The entertainment industry has long been dominated by legendary screenwriter William Goldman’s “Nobody-Knows-Anything” mantra, which argues that success is the result of managerial intuition and instinct. This book builds the case that combining such intuition with data analytics and rigorous scholarly knowledge provides a source of sustainable competitive advantage – the same recipe for success that is behind the rise of firms such as Netflix and Spotify, but has also fueled Disney’s recent success. Unlocking a large repertoire of scientific studies by business scholars and entertainment economists, the authors identify essential factors, mechanisms, and methods that help a new entertainment product succeed. The book thus offers a timely alternative to “Nobody-Knows” decision-making in the digital era: while coupling a good idea with smart data analytics and entertainment theory cannot guarantee a hit, it systematically and substantially increases the probability of success in the entertainment industry. Entertainment Science is poised to inspire fresh new thinking among managers, students of entertainment, and scholars alike. Thorsten Hennig-Thurau and Mark B. Houston – two of our finest scholars in the area of entertainment marketing – have produced a definitive research-based compendium that cuts across various branches of the arts to explain the phenomena that provide consumption experiences to capture the hearts and minds of audiences. Morris B. Holbrook, W. T. Dillard Professor Emeritus of Marketing, Columbia University Entertainment Science is a must-read for everyone working in the entertainment industry today, where the impact of digital and the use of big data can’t be ignored anymore. Hennig-Thurau and Houston are the scientific frontrunners of knowledge that the industry urgently needs. Michael Kölmel, media entrepreneur and Honorary Professor of Media Economics at University of Leipzig Entertainment Science’s winning combination of creativity, theory, and data analytics offers managers in the creative industries and beyond a novel, compelling, and comprehensive approach to support their decision-making. This ground-breaking book marks the dawn of a new Golden Age of fruitful conversation between entertainment scholars, managers, and artists. Allègre Hadida, Associate Professor in Strategy, University of Cambridge
Author(s): Thorsten Hennig-Thurau; Mark B Houston
Publisher: Springer
Year: 2018
Language: English
Pages: 917
Preface and Acknowledgements
Contents
1 Forget the “Nobody-Knows-Anything” Mantra: It’s Time for Entertainment Science!
The “Nobody-Knows-Anything” Mantra in Entertainment
Why Entertainment Science Should Be the New Mantra of the Entertainment Industry
Avoiding the “Nobody-Knows-Anything” Trap with Data Analytics
Avoiding the “False-Precision” Trap with Theory
Understanding (and Overcoming) the Persistent Forces of the “Nobody-Knows-Anything” Mantra
How This Book is Organized: Entertainment Science as a Cross-Product Approach to Knowledge Generation
Before We (Really) Get Started: Some Words on the Empirical Methods Employed by Entertainment Science Scholars
Regression Analysis as the Econometric “Mother” of Entertainment Science Methods
Some Challenges—and a Quick Glance at Methodological Approaches to Master Them
Concluding Comments
References
Part I Products, Markets, & Consumers—The Business and Economics of Entertainment
2 The Fundamentals of Entertainment
What’s Entertainment?
Why is Entertainment Important After All?
Entertainment Generates Substantial Economic Value!
Entertainment is a Pioneering Industry!
Entertainment Defines Our (and Your) World!
Entertainment Shapes Our View of the World (and of Dogs)
Entertainment Gives Us Language
Entertainment Provides Us Meaning and Motivation
Concluding Comments
References
3 Why Entertainment Products are Unique: Key Characteristics
Entertainment Products Offer Hedonic Benefits
The Pleasure Principle
Holistic Judgment
Hedonic Does Not Rule Out Utilitarian
Managerial Consequences of the Hedonic Character
Entertainment Products Are Prone to Satiation Effects
Of Utilities and Satiation
Levels of Satiation in Entertainment
Managerial Consequences of the Satiation Effect
Entertainment Products are Cultural Products
Entertainment Products Express Attitudes and Values
Entertainment Products Constitute Cultures and Influence Their Choices
Managerial Consequences of the Cultural Character
Entertainment Products are Difficult to Judge
The Experience (and Quasi-Search) Good Character of Entertainment
Entertainment Choices Depend on Taste
The Trouble with Taste Judgments
Do Consumers Have Taste, After All?
Where Do Differences in Taste Stem From?
