New Study Confirms: Internet Is Contributing To Massive Profit Levels At Legacy Entertainment Firms
from the sky-is-rising dept
Our own research has shown this over the past few years, but contrary to the doom-and-gloom stories from the big entertainment companies about how awful the internet has been for their business, the truth is that it’s enabling tremendous growth and profits. A few months ago, a study of the major record labels showed that they remained tremendously profitable.
A new, much larger, study from Ernst & Young shows that this is true across the media business these days — and that a lot of the profitability is coming… from the internet. A quote from the report’s lead author sums it up:
?We are seeing that digital is very much driving profits now, instead of disrupting it. Companies are figuring out how to monetize the migration of consumers to a variety of digital platforms, and this insatiable demand for content is fueling growth throughout the industry.?
Remember how the internet was supposedly killing music? Yeah, about that:
The music sector is driving record growth in profitability from the expansion of licensed digital subscription and streaming services, growth in music publishing and rising smartphone and tablet penetration in emerging markets.
Film?
Film and TV production companies are driving their profitability through increasing revenues from digital platforms and investments in franchise-based films and higher-margin television shows.
But, wait, just weeks ago, one of the copyright maximalist talking heads was telling us that franchise movies were being killed off due to piracy? Maybe not.
Either way, this goes back to the point that many of us made during the SOPA fight. Despite the desire of Hollywood and certain politicians to make this into a “fight” of Hollywood vs. Silicon Valley, it’s a bizarre kind of “fight” when it’s Silicon Valley providing all the “weapons” to Hollywood that’s making them so profitable.
Filed Under: entertainment industry, hollywood, internet, music industry, profits, recording industry
Comments on “New Study Confirms: Internet Is Contributing To Massive Profit Levels At Legacy Entertainment Firms”
and in typical fashion, it still isn’t enough for them and they want to control all the internet, thereby maximising their profits! why else do people think the industries have spent millions of dollars trying to get the laws in place that they want? why else do people think that the industries are doing all they can to get people kicked off the internet, get them massive fines, split up families, cause bankruptcy yo ordinary people who had very little to start with, want to get as many thrown into jail as possible? to scare the shit out of people so the industries can just slide in and take over the ‘net, whilst giving governments information they want from the new laws allowing the industries to spy on and track who is on the ‘net what sites they visit and what the do as far as downloading/uploading is concerned. it’s all one massive conspiracy and governments are in cahoots with the entertainment industries! just think about what is going on, how long it has been going on and what the industries have actually gained so far! unless there were an underlying objective, an idiot wouldn’t have done what these fuckers have. they would have packed up years ago! and all advice as to giving customers what they want has been thrown out every time! all the surveys, other than the ones the industries have paid for, have been thrown out as well. if an industry were truly desperate, was losing enormous amounts of money every year, wouldn’t they do something that improved the situation? every sane industry would but these do nothing except keep complaining and politicians being more worried about their own bank balances improving and being as thick as hell do whatever Hollywood and the ilk says!! bloody disgraceful way for governments to behave when they know what should be done!!
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nahh it’s the pirates that why they can’t pay the artists. That why they can’t promote new artists until they have proven they are worth stealing from… opps i mean profiting from…. err, promoting. besides they need all that extra money, they have lots of politicians to bribe, … er lobby.
If the industry is losing billions and jobs due to piracy that they so shout from the rooftops demanding action to be done against piracy then why hasn’t the industry filed for bankruptcy by now. Piracy cannot be a problem that they make it out to be costing them billions.
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Sure it can; it costs them billions in imagined profits. I seem to recall someone crunching the numbers a few years back, projecting what would happen if the entertainment copyright lobby actually GOT the money they said was owed them — basically, the US economy would collapse, then trade agreements would fail, and the entertainment industry would fold before the US economy recovered.
That’s what happens when you think people owe you 40% of the nation’s GDP.
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It’s like Dr. Evil’s ransom demand in Austin Powers 2, except the folks being shook down aren’t in a position to laugh down this ridiculous demand.
