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Part
Six
By Harlington L. Hanna
Jr.
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Opportunity Cost - Limited
Resources Protection & Exploitation -
Same Resource Same
Profit Principle, Different Product Same Profit
Principle
The entertainment entrepreneur must be careful to
expend his resources with an understanding of the
economic principle of opportunity cost in mind. Indeed
the major companies in the entertainment arena practice
this principle well. Resources are always limited no
matter how large the entity. Therefore with thousands
maybe millions of producers in the marketplace, companies
must make a concerted effort in deciding where to spend
their money and efforts. After all in business the bottom
line is profit. If ten dollars spent must result in
twenty dollars profit at the end of the day to keep thew
business viable, then it becomes incumbent upon
management to spend that ten dollars in a manner to
maximize the chance to make the necessary twenty dollars.
If management perceives that there may be many products
which it can acquire in a buyers market which can bring
them the twenty dollars, management will move between
these products until it finds one that it can maximize
its potential with. This is where the entertainment
producer often fails to understand the entertainment
businessman. The experienced businessperson is usually
not emotionally attached to the beauty and artistic
features of the production on the front end. He becomes
attached to it if he ever does only on the back end once
he has chosen and it from the legions offered him in this
buyers market, and after he is committed to it
financially. Then he sounds and hypes it like it is the
greatest thing he has ever seen.
In negotiating acquisitions this factor is extremely
important because for every property you acquire there is
some property you must forgo. O it is incumbent upon the
acquirer to ensure that he picks a product that will
bring him the same profit for the expenditures.
The fact is however the true entertainment businessman
sees a tremendous amount of potentially successful
products but no matter how deep his pockets are he can
only utilize so much of them. Beyond that his
acquisitions serve to keep competition out of the
marketplace either intentionally or unintentionally. He
is able to do this because he is a buyer operating in a
buyer's marketplace.
These scenarios are important for the sellers to
recognize. Sellers of productions should understand that
in a buyers market they must do several things;
1. Attempt to make their production as unique
as possible to standout from the competition
2. Market their production to as many potential users
at the same time as possible
3. Be reasonable in their expectations of the deal
they are looking for.
4. Be prepared to allow the exploiting company to make
a good profit in the deal.
5. Don't forgo other important aspects of a deal for
upfront money.
6. Don't allow your production to get tied up or sit
on the shelf because of over aggressive negotiations.
Remember one of the things large companies may do is
tie up your product to get it off the competitive
marketplace.
7. Be prepared to a cooperative and hard working
partner in the collaborative process necessary for
success
8. Don't forget that your deal with a smaller outfit
tied to a larger company may be better that being tied
directly to the large company. (The small affiliated
company may have what it takes to move the big company
to do things you cannot get them to do and meanwhile
allow you to maintain more control of your career
possibilities.
9. Become a part of an effective network from within
which they can work. This may provide the most
important tool and aspect to your business success.
Emotionalism
The entertainment entrepreneur must be careful to
leave emotionalism out of the formula in conducting
business operations. He or she must remember that in the
buyers marketplace there is always more production
available to the wise property acquirer. Due to the
inherent nature of the entertainment business and the
natural affinity individuals have for beautiful artistic
creations. It is easy to become emotionally involved with
a production. This makes it difficult to walk away when
indeed the business aspects of it demands you do so. In a
buyer's marketplace where there are potentially
successful products around every corner, the principles
of opportunity cost, same resource same profit, and
different product same profit should always apply to the
business decision. While the beauty of a song or book may
be compelling, it is only so in a business sense if your
dollars spent cannot produce the same return some where
else. Fortunately for the entrepreneur in a buyer's
marketplace there are always other projects just waiting
for their chance to make you the same amount of profit
for the resources expended. Emotionalism can therefore be
a very destructive factor to ultimate success in
entertainment. The wise entertainment entrepreneur must
learn to walk away easily and unemotionally. Although the
entertainment business is potentially extremely
lucrative, it can also be one of the quickest ways to
bankruptcy court. Usually it is this inherent
emotionalism that leads the way down the wrong financial
path.
Part Five
----- Part
Seven 