1. Chapter 12 Product and Price Decisions: Entertainment

2. Objectives Explain entertainment brand identity, brand marks, and trademarks. Explain entertainment brand identity, brand marks, and trademarks. Identify brand strategies used by entertainment companies. Identify brand strategies used by entertainment companies. Explain how celebrities are brands. Explain how celebrities are brands. Define gross profit and net profit. Define gross profit and net profit. Identify different pricing goals. Identify different pricing goals. Identify factors that determine CD and concert prices. Identify factors that determine CD and concert prices.

3. Case Study – Music Matters The Star Wars films and related products have distinct brand identities that consumers and moviegoers recognize. Creating a brand identity for entertainment products and companies such as record labels is an important factor for successful marketing. The Star Wars films and related products have distinct brand identities that consumers and moviegoers recognize. Creating a brand identity for entertainment products and companies such as record labels is an important factor for successful marketing. Realizing that a record deal was a long shot for their band, Ian MacKaye and Jeff Nelson formed Dischord Records in 1979. They planned to create a record label that would record the local music scene, treat musicians fairly, and sell records at a fair price. Realizing that a record deal was a long shot for their band, Ian MacKaye and Jeff Nelson formed Dischord Records in 1979. They planned to create a record label that would record the local music scene, treat musicians fairly, and sell records at a fair price. Since then independent the Washington D.C. label has released 7 inch singles, records, CD’s, and videos by unknown bands, splitting profits 50/50 and charging only $5 to $12 for a mail order CD. In fact, Dischord has released albums from some of the most popular bands in their category. Dischord promotes its bands through independent magazines and sidesteps radio conglomerates and MTV. The bands play in smaller all age clubs. They have also influenced mainstream music. As a result, major labels began competing by marketing similar bands. Since then independent the Washington D.C. label has released 7 inch singles, records, CD’s, and videos by unknown bands, splitting profits 50/50 and charging only $5 to $12 for a mail order CD. In fact, Dischord has released albums from some of the most popular bands in their category. Dischord promotes its bands through independent magazines and sidesteps radio conglomerates and MTV. The bands play in smaller all age clubs. They have also influenced mainstream music. As a result, major labels began competing by marketing similar bands. (100 Total Points) (100 Total Points) Analyze and write. Analyze and write. 1) How might Dischord’s brand identity differ from a major label’s identity? 1) How might Dischord’s brand identity differ from a major label’s identity? 2) What pricing decisions did Dischord make? 2) What pricing decisions did Dischord make? 3) What is Dischord’s brand identity? 3) What is Dischord’s brand identity? 4) How has this small entertainment company remained in business? 4) How has this small entertainment company remained in business?

4. Section 12.1 Branding and Entertainment

5. The Role Of Branding Branding and packaging are among the most important product elements of the marketing mix in today’s business world. Branding and packaging are among the most important product elements of the marketing mix in today’s business world. Whether it is labeling cars, soup, or movies, the brand name speaks volumes. Whether it is labeling cars, soup, or movies, the brand name speaks volumes. Ex.: Disney suggests wholesome family entertainment. Ex.: Disney suggests wholesome family entertainment.

6. Brand Identity Today “Brand identity” is a consistent feeling or image that consumers recognize when encountering the brand. “Brand identity” is a consistent feeling or image that consumers recognize when encountering the brand. Ex.: Madden – many enthusiasts will buy the next game no matter what others previously were like. Ex.: Madden – many enthusiasts will buy the next game no matter what others previously were like.

7. Different Identities It can be difficult for some companies to develop a consistent brand identity. Ex.: Universal Studios has a mix of entertainment products, and has made films for all ages. It can be difficult for some companies to develop a consistent brand identity. Ex.: Universal Studios has a mix of entertainment products, and has made films for all ages.

8. Fixed Brand Identity Having a consistent brand identity can lead to more focused marketing, but can have drawbacks. Having a consistent brand identity can lead to more focused marketing, but can have drawbacks. Ex.: Disney in the 80’s was known as G- rated filmmakers. Yet this limited its market. Ex.: Disney in the 80’s was known as G- rated filmmakers. Yet this limited its market. To get around this Disney created other companies owned by Disney – but not identified with the Disney name. To get around this Disney created other companies owned by Disney – but not identified with the Disney name.

9. The Value of Trademarks Symbols that you see every day help identify companies, and goods and services you buy. Symbols that you see every day help identify companies, and goods and services you buy. Ex.: Golden Arches represent McDonald’s. Ex.: Golden Arches represent McDonald’s.