Managerial Consequences of the Difficulty to Judge Entertainment
Entertainment Products are Creative Products
The “Art-for-Art’s-Sake” Property of Entertainment
The “Motley Crew” Property of Entertainment
The “Infinite Variety” Property of Entertainment
Managerial Consequences of the Creative Character
Entertainment Products are Information Goods
The “First-Copy Cost” Property of Entertainment
Managerial Consequences of the Information Good Character
Entertainment Products Have Short Life Cycles
The “Perishability” Property of Entertainment
Managerial Consequences of Entertainment’s Short Life Cycles
Entertainment Products (Potentially) Have Externalities
The “Two-Sided” Property of Entertainment
Managerial Consequences of Entertainment Products’ Externalities
Concluding Comments
References
4 Why Entertainment Markets Are Unique: Key Characteristics
The Big Entertainment Picture: Two Sub-Markets Characterized by High Innovation and Partial Concentration
High Innovation Frequency in Entertainment Markets
A Tendency Toward Concentration: High Entry Barriers in Entertainment Markets
Production and Marketing Resources
Distribution Resources
Access to and Control of Creatives and Their Works as Resources
Technological Resources
Even More Concentration: Network Effects
Direct Network Effects
Indirect Network Effects and How They Influence the Success of Entertainment Products
Managerial Consequences of Entertainment Markets’ Characteristics
Concluding Comments
References
5 Creating Value, Making Money: Essential Business Models for Entertainment Products
A Value Creation Framework for Entertainment
Who are Those Who Create Entertainment Value and How They Do It: A Snapshot of Players, Products, and Trends
Major Studios, Labels, and Publishers: The Entertainment Conglomerates
The Market for Filmed Content: Movies and TV Productions
The Market for Written Content: Recreational Books
The Market for Recorded Content: Music
The Market for Programmed Content: Electronic Games
The Dynamics of Entertainment: Some Words on Integration and Transformation Processes
Transforming Value into Money: Approaches for Managing Revenues and Risk
Generating Revenues from Consumers
Direct Distribution of Entertainment
Indirect Distribution of Entertainment
The Fixed Compensation Model
The Revenue-Sharing Model
Mixed Models
Generating Revenues from Advertisers
The Blessings (and Dangers) of Brand Placement
The Economics of Placements
But, Two Words of Caution
How to Design In-Product Advertising
Generating “Revenues” from Third Parties: The Case of Subsidies and Other Public Benefits
Managing the Risk of Entertainment Products
On the Riskiness of Entertainment
Approaches to Manage Risk on the Slate Level
Balancing Diversification and Expertise
Balancing Risk and (Expected) Returns
Be Careful, Outsiders: Some Words on Investing in Entertainment Portfolios
Approaches to Manage Risk on the Individual Product Level
Co-Financing of Entertainment
(Pre-)Sales Deals
Crowdfunding Entertainment
Concluding Comments
References
6 The Consumption Side of Entertainment
Why We Love to Be Entertained: The Sensations-Familiarity Framework of Entertainment Consumption
The Specific Motivational Values that Lead Us to Consume Entertainment
Of Sensations and Familiarity
The Emotional Facet of Entertainment Consumption
How Emotions Work
What Kinds of Emotions Exist?
A Simple (but Meaningful) Typology of Consumer Emotions
Looking Forward: Adding a Time Dimension to Our Understanding of Emotions
Which Emotions Affect Entertainment Decisions—and How?
General Findings on Emotions in Entertainment
The Fascination (and Relevance) of Negative Emotions
The Imagery Facet of Entertainment Consumption
On Event Models, Images, and Imagery
Some Imagery Basics
Types of Entertainment Imagery
The Drivers of Imagery
The Power of Imagery: Narrative Transportation, Immersion, and Flow
Narrative Transportation
Immersion
Flow
A Process Model of Entertainment Consumption
Concluding Comments
References
Part II Managing & Marketing Entertainment—What Makes an Entertainment Product a Hit?
References
7 Entertainment Product Decisions, Episode 1: The Quality of the Entertainment Experience
Linking (Experience) Quality with Product Success
What Makes High-Quality (a.k.a. “Great”) Entertainment?
Getting Closer to the Product’s Core: What Makes a “Great” Storyline?
Using Analytics and Theory to Understand “Great” Storytelling
Can Computers Craft “Great” Stories?
Concluding Comments
References
8 Entertainment Product Decisions, Episode 2: Search Qualities and Unbranded Signals
Technology as a Search Attribute in Entertainment
Technology and the Quality of Games
Technology and the Quality of Movies
Technology and the Quality of Books
Technology and the Quality of Music
Signals of Quality for Entertainment Products
Entertainment Genres and Themes
What, Exactly, is a Genre?
