The Entertainment “Arms Race”

Right now, there is a not-so-secret war raging in the entertainment sector centering around the acquisition and production of major franchise and book rights. Look no further than HBO’s Game of Thrones. Game of Thrones finds its base in author George R.R. Martin’s book series of the same name and has risen over the years to be the network’s most popular show. The success of the brand has resulted in ever increasing production cost of up to the reported $15 million per episode of the final season. So with the right IP purchase and execution, any company with the funds to make it happen could be sitting on the next multi-million dollar- billion even- cultural phenomenon.

Of course, having a company justify the often exorbitant costs of these high-quality, big impact shows and movies is another matter entirely. Sometimes taking a chance on a relatively unknown IP (or just making your own) works out. But cinematic flops and poor show ratings end up being pretty strong incentives to hold off on big budget spending. Of course, the alternative to betting big on something new, is to bet on something with a proven track record. Buying the rights to a huge hit like a trending book series, such as Game of Thrones, Harry Potter, Twilight, The Lord of the Rings, and so many more stand as shining examples of how adapting things like book series can payoff in a big way. While there is no guarantee that a new entertainment project will payoff, it can be extremely valuable to bring in an established fanbase and proven storyline.

And now, streaming sector giants now have the funds and willingness to go big for some truly gigantic IP. A great example of this is Amazon’s move to spend a projected $500 million on a series set in the universe of The Lord of the Rings. The rights alone purportedly ran up a ticket of $250 million. And even this seems like a small drop in the bucket compared to the vast sums spent by Disney on properties like Star Wars or Marvel, which are each being used for shows that will be on its own streaming service, Disney+.

It seems clear that a trend is forming around ever larger and grander purchases of entertainment IP. This should worry the smaller players in the business, who can’t afford multiple such mega projects. As things look now, it seems entirely plausible, even likely, that eventually, only the largest entertainment groups will remain. Aside from the funds brought in from the high profile shows and movies, the firms will get the benefits of ever more dominant name recognition and experience pulling off these costly and complicated jobs. Eventually, the deck becomes irreversibly stacked in their favor.

So the “arms race” here is the race to buy up popular and lucrative IPs from whatever source and convert it to high quality, big budget shows. Whoever pulls it off successfully enjoys riches and the all important recognition central to building up (and keeping up) a reputation as an excellent entertainment source. In a world regularly inundated with new entertainment, this is just what it takes. For streaming services that need to retain and attract subscribers, this point is simply much more emphatically true. Thus, the new big question for entertainment firms should be: what’s the next IP to acquire or develop? Do we have enough stockpiled to stay relevant? When billions of dollars rest on questions like these, it becomes easier to accept a cost of $15 million per episode or $250 million just for some rights.

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