10. Other Marks Trademarks are not just logos or pictures. Trademarks are not just logos or pictures. There are other legal marks that identify brands or companies besides designed logos and pictures. There are other legal marks that identify brands or companies besides designed logos and pictures. For example, the roaring lion that you hear at the beginning of an MGM film is called a “soundmark” or a trademark identified by a sound associated with a brand or company. For example, the roaring lion that you hear at the beginning of an MGM film is called a “soundmark” or a trademark identified by a sound associated with a brand or company. The winged horse that leaps off the movie screen at the beginning of a Tri-Star film is called a “motionmark,” or a trademark identified by specific movement associated with a brand or company. The winged horse that leaps off the movie screen at the beginning of a Tri-Star film is called a “motionmark,” or a trademark identified by specific movement associated with a brand or company.

11. Entertainment Brands on the Internet Branding on the Internet and e- commerce is just as important as in conventional marketing. Branding on the Internet and e- commerce is just as important as in conventional marketing. The internet’s multimedia capabilities make it an ideal channel for marketing entertainment. The internet’s multimedia capabilities make it an ideal channel for marketing entertainment.

12. Music and the Internet In 2003, the Recording Industry Association of America (RIAA) began to bring lawsuits against people who engaged in distribution and file sharing, or downloading, music from the Internet without paying for the music. In 2003, the Recording Industry Association of America (RIAA) began to bring lawsuits against people who engaged in distribution and file sharing, or downloading, music from the Internet without paying for the music. The industry believed that this exchange of files was violating the copyrights of artists and record companies. The industry believed that this exchange of files was violating the copyrights of artists and record companies. In 2003, Apple, with its Ipod system, began to sell songs for 99 cents. In 2003, Apple, with its Ipod system, began to sell songs for 99 cents.

13. Celebrities as Bands Celebrities recognize that they are not just performers, but they are also “brands” who have monetary value, just as the brands Nike or Pepsi do. Celebrities recognize that they are not just performers, but they are also “brands” who have monetary value, just as the brands Nike or Pepsi do.

14. Brand Extension “Brand extension” is the development and introduction of new products that expand the brand and take advantage of the recognition and image of an established brand name. “Brand extension” is the development and introduction of new products that expand the brand and take advantage of the recognition and image of an established brand name. Madonna was hired by The Gap to do commercials. The Gap believed that Madonna, who appeals to many age groups, would project the idea that The Gap sells products to consumers of all ages. Madonna was hired by The Gap to do commercials. The Gap believed that Madonna, who appeals to many age groups, would project the idea that The Gap sells products to consumers of all ages.

15. Franchises The concept of franchise is different in Hollywood than it is in the retail world. The concept of franchise is different in Hollywood than it is in the retail world. “Entertainment franchise” is a series of films, programs, or character portrayals planned to expand the character’s activities in a series. Ex.: The movie “Scream” was the beginning of franchise that would continue to reach the same fan base over and over. “Entertainment franchise” is a series of films, programs, or character portrayals planned to expand the character’s activities in a series. Ex.: The movie “Scream” was the beginning of franchise that would continue to reach the same fan base over and over.

16. Film Franchises Franchising is similar to making sequels, but it is planned from the beginning of the series. Franchising is similar to making sequels, but it is planned from the beginning of the series. A “sequel” is a film made to take advantage of the popularity of the first film. A “sequel” is a film made to take advantage of the popularity of the first film.

17. Television Franchises Television uses the same marketing strategy. The original Star Trek, paved the way for Star Trek: The Next Generation. Television uses the same marketing strategy. The original Star Trek, paved the way for Star Trek: The Next Generation.

18. Crossover Artists Another aspect of entertainment marketing that is related to performer’s image or brand is crossover, which is used as a brand strategy. Another aspect of entertainment marketing that is related to performer’s image or brand is crossover, which is used as a brand strategy. “Crossover” is an expansion of the popular appeal of an artist or work by achieving success in another market or style. “Crossover” is an expansion of the popular appeal of an artist or work by achieving success in another market or style. “No Doubt” singer Gwen Stefani transitioned into film acting, drawing her music fans into movies theaters. “No Doubt” singer Gwen Stefani transitioned into film acting, drawing her music fans into movies theaters. Shaquille O’Neal has performed rap music and acted also. Shaquille O’Neal has performed rap music and acted also. Some other examples of crossover artists are ___________________________. Some other examples of crossover artists are ___________________________.

