Tuesday, November 27, 2012

Profitability of Music, Games, and Film

Many speculate that the mainstream music industry is witnessing an all time low point due to the change in business processes of music creation and distribution.  If one had to compare the three largest entertainment industry sectors (film, video games, and music), how would they rank the three by profitability (by amount of revenue generated)?

             In mid 2011, an article discussed the actual worth of each industry.  CBS reported the video games industry to be a $23 billion industry, while the film and music industries both lagged behind at $10.6 billion and $6.9 billion respectively.   However, this year, retail sales of video games have dropped about 20% in the U.S. according to the New York Times), so we must put this widespread decline in revenue into perspective. Reuters.com claims that record labels are maintaining their spending on new music despite the decline in their industry.  Major labels have consolidated, merged and even disappeared in some cases during this decline. Artists are even protesting services like Pandora that have lowered music royalty rates (read more at SFGate.com) . So why are the video games industry and the film industry doing better than the music industry if every industry is experiencing some decline in revenue?

            Video games and films have much more to build on with each project created.  Video games are more interactive with their participants (as they should be).  Games are purchased, content is constantly updated, expansions and additions to the games are sold, websites and online communities are solely dedicated to the games, and festivals are attended (like the one to the right).  In the film industry, sequels and trilogies create loyal viewers (and sometimes critics) and communities are also built around the characters of the movies (with merchandise, video games, etc.). 

            In the music industry, however, the interaction must happen with the band or the artist for the fans to really connect.  The avenues for this type of interaction are fairly limited with mainstream music artists.  Interaction takes place in concerts, television appearances, and in the music itself.  Very rarely will mainstream artists take time to chat or tweet their fans, which creates a disconnect between the “product’s community” and the product itself.  Some artists will release free music or create countdowns for their fans to participate in, but that still does not come close to the interaction created in the film and video games industries. Sources of revenue are physical sales, digital sales, ticket sales, and sales related to artist merchandise (t-shirts, wristbands, etc). A movie and a video game usually cost a bit more than a music album as well.  Music may not ever be as interactive as the video games and film industries, but maybe if the music industry could tap into possibilities of their fan base communities more, major labels could achieve the same success as its fellow entertainment industry cohorts. 


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