Entertainment Industry Economics: A Guide for Financial Analysis, Tenth Edition
By Harold L. Vogel
Contents:
Preface page xix
Part I Introduction 1
Chapter 1 Economic Perspectives 3
1.1 Time Concepts 3
Leisure and Work 3
Recreation and Entertainment 4
Time 5
Expansion of Leisure Time 5
1.2 Supply and Demand Factors 9
Productivity 9
Demand for Leisure 11
Expected Utility Comparisons 13
Demographics and Debts 14
Barriers to Entry 17
1.3 Primary Principles 18
Marginal Matters 18
Price Discrimination 21
Public-Good Characteristics 23
1.4 Personal-Consumption Expenditure Relationships 23
1.5 Price Effects 27
1.6 Industry Structures and Segments 29
Structures 29
Segments 30
1.7 Valuation Variables 35
Discounted Cash Flows 35
Comparison Methods 37
Options 38
1.8 Concluding Remarks 38
Notes 39
Further Reading 46
Chapter 2 Basic Elements 48
2.1 Psychological Roots 48
2.2 Rules of the Road 49
Laws of the Media 49
Network Features 52
2.3 Legal Layers and Limitations 54
Layers 54
Limitations and Concentration Issues 55
2.4 The Internet 56
Agent of Change 56
Big Data and AI (Artificial Intelligence) 61
Long-Tail Effects 62
2.5 Advertising 64
Functionality 66
Economic and Business Aspects 67
2.6 Accounting and Valuation 70
Accounting 70
Valuation 70
2.7 Concluding Remarks 71
Notes 71
Further Reading 83
Part II Media-Dependent Entertainment 87
Chapter 3 Movie Macroeconomics 89
3.1 Flickering Images 90
3.2 May the Forces Be with You 92
Evolutionary Elements 92
Technology 92
Capital 95
Pecking Orders 96
Exhibition 96
Production and Distribution 97
3.3 Ups and Downs 99
Admission Cycles 99
Prices and Elasticities 100
Production Starts and Capital 102
Releases and Inventories 104
Market-Share Factors 110
Collateral Factors 110
Exchange-Rate Effects 110
Trade Effects 111
Financial Aggregates 113
3.4 Markets – Primary and Secondary 113
3.5 Assets 117
Film Libraries 117
Technology 117
Utilization Rates 119
Interest and Inflation Rates 119
Collections and Contracts 121
Library Transfers 121
Real Estate 124
3.6 Concluding Remarks 124
Notes 124
Further Reading 132
Chapter 4 Making and Marketing Movies 134
4.1 Properties – Tangible and Intangible 134
4.2 Financial Foundations 136
Common-Stock Offerings 137
Combination Deals 137
Limited Partnerships and Tax Shelters 138
Bank Loans 141
Private Equity and Hedge Funds 142
4.3 Production Preliminaries 143
The Big Picture 143
Labor Unions and Guilds 146
4.4 Marketing Matters 147
Distributors and Exhibitors 147
Sequencing 147
Distributor–Exhibitor Contracts 148
Release Strategies, Bidding, and Other Related Practices 152
Exhibition Industry Characteristics:
(a) Capacity and Competition 154
(b) Rentals Percentage 156
Video, Output Deals, and Merchandising 159
Video 159
Output Deals 161
Merchandising 162
Marketing Costs 162
4.5 Economic Aspects 163
Profitability Synopsis 163
Theoretical Foundation 164
4.6 Concluding Remarks 168
Notes 169
Further Reading 198
Chapter 5 Financial Accounting in Movies and Television 205
5.1 Dollars and Sense 205
Contract Clout 205
Orchestrating the Numbers 206
5.2 Corporate Overview 207
Revenue-Recognition Factors 207
Inventories 208
Amortization of Inventory 209
Unamortized Residuals 210
Interest Expense and Other Costs 212
Calculation Controversies 212
Statement of Position 00–2 214
5.3 Big-Picture Accounting 217
Financial Overview 217
Participation Deals 223
Pickups 223
Coproduction-Distribution 223
Talent Participations and Breakeven 224
Producers’ Participations and Cross-Collateralizations 228
Video Participations 229
Distributor–Exhibitor Computations 229
Distributor Deals and Expenses 231
Studio Overhead and Other Production Costs 234
Budgets High and Low 235
5.4 Television-Programming Accounting 240
Feature Licensing 240
Program Production and Distribution 241
Development and Financing Processes 241
Syndication Agreements 244
Costs of Production 246
Costs and Problems of Distribution 247
Timing Troubles 248
5.5 Weakest Links 251
Exhibitors: The Beginning and the End 251
Distributor–Producer Problems 252
5.6 Concluding Remarks 253
Notes 254
Further Reading 279
Chapter 6 Music 281
6.1 Feeling Groovy 281
6.2 Size and Structure 284
Economic Interplay 284
The American Scene 284
The Global Scene 289
Composing, Publishing, and Managing 290
Royalty Streams 291
Performances 291
Mechanical Royalties 292
Synchronization Fees 293
Copyright 293
Guilds and Unions 294
Concerts and Theaters 294
6.3 Making and Marketing Recordings 295
Deal-Maker’s Delight 295