19. Achieved Brands The use of achieved brands is another brand strategy. The use of achieved brands is another brand strategy. Marilyn Monroe, and Elvis Presley have become classic brands. Their legendary status has grown over the years, and they have become marketing icons. Marilyn Monroe, and Elvis Presley have become classic brands. Their legendary status has grown over the years, and they have become marketing icons. They estates are worth more now than when they were alive. They estates are worth more now than when they were alive.

20. Film Vaults The vaults or archives of a studio contain entertainment properties that are part of its brand and product line. The vaults or archives of a studio contain entertainment properties that are part of its brand and product line. The accumulation of movies and tv shows is worth billions of dollars. The accumulation of movies and tv shows is worth billions of dollars. Universal’s library of titles is worth an estimated $14 billion (Ex.: The Munsters, Magnum P.I., etc.). Universal’s library of titles is worth an estimated $14 billion (Ex.: The Munsters, Magnum P.I., etc.).

21. Section 12.2 Price Decisions

22. Revenue, Profit, and Loss Revenue is the total income brought in through the sales of goods and services. It can include, ticket sales, merchandise sales, or concession sales. Revenue is the total income brought in through the sales of goods and services. It can include, ticket sales, merchandise sales, or concession sales.

23. Product Placement Product placement is the appearance of a product as a prop in a film or tv show, in exchange for a fee paid by the product’s advertiser. Product placement is the appearance of a product as a prop in a film or tv show, in exchange for a fee paid by the product’s advertiser. Ex.: BMW paid MGM $15 million, to have its automobiles in James Bond movies. Ex.: BMW paid MGM $15 million, to have its automobiles in James Bond movies.

24. Gross Profit Gross profit is revenue minus the cost of goods sold. Gross profit is revenue minus the cost of goods sold. An example is _____________. An example is _____________.

25. Net Profit Net profit is gross profit minus expenses. Net profit is gross profit minus expenses. An example is _______________. An example is _______________.

26. Pricing Strategies and Goals Pricing in the entertainment field is similar to retail pricing for goods. Pricing in the entertainment field is similar to retail pricing for goods. Entertainment pricing is similar to sports pricing for intangible services. Entertainment pricing is similar to sports pricing for intangible services. Setting prices can be based on recovering costs, specific return on investment, hitting profit goals, or meeting or beating the competition. Setting prices can be based on recovering costs, specific return on investment, hitting profit goals, or meeting or beating the competition.

27. Recovering Costs It is not easy to make a profit in the entertainment industry. It is not easy to make a profit in the entertainment industry. Ex.: Most CD’s released do not recover the cost of production and distribution. Therefore, prices of CD’s must be set high enough to recover costs. Ex.: Most CD’s released do not recover the cost of production and distribution. Therefore, prices of CD’s must be set high enough to recover costs.

28. Return on Investment “ROI” simply means that for every dollar the company puts into a project, the goal is to get the maximum return. “ROI” simply means that for every dollar the company puts into a project, the goal is to get the maximum return.

29. Competition Pricing Another pricing goal might be to meet or beat the competitor’s price. Another pricing goal might be to meet or beat the competitor’s price. Lower prices might discourage the illegal downloads off the Internet. Lower prices might discourage the illegal downloads off the Internet. Ex.: Apple’s 99 cent songs. Ex.: Apple’s 99 cent songs.

30. Net Profit Pricing Some entertainment companies set forth net profit pricing goals so that their prices will bring the desired net profit, providing they sell enough units. Some entertainment companies set forth net profit pricing goals so that their prices will bring the desired net profit, providing they sell enough units.

31. Profit Margin Profit margin is the difference between the expenses and the retail price. Profit margin is the difference between the expenses and the retail price.

32. Pricing in Television and Radio One of the most famous prices in television is the cost of a Super Bowl ad. One of the most famous prices in television is the cost of a Super Bowl ad. Super Bowl 44 in Miami in 2010 may yield costs of $3 million per 30 second commercial. Super Bowl 44 in Miami in 2010 may yield costs of $3 million per 30 second commercial.

33. Reach and Frequency Reach and Frequency is as advertising term meaning the number of people exposed to an advertisement and the number of times they are exposed to it. Reach and Frequency is as advertising term meaning the number of people exposed to an advertisement and the number of times they are exposed to it.

34. Radios and Promotions Record labels take a different approach. Record labels take a different approach. They may pay radio stations up to $1 million in promotional airplay cost before a record is a hit. They may pay radio stations up to $1 million in promotional airplay cost before a record is a hit.