Are Some Genres More Successful Than Others?
The More Genres the Merrier?!
International Differences: Not Everyone Loves Baseball
Culture is a Dynamic Phenomenon: The Zeitgeist Factor
Entertainment Ratings and the Controversial Content on Which They Are Based
Linking Entertainment Ratings with Product Success
Disentangling the “Appeal Effect” of Radical Content and the “Restriction Effect”
The Appeal of Radical Content, Contextualized. Or: Nobody Wants to See Sex (in a Galaxy Far, Far Away)
Finally, a Few Words on Risk and Radicalness
Entertainment’s Country of Origin
“Made in Hollywood” as a Quality Signal
Empirical Findings on How Entertainment’s Country of Origin Influences Success
Both Sides Matter: Cultural Discount
The Production Budget
Concluding Comments
References
9 Entertainment Product Decisions, Episode 3: Brands as Quality Signals
The Fundamentals of Entertainment Branding
What’s in an Entertainment Brand?
Strategic Options of Entertainment Branding
A Typology of Brands: The “Entertainment Brandscape”
Entertainment Branding Strategies
Brand Integration Strategies
Brand Alliance Strategies
Which Branding Strategy Has the Most Potential?
Brand Elements: What is a Good Brand Name (and Does it Matter Financially)?
Entertainment Line Extensions: The Case of Sequels and Remakes
What Sequels and Remakes Have in Common—and What Sets Them Apart
“Average” Return and Risk Effects for Entertainment Line Extensions
What Can Entertainment Producers Gain from an “Average” Sequel?
Some Basic Insights on Sequel Value
The “Treatment Bias” Problem—and a Solution
And What Can be Gained from an “Average” Remake?
A Closer Look at the Factors that Make a Successful Entertainment Line Extension
Characteristics of the Family (or Parent) Brand
“Fit” Characteristics
Characteristics of the Line Extension
Using Contingency Information to Develop a Return-Risk Portfolio
The Dynamics of Line Extension Similarity: Of Thresholds that Vary with Time
Entertainment Category Extensions
Why Do a Category Extension?
How Category Extensions Affect Revenues and Risk: Averages and Contingencies
Stars as Human Entertainment Brands
How Do Stars Generate Value for Consumers?
The “Cognitive Route”: Stars are Ingredient Brands
The “Emotional Route”: Stars are Parasocial Relational Partners
The Financial Impact of Stars on Product Success
“Average” Star Power Effects
Basic Insights on Star Value
The “Treatment-Bias” Problem Once More
Contingency Factors for (Movie) Star Power
Star Characteristics
Movie Characteristics
“Fit” Characteristics
The Effect of Stars on Financial Risk
When You Wish to be a Star: The Controversial Roles of Talent and Serendipity
Rosen’s “Talent Argument”
Adler’s “Chance Argument”
What Data Analytics Can Tell Us About the Talent Versus Chance Controversy
Franchise Management: A Holistic Look on Entertainment Brands
How Thinking in Franchises Shapes the Economic Logic
When the Extension Affects the Original Brand: Reciprocal Spillover Effects
Reciprocal Spillover Effects of Line Extensions: The Case of Movie Sequels
Reciprocal Spillover Effects of Category Extensions: The Case of Book Adaptations
From Star Wars to Marvel: The Rise of Entertainment Universes
“A Long Time Ago”: Star Wars as the First Entertainment Franchise
From Franchises to Mega-Franchises a.k.a. Universes
What’s an Entertainment Brand Worth? Using Econometric Approaches for Measuring Brand Equity in Entertainment
Going Beyond Averages and Subsets: On the Valuation of Individual Entertainment Brands
Valuing the Next Spider-Man Sequel
Step 1: Estimating Forward Spillover Revenue Effects
Step 2: Adjusting Results for Risk Effects
Step 3: Estimating Reciprocal Spillover Effects
Concluding Comments
References
10 Entertainment Product Decisions, Episode 4: How to Develop New Successful Entertainment Products
The Strategic Dimension of Entertainment Innovations
Artistic Versus Economic Innovation Goals
The “Right” Degree of Innovativeness
Make, Cooperate, or Buy?