What the hell happened to UMG in 2009?
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Or Sony from ’06 to ’09
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2006 was just after the Sony/BMG rootkit debacle (discovered in late 2005). Lots of people announced that they were going to boycott Sony; maybe enough actually did that it affected Sony’s profits?
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That chart is probably about Sony music. That company was defunct in about that time span, where Sony music was fused with Bertelsmann Music Group to form Sony BMG. Late 2008 That became Sony Music again, when Sony officially acquired the joint venture Sony BMG.
the only thing surprising here is that one of the studios actually lost money one of those years.
That’s what happens when you take 70% of Spotify’s reveue.
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Yup. This is also what happens when those 3 labels have gobbled up all the other major labels since the early 2000s.
You know what they say about statistics…
Cough
http://techcrunch.com/2014/09/17/how-the-internet-killed-profit/
“One of the most well-documented areas killed by the Internet has been music”
Cough
🙂
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Yeah… What the hell is that guy smoking?
“…after reaching a peak in 2000, the music industry now earns half the money, having lost over $7 billion of revenue and more than half its value since the dawn of the Internet.”
No doubt.
Also “…but it was the next move, from ownership to streaming, that really killed an industry”. Yup. Makes total sense. Keeping with the times (dragged by the hair, kicking and screaming) killed music. Mystery solved!
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Because it’s true. That chart showing profits from those labels is because they’re the only major labels left. All the others either went out of business or were absorbed by the Big 3.
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Profits that don’t exist. WMG has been bleeding crazy amounts of money for years.
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The chart is labelled operating profits, that is income minus costs of production, that is profit before other costs like interests on loans and fees to parent companies for services rendered, like Hollywood uses to make sure that films never make a profit.
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So we are only including numbers that prove our point and leave out the rest. Sounds awful similar to the very industry we are criticizing.
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If a company is over leveraged, then that is its fault that it cannot make a profit. Sometimes head office charges are used to create a loss for tax purposes, or even propaganda purposes. Hint, a business is not kept going for long if it is actually making a loss.
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With debt in the billions and continuous layoffs, it is pretty clear they are not intentionally trying to lose money. They have even cut contributions to the RIAA.
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I think it’s funny how they spend all their time whining and screaming about how they’re dying and yet manage to handsomely pay off their own gang of extortionists.
For fuck’s sake, Cary Sherman and Mitch Bainwol get ever-increasing bonuses, every year. Why? Who the hell pays someone for failing at their job?
Cutting contributions to the RIAA isn’t going to garner sympathy. It simply convinces others that labels need to skim the fat on a lot of useless expenses.
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they are not intentionally trying to lose money.
If you keep doing the same stupid thing over and over again, it looks intentional to sane and rational people.
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I like that it opens with the following.
“Editor’s note: Tom Goodwin is the founder of Tomorrow Group, a marketing and advertising consultancy for the post-digital age.”
Also, it’s interesting that it notes a number of companies who are failing to make a profit off really successful offerings (like Netflix), but fails to note that despite their success (from a number of users standpoint) they are also being taken to the cleaners once proven successful (by the legacy industries).
You gotta love how they do all this research into “the internet is killing everything” and yet they always miss that “the internet is saving everything, it’s the invested interests and companies that are killing the new things”.
Info
Where did this info come from? WMG hasn’t been profitable for most of the last decade.
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It’s pretty clear where the info is coming from here.
Where’s your info coming from?
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My source? Reality apparently.
2013: http://www.wmg.com/newsdetails/id/8a0af81242e11c330142e3d6b4de0071
2012: http://www.wmg.com/newsdetails/id/8a0af8123b8e9173013b90bc5714004d
2011: http://www.wmg.com/newsdetails/id/8a0af8123417fa0101341a5f9ebf0052
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2013: http://www.wmg.com/newsdetails/id/8a0af81242e11c330142e3d6b4de0071
2012: http://www.wmg.com/newsdetails/id/8a0af8123b8e9173013b90bc5714004d
2011: http://www.wmg.com/newsdetails/id/8a0af8123417fa0101341a5f9ebf0052
Those appear to confirm the numbers above, showing operating profits.