35. Pricing in the Television Industry For producing, television shows, the general rule is that if a series can stay on the air for three years and/or 60 episodes, it is a financial success. For producing, television shows, the general rule is that if a series can stay on the air for three years and/or 60 episodes, it is a financial success. This puts the series into profitable reruns, and syndication on local tv stations. This puts the series into profitable reruns, and syndication on local tv stations.

36. Longest Running TV Shows (Not Reruns) The Tonight Show – 50+ seasons The Tonight Show – 50+ seasons 60 Minutes - 36+ seasons 60 Minutes - 36+ seasons Monday Night Football – 34 seasons Monday Night Football – 34 seasons 20/20 – 27 seasons 20/20 – 27 seasons

37. Pricing in the Film Industry Sources of revenue in the film industry include profits from tickets, rentals, video, DVD sales, toys, CD soundtracks, books, and video games. Sources of revenue in the film industry include profits from tickets, rentals, video, DVD sales, toys, CD soundtracks, books, and video games.

38. Pricing in the Music and Recording Industries Selling music in CD form through retail stores and e-commerce is a risky business. Selling music in CD form through retail stores and e-commerce is a risky business. On average, the cost of production for a popular album is minimum $125,000 (not including marketing and promotional costs). On average, the cost of production for a popular album is minimum $125,000 (not including marketing and promotional costs).

39. Enough for Profits The bottom line is that the large production and marketing costs must be covered, and there must be enough money left from the gross revenue for the artist’s royalty payments per album as well as profit for the record company. The bottom line is that the large production and marketing costs must be covered, and there must be enough money left from the gross revenue for the artist’s royalty payments per album as well as profit for the record company. Wholesale cost per CD might average $11/$12. Wholesale cost per CD might average $11/$12. Therefore CD’s might retail for $15 to $19. Therefore CD’s might retail for $15 to $19. This provides a profit margin of 27 to 37%. This provides a profit margin of 27 to 37%.

40. Assignment – Using Surveys (100 Total Points) (100 Total Points) Create a survey with questions to ask people what they think about celebrities and brand extension. Include the celebrity’s name and product(s) in your survey. Create a survey with questions to ask people what they think about celebrities and brand extension. Include the celebrity’s name and product(s) in your survey. Survey Questions Answers Survey Questions Answers 1) 1) 2) 2) 3) 4) 3) 4) 5) 5) 6) 6) 7) 7) 8) 8) 9) 9) 10) 10)

41. Assignment – Comparing Prices (100 Total Points) (100 Total Points) You are the owner of a music store. You have decided to advertise on local radio and television. Your budget is limited, but you want favorable “reach and frequency.” Research local radio and tv stations to learn about their prices for ads. Choose the medium for your ads – tv, radio or both. Decide on the number of ads you will run and when they will run. Explain your choices. You are the owner of a music store. You have decided to advertise on local radio and television. Your budget is limited, but you want favorable “reach and frequency.” Research local radio and tv stations to learn about their prices for ads. Choose the medium for your ads – tv, radio or both. Decide on the number of ads you will run and when they will run. Explain your choices. 1) Describe your ad campaign. 1) Describe your ad campaign. 2) Explain your choices. 2) Explain your choices.

42. Checking Concepts/Critical Thinking/Cross-Curriculum Skills (100 Total Points/10 Points Each) (100 Total Points/10 Points Each) 1) Define brand identity. 1) Define brand identity. 2) Name two branding strategies. 2) Name two branding strategies. 3) Explain why celebrities can be considered brands. 3) Explain why celebrities can be considered brands. 4) Differentiate between gross profit and net profit. 4) Differentiate between gross profit and net profit. 5) Discuss the different pricing goals used by entertainment companies. 5) Discuss the different pricing goals used by entertainment companies. 6) Explain how retail CD prices are set. 6) Explain how retail CD prices are set. 7) Explain the factors that determine concert ticket prices. 7) Explain the factors that determine concert ticket prices. 8) Explain why you think the courts have judged downloading certain music from the internet without paying as illegal. 8) Explain why you think the courts have judged downloading certain music from the internet without paying as illegal. 9) Create a chart to organize the information on pricing methods used in the entertainment industry. 9) Create a chart to organize the information on pricing methods used in the entertainment industry. 10) If a CD’s wholesale cost is $10, and you will sell the CD for $15 retail, what is the $ and % markup per CD? 10) If a CD’s wholesale cost is $10, and you will sell the CD for $15 retail, what is the $ and % markup per CD?