Some Threats to Systematic Innovation Management in Entertainment
The “Artistic Temptation” Threat
The “Micromanaging of Creatives” Threat
The “(Perceived) Violation of Artistic Integrity” Threat
The “Myopia” Threat
The Cultural Dimension of Entertainment Innovation
Theme 1: Autonomy and Responsibility
Theme 2: Adherence to a Shared Core Goal
Theme 3: Entrepreneurial Orientation
Theme 4: Peer Culture Built on Candor and Trust
The Organizational Dimension of Entertainment Innovation
The “Who” Question: The Importance of Human Resources
Internal Human Resources
External Human Resources
The “How” Question: Creativity Needs Freedom
Condition 1: (Relatively) Flat Hierarchical Structures
Condition 2: Leave Room for Failure in the Early Phase of the Innovation Process (Only)
Condition 3: Avoid Over-Structuring When Growing
The Product Level: How to Forecast the Success of New Entertainment Products
Some Words on the Essentials of Success Prediction
Prediction Methods: Feature-Based Versus Diffusion-Based Success Prediction
Feature-Based Approaches of Success Prediction
Diffusion-Based Approaches of Success Prediction
The “Bass Model” of Diffusion
Applying Diffusion Models to Entertainment Products
The “When” of Success Predictions: Early Versus Later Approaches
Early-Stage Predictions for Entertainment Products
Later-Stage Predictions for Entertainment Products
Multi-Stage Prediction Models
So, Better to Wait for the Fanny to Squirm or Use Prediction Models?
Concluding Comments
References
11 Entertainment Communication Decisions, Episode 1: Paid and Owned Channels
To Control or Not to Control: Some Words on the Three Basic Communication Categories
What to Communicate: Designing the Content that Fuels Entertainment Communication Channels
What Makes a Powerful Trailer?
The Roles of Trailers Then and Now
Three (or More) Principle Appeals of Trailers
What Makes a Powerful Poster Ad?
The “How-Much” Question: Can There Be Too Much of a Good Thing?
The Pros and Cons of Spoilers
The “Anticipatory Route”: How Spoilers Influence Consumption Intentions
The “Evaluative Route”: How Spoilers Influence Enjoyment
Beware of Who You Spoil—and for Which Product You Do so
Attracting Consumers via Paid Media: The Role of Advertising
The Functions of Advertising
How Much to Spend—and When: Some Introductory Comments on Advertising Budgets and Timing
Some General Insights on the Effectiveness of Entertainment Advertising
The Effectiveness of Pre-Release Advertising
Average Effects
The Case of Movies
The Case of Other Entertainment Products: TV Series and Video Games
More on Contingencies: Interestingness, Uncertainty, Situational Factors. And Culture?
The Effectiveness of Post-Release Advertising
Balancing Advertising Timing Within and Between Sequential Distribution Channels
Attracting (and Keeping) Audiences via Owned Media: Playing Pinball
The Pinball Framework of (Entertainment) Communication
Content that Matters
Managing Consumer Engagement: Co-Creation and Moderation
The Logic of Co-Creating Entertainment Brand Stories
Some Practical Examples of Co-Creating Entertainment Brand Stories with Fans
How Effective is Communication Through Owned Media?
A Different Kind of Owned Media: Packaging as a Communication Instrument
Concluding Comments
References
12 Entertainment Communication Decisions, Episode 2: “Earned” Channels
Informed Cascades: The Power of Word of Mouth
What Makes Us Articulate Word of Mouth?
Does Word of Mouth Influence Entertainment Product Success? Yes. But It’s Complicated
Average Effects: Word of Mouth (Valence) Matters!
The Product Type Matters
Not All Word of Mouth is Created Equal
Not All Word-of-Mouth Givers are Equal, Too…
The Timing of Word of Mouth
When Consumers Have Different Views: The Role of Word-of-Mouth Variance
Uninformed Cascades: The Power of Herds
Post-Release Action-Based Cascades: When Entertainment Success Breeds Entertainment Success
Some Words (and Numbers) on the Mechanisms at Work
The Impact of Popularity on Entertainment Success
Success-Breeds-Success Between Channels and Markets
Inter-Channel Success-Breeds-Success
Inter-Market Success-Breeds-Success
Managerial (Mis-)Use of Post-Release Uninformed Cascades
Pre-Release Action-Based Cascades: Buzz
So, What Exactly is “Buzz”?
How Buzz is Linked to Product Success
The Link Between Buzz Volume and Product Success
Differences Between Buzz Measures: Where Behaviors, Pervasiveness, and Content Matter
Buzz Cascades and Thresholds
Buzz Patterns Over Time
And What Drives Buzz?
