6, https://goo.gl/opNXpT.
Lindvall, H. (2011). Spotify should give indies a fair deal on royalties. The Guardian, February 1, https://goo.gl/vSkNHh.
Littleton, C., & Holloway, D. (2017). Jeff Bezos mandates programming shift at Amazon Studios. Variety, September 8, https://goo.gl/GFtV37.
Liu, Y., Mai, E. S., & Yang, J. (2015). Network externalities in online video games: An empirical analysis utilizing online product ratings. Marketing Letters, 26, 679–690.
Marchand, A. (2016). The power of an installed base to combat lifecycle decline: The case of video games. International Journal of Research in Marketing, 33, 140–154.
Marchand, A., & Hennig-Thurau, T. (2013). Value creation in the video game industry: Industry economics, consumer benefits, and research opportunities. Journal of Interactive Marketing, 27, 141–157.
McClintock, P. (2014). $200 million and rising: Hollywood struggles with soaring marketing costs. The Hollywood Reporter, July 31, https://goo.gl/eoEXYb.
Nocera, J. (2016). Can Netflix survive in the new world it created? The New York Times Magazine, June 15, https://goo.gl/e1d2Zu.
Pähler vor der Holte, N., & Hennig-Thurau, T. (2016). Das Phänomen Neue Drama-Serien. Working Paper, Department of Marketing and Media Research, Münster University.
Peltoniemi, M. (2015). Cultural industries: Product-market characteristics, management challenges and industry dynamics. International Journal of Management Reviews, 17, 41–68.
Penrose, E. G. (1959). The theory of the growth of the firm. New York: John Wiley & Sons.
Quandt, T., & Kröger, S. (Eds.). (2014). Multiplayer: Social aspects of digital gaming. Milton Park: Routledge.
Shanken, M. R. (2008). An interview with Arnon Milchan. cigar aficionado, September/October, https://goo.gl/7xuGwM.
Spacey, K. (2013). The James MacTaggart memorial lecture in full. The Telegraph, August 22, https://goo.gl/Wkwwz1.
Superannuation (2014). How much does it cost to make a big video game? Kotaku, January 15, https://goo.gl/MqQVT8.
Takahashi, D. (2009). EA’s chief creative officer describes game industry’s re-engineering, August 26, https://goo.gl/BzKXf9.
The Deadline Team (2013). Steven Soderbergh’s state of cinema talk. Deadline, April 30, https://goo.gl/3md7zK.
Vance, A. (2013). Netflix, Reed Hastings survive missteps to join Silicon Valley’s elite. Business Week, May 10, https://goo.gl/ss45xZ.
Waldfogel, J. (2017). How digitization has created a golden age of music, movies, books, and television. Journal of Economic Perspectives, 31, 195–214.
Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5, 171–180.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2019 Springer International Publishing AG, part of Springer Nature
About this chapter
Cite this chapter
Hennig-Thurau, T., Houston, M.B. (2019). Why Entertainment Markets Are Unique: Key Characteristics. In: Entertainment Science. Springer, Cham. https://doi.org/10.1007/978-3-319-89292-4_4
Download citation
DOI: https://doi.org/10.1007/978-3-319-89292-4_4
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-89290-0
Online ISBN: 978-3-319-89292-4
eBook Packages: Business and ManagementBusiness and Management (R0)