Michael Wolf is a Partner in Booz-Allen Hamilton's Media and Entertainment Group and hobnobs with the likes of Ted Turner (of CNN fame) and Lew Wasserman, head honcho of MCA/Universal. He thus can be presumed to know a thing or two about the entertainment business.
The second page of his book sums it all up:
"Entertainment not autos, not steel, not financial services is fast becoming the driving wheel of the new world economy. In the United States, which has the most developed entertainment and media industry, entertainment ranks ahead of clothing and health care as a percentage of household spending (clothes 5.2%, health care 5.2%, entertainment 5.4%). Even if you don't count consumer electronics (which means leaving out TV sets and VCRs, which I would argue are bought primarily for entertainment), we are looking at a $480 billion dollar industry.
But that is only part of the story. Within its home turf movies, television, popular music, spectator sports, theme parks, radio, casinos, magazines, newspapers, books, children's (and grown ups') toys, and so on entertainment is in many parts of the world the fastest-growing sector of the economy. This is as true of developing economies as it is of mature ones. But of even wider impact is the way entertainment content has become a key differentiator in virtually every aspect of the broader consumer economy. From travel to supermarket shopping, from commercial banking to financial news, from fast foods to new autos, entertainment content has seeped into every part of the consumer economy in much the same way that computerization made its presence felt in previous decades. In choosing where we buy French fries, how we relate to political candidates, what airline we want to fly, what pyjamas we choose for our kids, and which mall we want to buy them in, entertainment is increasingly influencing every one of those choices that each one of us makes every day. Multiply that by the billions of choices that, collectively, all of us make each day and you have a portrait of a society in which entertainment is one of its leading institutions. Without entertainment content, few consumer products stand a chance in tomorrow's marketplace." (pp. 4,5)
Increasingly, businesses will have to incorporate what he calls the 'E-factor' (entertainment factor) into their offerings, be they goods or services, in order to be competitive. Wolf calls this "hedonomics" the science of understanding the 'fun-focused consumer'. Fundamental to this is his notion that society's concept of time has changed. The pressures of work, family, social obligations, etc., have forced us to compartmentalize our lives into a series of highly segmented boxes of time. And, just as nature abhors a vacuum, we don't like to have any of those boxes unfilled (or 'wasted'). So we turn to entertainment to fill the unscheduled portions of our day. This societal change, plus the development of distribution technologies such as the Internet, has fueled the tremendous growth of the entertainment industry.
The consumer response to entertainment products is a process that Wolf spends some time in the book discussing. He sees that there is a core group of early adopters (he labels them 'alpha consumers') who are responsible for generating, early on in the life of an entertainment product or service, positive (and free) word of mouth promotion. The group of alpha consumers will be different for each product for cell phones it will be businessmen; for The Bridges of Madison County it will be middle-aged women; for Titanic it will be teen-aged girls. These alpha consumers generate the initial critical response to a new offering, which then disseminates into the general population via the media. This is how relatively small-scale entertainment offerings that do not have huge marketing budgets can become major phenomena (witness the success of The Crying Game or The Full Monty). The corollary to this is that if the alpha consumers' critical reaction is negative, then no amount of publicity or marketing can overcome the initial negative reaction (think of Apple's failure with the Newton, or the flops Waterworld and Ishtar).
Unlike many other industries, the structure of the mainline entertainment industry is one dominated by visionary individuals who run their companies like their own little (actually, big) fiefdoms. In a chapter entitled 'Mogul Kombat', Wolf describes the shenanigans of the likes of:
A key characteristic of these individuals is that, while they of course have tremendous amount of business savvy and insight into the market, even they cannot guarantee what offerings will be hits (or even better, phenomena, which are world-wide mega-hits). Accordingly, they tend to have a number of different properties in development at any given time, playing the odds. A small percentage of these offerings Wolf estimates one in ten will become highly profitable 'hits', and might, just might, make it as a 'phenomenon' generating hundreds of millions and possibly billions in profit.
In a chapter entitled 'Enteractivity: The Internet and Reality', Wolf discusses his view as to how the Internet will evolve as a medium of exchange, and what is required for companies to be successful at this. First of all, he notes that there are only four ways in which commerce can be transacted over the Internet:
Any company, to be successful in this area, must incorporate the E-factor (where 'e' stands for entertainment, not electronic) into their web site.
"In the I-world [Internet world], as in the R-world [reality world], then, it comes down to presenting a story, telling it well, endowing it with flash, sizzle and glamour, and getting the message out there with the right marketing campaign that will attract audiences. The secret here, then, is ultimately not financial or technological, it is creative: aggregating creative talent will be as important on-line as it is on movie screens or concert stages." (p. 218)
He also notes that despite all that has been written lately about 'disintermediation', there is a role for third parties that can bring together content providers with a mass audience. For example, the company 1-800-FLOWERS, which sells flowers over the Internet and has become bigger than FTD in the process, has a deal with AOL to do this. AOL provides the audience, for a price, and 1-800-FLOWERS provides the content. Wolf expects to see more of these kinds of deals in future.
Chapter 8 of the book describes how entertainment brands are created around various offerings or even personalities (e.g. ESPN, Martha Stewart, Michael Jordan, the NBA, Disney, etc.). A key ingredient of the success of these brand positionings is that all aspects of the brand including the show or game, the merchandise that is created, the publications that are issued, the publicity and public relations generated, the web site that is created, etc. etc. are consistent and mutually reinforcing. As well, of course (and this almost goes without saying, but Wolf says it nonetheless) the quality of the offering must be right it must fit in with the public consciousness in the right way at the right time. This is the area where there are (unfortunately) no rules for success. And this is why, argues Wolf, that companies need to pay particular attention to the creative element:
"The great wild card in the entertainment economy is the creative element. This is a little scary for businesspeople who are used to making their decisions on the basis of exhaustive spreadsheet analyses. There is no spreadsheet that can fully predict whether the public will prefer a particular new color over another, one song over another, one film over another, one car design over another. A color sells or sits on the rack. A tune is catchy, or it isn't. A movie strikes a chord with the public or disappears into oblivion. A new car invades the streets or sits in the showroom.
Even though the creative element is unpredictable, that is not enough of a reason to shy away from it. In the crowded marketplace, ignoring it is the same as condemning the product to extinction. I believe successful companies will be the ones that create talent-friendly environments. They need creative visionaries at or near the top." (p. 295)
The Entertainment Economy is quite an easy read, and makes some fairly basic points. There is nothing startlingly new or brilliant in the book; at the same time the fundamental lesson that we should all incorporate more E-content into our goods and services offerings in order to stay more competitive is one we would do well to take to heart.
THE TCI MANAGEMENT CONSULTANTS RATING:
IF YOU HAVE ANY COMMENTS ON THIS REVIEW (I.E. DISAGREEMENTS, ADDITIONAL PERSPECTIVES, ETC.) OR SUGGESTIONS FOR FUTURE BUSINESS BOOK REVIEWS, WE'D LIKE TO HEAR FROM YOU! CONTACT US AT firstname.lastname@example.org
• • • •
TCI Management Consultants
Copyright © 2014, TCI Management Consultants. All rights reserved.