The Mediating Role of Buzz
Automated Personalized Recommendations
How Recommender Systems Work: A Look at Their Algorithmic Logic
Collaborative Filtering: The Matrix Completion Challenge
User-to-User Collaborative Filtering
Item-to-Item Collaborative Filtering
Content-Based Recommendations
Content-Based Recommenders: An Example
Challenges for Content-Based Recommenders: The Critical Role of Attributes
Hybrid Approaches: The Best of All Recommender Worlds?
Recommenders are Way More Than Algorithms: Beyond Matrix Completion
Contextualization
Design and Interaction
Trust
How “Good” are Recommender Systems?
Professional Reviews
Review(er) Effects on Consumers: The “Influencer Versus Predictor” Controversy
Initial Insights: The Eliashberg and Shugan Study
What We Have Learned About Review Effects Since Then
Toward an Even Richer Understanding of Professional Reviews: Moderators and Mediators of Their Impact
Product Factors as Moderators
Consumer Factors as Moderators
Macro Factors as Moderators
Distributors as Mediators
Managerial (Mis-)Use of Professional Reviews
Awards as Recognitions of Excellence in Entertainment
Some Essentials of Entertainment Awards
Awards and Success: What Entertainment Science Can Tell Us About Their Link
Why Determining the Commercial Impact of Awards is Quite a Challenge
Monetizing the Oscars and Other Learnings
Managerial (Mis-)Use of Awards
Concluding Comments
References
13 Entertainment Distribution Decisions
The Timing Challenge: When is the Right Time for an Entertainment Product?
Isolated Timing Effects
Long-Term Timing
Mid-Term Timing
Seasonal Patterns
Demand-Sided Versus Supply-Sided Effects
Moderating Factors
Short-Term Timing
Competitive Timing
How Competition Affects Entertainment Product Success
What is the Right Time to Enter a Competitive Entertainment Market?
Changing the (Release) Time
The Multi-Channel Challenge: Orchestrating the Multiple Formats of Entertainment
What’s to be Considered When Designing the Optimal Channel Mix
A Quick Overview of Entertainment Windows and Underlying Interests
A Framework of the Forces that Determine Optimal Windows
Macro-Level Forces
Micro-Level Forces
Valuing Alternative Distribution Models Empirically
The Piracy Challenge: How to Deal with Competitors Who Offer One’s Own Products for Free
The Impact of Piracy
How to Fight Entertainment Piracy
Why and When Do Consumers Prefer the Illegal Copy Over the Original?
Some Thoughts (and Findings) on Anti-Piracy Strategies in Entertainment
Concluding Comments
References
14 Entertainment Pricing Decisions
A Primer on Pricing Theory: Customer Value as the True Foundation of Pricing
The Uniform Versus Differential Pricing Puzzle of Entertainment
Theoretical Arguments for Differential Pricing—and Against It
Consumer Reactions to Entertainment Product Prices in General
What We Know About Consumer Reactions to Differential Pricing for Entertainment Products
Price Discrimination: Different Prices for Different Customers (and Products)
First-Degree Discrimination: “Perfect” Price Discrimination
Second-Degree Discrimination: Versioning and Bundling
Non-Linear Pricing: Quantity-Based Pricing
Versioning: Let the Consumer Pick!
Bundling: A Special Case of Versioning
Cross-Subsidization (or Informal Bundling)
Third-Degree Discrimination: Segment Pricing
Concluding Comments
References
15 Integrated Entertainment Marketing: Creating Blockbusters and Niche Products by Combining Product, Communication, Distribution, and Pricing Decisions
The “Pre-Sales Approach”: The Blockbuster Concept
Defining the Blockbuster Concept
“The Monster that Ate Hollywood”: A Short Blockbuster History
Blockbuster Diffusion: Innovators and Buzz are What It Takes!
The “Experience Approach”: The Niche Concept
Defining the Niche Concept
Niche Diffusion: Imitators and Quality are What It Takes!
The Long Tail: Using the Opportunities of Digital Media
Blockbusters Versus Niche Products: Where We Stand Today and the “Too-Much-of-a-Good-Thing” Problem
Living in a Blockbuster World!
The “Too-Much-of-a-Good-Thing” Trap
Concluding Comments
References
Correction to: Entertainment Pricing Decisions
Correction to: Chapter 14 in: T. Hennig-Thurau and M. B. Houston, Entertainment Science, https://doi.org/10.1007/978-3-319-89292-4_14
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