How the entertainment industry is becoming part of modern business models and new markets

Entertainment used to be a sell once and sell many times business. With film, you would shoot, press discs and book tours. It was a hit dependent business, it would leave you with either great returns or no returns. Those who operated in the industry thought of themselves as showmen rather than business operators. That thinking evolved without much notice.

Entertainment looks like a software or subscription service company. Entertainment companies will not thrive on blockbusters anymore. Entertainment companies will determine their values on their customer retention and the lifetime value of their customers. Now, entertainment will be forced to merge with other existing industries because customer retention will determine the value of an entertainment company.

The move from hits to recurring revenue

Everyone copied the same pivot. That pivot was subscription models. Rather than selling a good or service, you sell access. Following access monetization, a number of things shift. For instance, you aren’t focused on the big launch anymore. Instead, you’re focused on churn, the slow cancellation mode of users. A subscription model alters a company’s economics in a way that makes revenues more predictable, stable, and reliable, allowing said company's resources to be invested externally in growing the company, i.e. borrowing, rather than relying on the success of the next big thing.

The freemium and live-service models pushed gaming in new directions. Provide a core gaming experience for free, monetize a dedicated community, and continuously develop the game's experience with updates and events. No longer are games developed with the intent of shipping them and never looking back. With the always evolving design focused on operations and monetization, games are treated as facilities that never close. Relationships and data are the true exports of entertainment to the rest of the economy.

Digital business. Photo: Lukas Blazek / Pexels

Data, direct relationships and owning the audience

The second major change is the ownership of audiences. Previously, content creators were separated from audiences by distributors and broadcasters. Digital innovations mean that entertainment companies can now go straight to audiences.

Data is a valuable resource companies can use for personalization, upselling, bundling, and predicting. Using first-party data, a certain operator builds new offerings for an audience they have built and continues to expand upon that audience. The creator economy does the same, arming people with the ability to start a media business, a storefront, and a community from their bedroom. These functions would have been offered by a formal corporation just 10 years ago.

It changes the way companies are valued. Investors are interested in how many and how engaged users are. They also consider how long users stay, and the value each user is likely to bring over their lifetime. These are the metrics for a software company. They really do not apply to film studios. When businesses start to adopt this outlook, everything including production choices, partnerships, and the markets they enter, is funneled through this line of thinking. The way a show is produced is the same as it has always been, but the financial model for the show resembles that of a software company more than a film studio.

Entertainment as a doorway to new markets

These digital businesses use a customer-centric approach and therefore are highly portable. An entertainment audience is a valuable asset that can be used to build digital commerce, education, live events, merchandising and financial services. Sport used streaming and data to retain their audience. Music used live events and licensing. Crossing industry borders is easier for these businesses because they can use digital marketing to sell their software-based products globally. An entertainment-based company can launch in a new country much quicker than a traditional company because they have a much easier and shorter product development timeline.

Digital entertainment controlled by regulations is probably the most evident example, because it combines fun consumer product traits with the serious operations of an operator.

• A technology stack that can process millions of ongoing transactions.
• Thorough compliance and licensing to pass the standards of each respective regulator.
• Retention and personalisation methods borrowed from streaming and gaming.
• With the entirety of the relationship being conducted via mobile devices, mobile-first design only makes sense.

Get that blend right and you have a business that scales across borders while still feeling like entertainment to the person using it.

The online betting business as a case study

Easy to see why the changing perception of “entertainment as serious business” entirely aligns with the principles of modern online betting. For today's operator, rather than being unregulated and improvised, an online betting service is designed and built on regulated frameworks and continuous digital infrastructure and is focused on experience, retention, and trust, rather than on a single transaction. This means it must be as quick and as immersive as a game and as dynamic as a bank, all at the same time. Everything, from onboarding to support, is treated to a similar level of detail, as a software team would manage a release.

If you study a market-focused brand, you can easily define its business model. An operator building for the Irish market, the audience typing online betting Ireland into a search bar, is not just posting odds; it is localising for a specific regulated market, meeting licensing rules, tailoring payments and support, and treating the audience relationship as the asset. This is the likely course of events for the rest of the entertainment industry. Distribute content in a new market. Retain as direct a relationship with the customer as possible, and monetize it incrementally.

The businesses that will define the next decade

The entertainment industry does more than simply produce shows. It exports a specific method of running a business, paving the way for recurring income, direct audience ownership, personalized product offerings influenced by the data, and disciplined growth into new regions, all while attracting other hitherto discrete business domains.

To operate at this level, you need a full command of both sides of the equation. Craft earns the attention; operational rigour turns that attention into a sustainable, borderless business. Operating in entertainment used to be the opposite of a serious industry. Now, it’s the model to follow.