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They show profits in the individual units when you don’t consider the costs of borrowed money, and other line items. When you read it all the way to the bottom, Warner in 2014 lost something like 127 million.
Cherry picking (look, this area is profitable) and ignoring the whole business is classic making the numbers be what you want them to be, I guess.
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The content industry is addicted to the various means of turning a profit making company into a loss making company, so that it can lobby for more government money and laws to protect its business. Making a loss when a reasonable operating profit exists is due to bad management and/or creative accounting.
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Please see the definition of operating profit.
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To reiterate…please see the definition of operating profit. Once you do, note that legal and lobbying costs are not included, among other things.
Who’s fault is that?
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I was wondering the same thing. I’d like TechDirt to explain to me where their recent 10K filing with the SEC shows profit and not loss: http://investors.wmg.com/phoenix.zhtml?c=182480&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTk3MzkyODImRFNFUT0wJlNFUT0wJlNRREVTQz1TRUNUSU9OX0VOVElSRSZzdWJzaWQ9NTc%3d
The RIAA's and MPAA's response . . .
RIAA: Hear no evil. I can’t hear what you are saying. My fingers are in my ears. And I’m tone deaf. Being tone deaf is a qualification for being an executive in a field having to do with sound.
MPAA: See no evil. I can’t see your message. My hands are over my eyes. And I’m blind to things I don’t want to see and have limited vision and foresight. Being blind is a qualification for being an executive in a field having to do with motion pictures.
Other Factors...
What this article doesn’t take into consideration is a multiple of factors that has turned the music industry around. The full on monopoly the major labels have over commercial radio, the ownership of Spotify, and 360 deals have all contributed to their success. Of course, this has all been for the worse because there is far less diversity of genres being invested and marketed while the music we do mostly get is simple and dumbed down to appeal to a small demographic (Tweens).
http://www.facebook.com/chancius
Re: Other Factors...
So ignore the big labels and their artists, there is plenty of music of all genres out there on the Internet.
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There is more variety in music then ever. If you just listen to the music the big labels put then that may be true.
The riaa ,music companys, etc attack all new technology ,
eg vcr,mp3 players,
digial downloading,
then wake up 1 day and realise they depend on new tech for
their profits.
Home video renting, buying videos ,did not exist before the vcr was invented .
All these new channels and netflix mean the film company,s
have new users to buy their films.
Valve don,t waste time complaining about piracy ,
they made a good platform that allows people to
buy games easily at a fair price .
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Company after Company has found out through Steam how you can be profitable selling your game with deep discounts when it’s on a good platform that people enjoy and doesn’t get in the way much.
It’s never been about losing money to piracy , It’s about them intentionally losing profits so they can get write offs ,they need to own the internet because way too many parties keep track of sales.
What about the popcorn farmers?
Yes, the profits look pretty good. However, dig a little deeper, and then compare it to the rhetoric around here, and you will realize that the reality is that these companies are doomed.
The problem here is that much of the revenue is from non-retail uses, which are based on the rules of copyright. Licensing music (now more than a third of the industry income) would be very much more difficult to do if the rules of copyright are tossed out.
If you look at the Warner statements, it’s clear that licensing / publishing represent a huge part of the business income. Toss that out or change those rules, and that income slides away.
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Doomed companies don’t pay off the RIAA every year.
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Right, that’s why after ~15 years of crying wolf those doomed companies are still making money.
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So, no company has the absolute right to remain in business without adapting when new technology comes along, or laws are changed to reflect the will of the people.
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You’re absolutely right, these companies are doomed…but not because of piracy or the internet (directly). They’re doomed because they aren’t bothering to compete and instead crying to legislators to makes laws banning competition. That may result in a short term gain (possibly, but not likely) but they’re hemmoraging money on lawyers and lobbyists rather than spending that money to compete.
They’re making plenty of money…it’s not our fault they’re pissing it all away for no reason.