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Business Intelligence Plays a Major Role in the Entertainment Industry

Dave Stark, BeyeNETWORK

This article originally appeared on the BeyeNETWORK

I'm sure everyone reading this will agree that technological changes are significantly transforming business practices in all industries.

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The entertainment industry is no exception. Particularly in the film, television and music segments, it seems that the pace of technological change continues to be rapid, which has caused both concerns and opportunities. Using business intelligence can mean the difference between staying relevant or becoming obsolete.

The entertainment industry is now under constant pressure to create, deliver and market the next hit, as well as profit from the audiences fleeting interest. Not only are creative risks high, but even successful new film and music products can have a short shelf life. Entertainment consumers are constantly looking for what's new, hot and fresh--and they are faced with an ever-increasing range of choices. While it is already very challenging to determine how likely customers are to buy a particular creative product before investing possibly several millions of dollars to produce it, technology creates further complications.

Although talents like writing, performing and producing (among others) are the foundation of the entertainment business, the shape of the modern entertainment industry is the direct result of technology. About 100 years ago, live performances were the only way to enjoy theater and music. The development of recording technologies opened a mass market for entertainment. Movie theaters, radio and eventually television enabled recorded performances to be presented to millions of people. This was also true for vinyl records and VHS videos. More recently, CDs and DVDs have enabled us to enjoy what we want, when we want it and in the comfort of our homes.

The speed of disruptive technological change has increased in recent years. Cable and satellite TV systems offer greater choices to audiences. Today, Video on Demand through cable systems and internet music downloads give consumers even more options. Apple's newest iPod and video-enabled cell phones are making video even more portable and accessible. As a result, business models that worked a few years ago are becoming less profitable, and even obsolete. Fortunately, the entertainment industry is being presented with potential new revenue streams and ways to meet their consumers' needs.

For content producers, such as movie studios, television networks and record labels, new technologies and distribution methods can help increase profits from existing creative properties. For example, DVDs and Video on Demand give consumers more access to classic movies and television shows. The ability to download individual songs (or music samples, much like cell phone ring tones) could result in greater revenue from hits than from selling tracks previously only available on a packaged CD. Technology is making entertainment more accessible to consumers. Technology is also making it possible for producers and retailers to derive additional revenue, and consequently target more specific market segments. The entertainment industry's challenge is to learn how to profit from these opportunities.

Business intelligence is certainly relevant here. While technological advances in entertainment production and distribution are transforming the industry, advances inbusiness intelligence technology can transform the entertainment business. From detailed market and customer behavior analysis, to summary level sales and profit trending, to real-time operational intelligence, business intelligence can offer insight into where the opportunities can be found and how to address them. Here are just a few examples of how business intelligence can help those who produce and distribute creative content stay ahead:

  • Product profitability: How much profit does a particular property (for example, a video "title") contribute? How does a property's profit break down across business units, media and distribution channels? What are the specific costs and expenses associated with a property? What percent of revenue or profit do they represent?
  • Promotional effectiveness: What are the promotional expenses and what are the components? Have the promotions had a positive effect on revenue and profits? How can promotions be better targeted for greater leverage?
  • Customer and market analysis: What are the key demographic characteristics of customers by product? What promotions do they respond to best? Which other products do they tend to buy? Does the data indicate that an underserved market segment has greater revenue potential?
  • Channel analysis: Which channels reach what types of consumers? How profitable is each channel? How will channels be affected by changing technologies, as well as the emergence of new channels?
  • Forecasting and planning: What is the market potential of a new product, and how much investment should be made? How will a new release perform and what will its profit contribution be? How will promotions and events affect sales? What level of supply will adequately meet demand (in the case of CDs, DVDs, etc.)?

Today's business intelligence technologies can help in each of these areas. For some business needs, multidimensional (or OLAP) applications can provide the ability to slice-and-dice across dimensions (product, time, channel, etc.), or by product attribute. Detailed customer and market analysis may be addressed most successfully through transaction-level sampling, where data mining techniques would be best.

Of course, analysis and reporting alone are not enough to leverage the benefits of business intelligence in such a dynamic industry. The right information must get to the right people at the right time. Most importantly, however, people must act on the information. Business intelligence must become part of the business process, within the management feedback loop. It must not only help to understand the past, but also work to find new opportunities and emerging trends in the future!


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