Production Agreements 295
Talent Deals 297
Production Costs 298
Marketing Costs 298
Distribution and Pricing 299
Structure 299
Pricing 301
6.4 Financial Accounting and Valuation 301
Artists’ Perspective 301
Company Perspective 305
Valuation Aspects 307
6.5 Concluding Remarks 309
Notes 309
Further Reading 325
Chapter 7 Broadcasting 328
7.1 Going on the Air 328
Technology and History 328
Basic Operations and Spectrum 331
Basic Operations 331
Spectrum 335
Regulation 337
Organizational Patterns and Priorities 337
Networks and Affiliates 337
Ratings and Audiences 340
Inventories 342
Independent and Public Broadcasting Stations 343
7.2 Economic Characteristics 344
Macroeconomic Relationships 344
Microeconomic Considerations 346
7.3 Financial-Performance Characteristics 347
Variable Cost Elements 347
Financial-Accounting Practices 349
7.4 Valuing Broadcast Properties 351
7.5 Concluding Remarks 353
Notes 355
Further Reading 367
Chapter 8 Cable 372
8.1 From Faint Signals 372
Pay Services Evolve 373
8.2 Cable Industry Structure 374
Operational Aspects 374
Franchising 378
Revenue Relationships 380
8.3 Financial Characteristics 383
Capital Concerns 383
Accounting Conventions 385
8.4 Development Directions 387
Pay-Per-View 387
Cable’s Competition 388
DBS/DTH and Other (MMDS, SMATV, and STV) 388
Telephone Companies 389
8.5 Valuing Cable-System Properties 390
8.6 Concluding Remarks 392
Notes 393
Further Reading 401
Chapter 9 Publishing 405
9.1 Gutenberg’s Gift 405
First Words 405
Operating Characteristics 406
9.2 Segment Specifics 408
Books 408
Educational and Professional 409
Trade 410
Periodicals 413
Newspapers 413
Magazines and Other Periodicals 416
9.3 Accounting and Valuation 418
Accounting 418
Valuation 419
9.4 Concluding Remarks 419
Notes 420
Further Reading 423
Chapter 10 Toys and Games 428
10.1 Not Just for Kids 428
Financial Flavors 429
Building Blocks 432
10.2 Chips Ahoy! 433
Pong: Pre and Après 434
10.3 Structural Statements 436
Game Evolution 436
Profit Dynamics 438
Coin-Op 439
10.4 Concluding Remarks 440
Notes 441
Further Reading 449
Part III Live Entertainment 453
Chapter 11 Gaming and Wagering 455
11.1 From Ancient History 455
At First 455
Gaming in America 456
Preliminaries 456
The Nevada Experience 459
Enter New Jersey 460
Horse Racing 461
Lotteries 462
Other Wagering Segments 462
Asia’s Jackpot 464
11.2 Money Talks 466
Macroeconomic Matters 467
Funding Functions 468
Regulation 469
Financial Performance and Valuation 471
11.3 Underlying Profit Principles and Terminology 472
Principles 472
Terminology and Performance Standards 474
11.4 Casino Management and Accounting Policies 477
Marketing Matters 477
Cash and Credit 478
Procedural Paradigms 480
11.5 Gambling and Economics 481
11.6 Concluding Remarks 484
Notes 484
Further Reading 492
Chapter 12 Sports 497
12.1 Spice Is Nice 497
Early Innings 497
Media Connections 499
Wagering Connections 502
12.2 Operating Characteristics 503
Revenue Sources and Divisions 503
Labor Issues 504
12.3 Tax Accounting and Valuation 506
Tax Issues 506
Historical Development 506
Current Treatments 508
Asset Valuation Factors 509
12.4 Sports Economics 509
12.5 Concluding Remarks 513
Notes 513
Further Reading 525
Chapter 13 Performing Arts and Culture 533
13.1 Audiences and Offerings 534
Commercial Theater 535
On and Off Broadway 535
Circus 539
Orchestras 540
Opera 541
Dance 541
13.2 Funding Sources and the Economic Dilemma 541
13.3 The Play’s the Thing 544
Production Financing and Participations 544
Operational Characteristics 546
13.4 Art Markets and Museums 548
Art Markets 548
Museums 550
13.5 Economist Echoes 550
Organizational Features 551
Elasticities 551
Price Discrimination 552
Externalities 552
About Cultural Economics 553
13.6 Concluding Remarks 553
Notes 555
Further Reading 564
Chapter 14 Amusement/Theme Parks 571
14.1 Flower Power 571
Gardens and Groves 571
Modern Times 572
14.2 Financial Operating Characteristics 576
14.3 Economic Sensitivities 579
14.4 Valuing Theme Park Properties 580
14.5 Concluding Remarks 581
Notes 582
Further Reading 583
Part IV Roundup 587
Chapter 15 Performance and Policy 589
15.1 Common Elements 589
15.2 Public Policy Issues 592
15.3 Guidelines for Evaluation 593
15.4 Final Remarks 597
Appendix A: Sources of Information 598
Appendix B: Major Games of Chance 600
B.1 Blackjack 600
B.2 Craps 601
B.3 Roulette 602
B.4 Baccarat 602
B.5 Slots 603
Notes 604
Appendix C: Supplementary Data 606
Glossary 612
References 636
Index 703