Branding and Entertainment Price Decisions 2

Chapter Objectives Explain entertainment brand identity, brand marks, and trademarks. Identify brand strategies used by entertainment companies. Explain how celebrities are brands. Define gross profit and net profit. Identify different pricing goals. Identify factors that determine CD and concert ticket prices. 3

The Role of Branding Popular brand names are vital to the success of a company. The use of brands has been around for thousands of years. 4

The Role of Branding Brand identity Brand identity is a major part of entertainment marketing. brand identity a consistent image or feeling that consumers recognize when encountering the brand 5 brand mark Entertainment companies must develop and identifiable brand mark. brand mark a brand name and symbol

Operating an e-tail business on an electronic channel—the Web—can be costly, due to design, delivery, returns, and operating expenses. Though Many larger dot-com companies crashed in the 1990’s, small stores like Harris Cyclery of West Newton, Massachusetts, actually increase sales using a basic Web site. Today, a third of Harris’s bicycle business rides in on the Web to get hard-to-find parts and personal service. Describe an e-business’s home page to your class after viewing one through marketingseries.glencoe.com.marketingseries.glencoe.com Sneak Preview 6 Both major and independent films have created Web sites that often offer Internet-only features, such as downloadable clips, Internet-only trailers, and extended cast and crew profiles—all in one place. People come to the Web for the promise of exclusive content—and word-of-mouth travels far and fast. For more information on sports and entertainment marketing, go to marketingseries.glencoe.com.marketingseries.glencoe.com You know that the Internet distributes information through multiple methods: text, audio, and visual. The Web’s multimedia capability makes it the ideal place to market a movie.

The Value of Trademarks Symbols that you see every day help identify goods and services you buy. soundmark a trademark identified by a sound associated with a brand or company 7 soundmark motionmark Two other legal “marks” that identify brands or companies include soundmark and motionmark. motionmark a trademark identified by specific movement associated with a brand or company

The Value of Trademarks Branding on the Internet and in e-commerce is just as important as in conventional marketing. Having a domain name is necessary for a company’s Web site. 8

The Value of Trademarks Celebrities are not just performers; they are also “brands.” brand extension the development and introduction of new products that expand the brand and take advantage of the recognition and image of an established brand name 9 brand extension Clothing lines by celebrities are examples of the brand strategy called brand extension.

Franchises franchise The concept of entertainment franchise is different from the franchise of the sports world. entertainment franchise a series of films, programs, or character portrayals planned to expand the character’s activities in a series 10 Franchising is similar to making sequels, but it is planned from the beginning of a series.

Crossover Artists Crossover Crossover is related to a performer’s image or brand. crossover an expansion of the popular appeal of an artist or work by achieving success in another market or style 11 Celebrities expand their markets as much as possible to increase mainstream exposure and stay in the public eye.

Archived Brands The use of archived brands is another brand strategy. Some performers such as Marilyn Monroe and Elvis Presley have become classic brands and marketing icons. The vaults, or archives, of a studio contain entertainment properties that are part of its brand and product line. 12

Why can a performer be considered a brand? What is brand extension? What is meant by a crossover artist?

Revenue, Profit, and Loss product placement Revenue can include money for product placement. product placement 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 14 gross profit net profit Profit is viewed in two ways—gross profit and net profit. gross profit revenue minus the cost of goods sold net profit gross profit minus expenses

Revenue, Profit, and Loss Three types of pricing goals in the entertainment industry include: profit margin the difference between the expenses and the retail price, expressed as a percentage or a dollar amount 15 Return on investment pricing Competition pricing Net profit pricing –Profit margin

Price Strategies and Goals Marketers must determine the goals of their pricing strategies. Setting prices can be based on recovering costs, getting a specific return on investment, hitting profit goals, or meeting or beating the competition. Once the goal is decided, the planning process focuses on reaching the objectives. 16

Pricing in Television and Radio Advertising reach and frequency For media-ad purchases, reach and frequency are the key elements to consider in planning. reach and frequency the number of people exposed to an advertisement and the number of times they are exposed to it 17 Record labels may pay radio stations up to $1 million in promotional airplay costs before a record is a hit.

Pricing in the Television Industry 18 Price of AdMediumResult $2.5 million 30 seconds on national TV Higher expense Higher profit $50 30 seconds on local TV at 2 A.M. Lower expense Possibly no profit A greater reach and frequency will contribute to the success of an ad.

Pricing in the Television Industry The general rule is that if a series can stay on the air for three years and/or complete production on 60 episodes, it is a financial success. Real profits are generated in reruns because most production costs have already been paid. Only about one in five shows lasts long enough to produce 60 shows. 19

Pricing in the Film Industry Sources of revenue in the film industry include profits from tickets, rentals, video and DVD sales, foreign distribution, toys, CD soundtracks, books, video games, merchandise, tie-ins, and other spin- offs. After paying the distribution fees, ads and publicity, and theater costs, an average of 31 cents remains to cover production and negative costs. For the exhibitor, 10 to 20 percent of the ticket dollar goes to the house. 20

Pricing in the Music and Recording Industries On average, the cost of production for a popular album is a minimum of $125,000 Costs include marketing and promotion, album- cover design and graphics, pressing of CDs and shipping costs, junkets, and promotional items. Large production and marketing costs must be covered and there must be enough money left for the artist’s royalty payments. The retailer makes a 27 to 37 percent profit. 21

Concert Pricing Pricing concerts and other public performances relies on estimating public demand and trying to match what others are charging. The size of the venue,the cost of production, transportation, and employees are included in the ticket price. Contract agreements with arenas or theaters can include a guaranteed performance fee plus a percentage of concessions. 22

Brands and Pricing Customers’ perceptions of an entertainment brand identity can affect purchasing decisions and the price of an entertainment product. 23

What are some of the strategies entertainment companies use when planning prices? How does gross profit differ from net profit? What factors influence the prices of concert tickets?

Define brand identity. 25 Name two branding strategies. Brand identity is a consistent feeling or image that consumers recognize when encountering the brand. 1.Answers may include brand extension, creating entertainment franchises, and the use of crossover and archived properties. 2. Explain why celebrities can be considered brands. Celebrities have identities that are recognized by the public, which translate into brand recognition. 3. Checking Concepts Differentiate between gross profit and net profit continued Gross profit is revenue less the cost of goods sold; net profit is gross profit less other expenses. 4.

Discuss the different pricing goals used by entertainment companies. 26 Explain how retail CD prices are set. Pricing goals can be based on covering costs, getting a specific return on investment, hitting profit goals, or meeting or beating the competition. 5. Explain the factors that determine concert ticket prices. CDs have large production and marketing costs, as well as artists’ royalties and record company profit, to cover. Since most new releases fail, the successes must make enough money to cover the failures and their own costs. 6. Checking Concepts Factors include the demand for the act, the size of the venue, and the cost of production, staging, transportation, and employees are factors included in concert ticket prices. 7. continued

The courts have judged downloading from the Internet without paying as infringing on artists’ copyrights. 8. Explain why you think the courts have judged that downloading certain music from the Internet without paying is illegal. 27 Critical Thinking Checking Concepts 8.

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