ECONOMIC CHARACTERISTICS OF EXPERIENTIAL PRODUCTS


Entertainment can offer consumers a tangible good, such as a cinema ticket, a
movie on DVD or a book, and can be intangible services and information, such as a musical performance.

Entertainment goods and services can be consumed as is, or go into the production of other kinds of products (the score of a movie).

Some are capital or durable consumer goods, such as a painting in a museum or the installations for an attraction in a theme park, which can yield a flow of services over their lifetime.

Others, such as a circus performance or musical concert, exist only for a particular time span.

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Finally, entertainment can be sold on the market or provided free of charge.
While entertainment goods and services are experiential, most of them are
experiences — intangible content not consumable in the purest sense of the term
(Doyle, 2002; Towse, 2003).

A high level of financial uncertainty accompanies any new production, because the full value can be assessed only after the producer has paid almost the full cost of creating the good or service. Furthermore, any new production is subject to radically uncertain reception. Because consumers must first experience the
product before being able to appreciate it, consumer demand does not necessarily reflect value (Alexander, 2004; Doyle, 2002; Towse, 2003).

Ultimately, any creative project “can be a golden goose or a turkey” (Gasson, 1996: 50). To minimize the danger of misses, producers are formatting the output, either using genres or adopting the star system. Another solution is supplier-induced demand, where “an expert judgment has to be relied on to ensure quality.” In this way, they rely on brand-name talent, such as prominent columnists in publishing, best-selling authors in book publishing, or celebrities in film and television (Hesmondhaghl, 2002).

One of the consequences of these approaches has to do with the “dominance of expert opinion, often supported by state finance, with the consumer/taxpayer being unable to assert her preferences” (Towse, 2003: 3).

The adoption of stars systems can help because the use of a film celebrity may
increase box-office sales and it may significantly increase the fixed production costs.

Significant high capital requirements for production and global marketing costs can be positive because can maintain barriers to entry (Towse, 2003). On the other hand, a significant increase in fixed production costs combined with a high rate of failure and uncertain demand can exacerbate the overall financial risk. Dependence on brandname talent, a star columnist, a best-selling author, or a film celebrity usually “doubles the stakes regarding investment in a project” (Gasson, 1996; Towse, 2003).

Big brand names like comiclite own themselves, exercise oligopolistic control over the industry, can reduce profit margins to a minimum in their demands for the best financial settlement (such as payments in advance and royalties on sales). Although companies may create the brand name, the talent could decamp to the competitor, or promote another product, taking with them any goodwill created, (Gasson, 1996: 50).

While entertainment goods and services may be appreciated for the ways in
which they enrich a cultural environment, there is also a market for them as products perceived to satisfy needs and wants.

Buyers are willing to pay for “information on events and public activities, occurring at the local, national and international levels, for discussion of ideas and opinions, entertainment and diversion, and information on how to meet other needs and wants” (Picard, 2002: 105).

Organizations in many creative industries, especially the media, operate in the dual product market, i.e. packaging and selling two distinct commodities — content, and audiences; entertainment and tech (Doyle, 2002; Picard, 1989, 2002). Content such as news or entertainment is the product, while access to audiences is sold to advertisers in the advertising market.


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