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.
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- 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.
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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
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