LOOKING FOR THE UNDERLYING REASONS WHY STRATEGIES WORK
For one, the cases examine how much investment should be made across product portfolios, with Elberse citing movie studios as an example. “A large movie studio might have a budget of a billion dollars: How do you divide that over different projects that you’re trying to launch in a given year?” The answer, of course, is “it depends.”
As part of the case discussions, students deconstruct the unique variables inherent to given situations. “We’re diving into what is now the most popular strategies in a variety of entertainment sectors,” Elberse specifies. “Not only are we looking at evidence to see why it works so well in certain settings but we’re also trying to get to the bottom on why that is the case – the underlying reasons for why these strategies work so well.”
CELEBRITY ENDORSEMENTS: PAY UP FRONT…OR FORK OVER EQUITY?
The cases also zero in on talent. As part of that, participants look at what the talent themselves want. “We talk a lot of about the talent lifecycles – and the incentives and motivations of talent – and how it changes over course of career from a business perspective,” Elberse shares.
Increasingly, stars understand that their name is their brand. As a result, they’re looking to monetize the value of this brand. LeBron James, a perennial NBA all star, is a case in point. In one case, class participants evaluate three endorsement options available to him. On the surface, each opportunity is a winner. However, as Elberse explains, each comes with a different compensation structure whose value is dependant on a star’s priorities.
“Would you want a structure where you get a big payment up front? Would you rather be participating in the upside where you have a share of the revenues? Or, [would you prefer] an equity stake in the company that you’re dealing with? So we talk about [these options] and why athletes in certain situations prefer [certain structures].” At the same time, as Knaya observes, some stars factor in considerations beyond money. “You must think about how to present a case, presentation, or project. [Some] want to make a difference. Others are looking for you to give them the best conditions to do what they do.”
The LeBron James case also looks at the perspective of the companies vying for James’ endorsement. “If you’re eliciting an endorser,” Elberse poses, “would that be a model that you would prefer to pay by as well? What advantage does it give you? Sometimes, it might be better to push for a more traditional payment model. You know exactly what it is that you’re paying.” And that’s a major consideration for companies weighing the risks of using celebrity endorsers. “I’ve done academic research in this space, Elberse points out. “In crunching the numbers, you see that the payoff of celebrity endorsers is quite significant. They do have a significant impact on sales and even stock prices. But obviously, we’ve also seen examples where companies make the wrong bet – and that endorser gets into trouble in some way or another and they have to deal with the fallout.”
THE BUSINESS OF BEING BEYONCÉ
In a similar vein, the course looks at the tension between developing new talent or paying established stars, using Spanish Soccer club Barcelona as a case. “There, do you actually focus on acquiring superstars – which is obviously very expensive but very often is a way to de-risk” Elberse explains. “So a movie studio, record label or soccer club making these big bets on big stars – yes, you’re spending a lot of money, but your chances for success are also increasing quite significantly…And then to what extent do you want to continue to invest in developing talent? The time you spend $30 million dollars to acquire a big star means you can’t spend $30 million dollars improving [talent] on your youth academy. So how do you think about that and what makes most sense?”
Another example is the course’s case study of Beyoncé, whose star power has enabled her to seize control of both the creative and business ends. In Beyoncé’s case, she formed Parkwood Entertainment to handle functions like building partnerships and distributing content that were traditionally managed by the record label. And her decision to build an infrastructure devoted to her ambitions opened new opportunities for artists – and created new competition for entrenched players.
“Now, you can reach out to Facebook and arrange the launch of an album through Facebook and with Apple directly, Elberse observes. “That goes way beyond thinking about Beyoncé’s brand and monetizing that brand and goes to the question of the future and how industries are going to be organizing themselves. We definitely go to that second level as well.”
THE REVOLUTION WILL BE DIGITIZED
Finally, many cases were interconnected in looking at the digital technologies and players that have hit the mainstream – and how they are changing business practices. In particular, these technologies enable organizations to fulfill two of the chief mandates from customers: Cheap goods and easy access.
“Because entertainment goods, in many ways, can be brought back to 0s and 1s – because they can be fully digitized – [it] is not like selling bicycles or titanium welding equipment,” Elberse explains. “You can bring this back to, ‘here’s the file and this is the entire entertainment product.’” As a result, goods are less costly to produce and distribute – and easier to consume in the process – a true virtuous circle.
And these changing dynamics have yielded a series of thought-provoking case studies for the course, Elberse adds. “We look at a case on Facebook, which allows us to talk about the impact that social media is having on the entertainment space and what the future of that might be. I have a case on House of Cards, which is really about Netflix and how it is changing practices in television. Traditionally, we teach a case on the Metropolitan Opera, which is not something you think about when you think about digital technology. However, their ‘Live in HD’ program, which broadcasts performances live in HD to movie theaters, allows us to study some of the most essential opportunities and challenges involved in going digital.”
So where did Elberse get the idea to each this course? For one, she is also the author of the acclaimed 2013 book Blockbusters: Hit-making, Risk-taking, and the Big Business of Entertainment, which dissects the attention-grabbing strategies used by stakeholders ranging from Apple to club DJs. In addition, she has already been teaching a similar course, Strategic Marketing in Creative Industries, as an elective for second year students at HBS (Elberse brings in HBS professors Kristin Williams Mugford and Felix Oberholzer-Gee to be part of the BEMS team). After receiving numerous requests from industry executives to sit in on the class, she developed an executive education program targeted to entertainment leaders and talents.