Why Strategic Finance in Entertainment is so Complex

Every industry has its own set of strategic finance challenges and nuances, but the field of entertainment can be particularly difficult to navigate. Money and reputations are unrelentingly on the line, and one bad strategic decision can devastate a studio, production house, or other enterprise. What is it about entertainment that makes this arena so demanding? In today’s post, we’ll explore strategic finance in entertainment and find out why skilled strategists are needed not just at the top of an organization but throughout its major divisions.

An Overview of Strategic Finance in Entertainment

With its widely varied sectors, the entertainment industry does not easily lend itself to broad financial brush strokes. Movies, television, and music garner the lion’s share of public attention, but the field extends to sectors including live production and its related elements, gaming/casinos, promoters, venue operations, and the ever-evolving online world of product distribution, to name a few. Strategy that successfully lifts one sector might well spell disaster for another.

Strategic Vision Across Sectors

Whatever the sector, the overarching goal of strategic finance in entertainment is to maximize corporate value. The industry is no different than any other in that regard, but value maximization in entertainment could mean anything from choosing the right property for a studio acquisition to deciding on avenues or markets for television content distribution. Strategic decisions like these can define an entertainment company and make or break its future, and they involve a sea of big picture issues that are as varied as the industry’s wide range of sectors. As we will discuss, even the most far-sighted lead financial strategists can benefit from astute division level support that augments the broad sector knowledge they must possess.

Timing is Everything

The breadth of entertainment sectors is not the only thing that makes strategic finance in the field so challenging. With today’s hot entertainment idea or property all too often tomorrow’s old news, visionary financial strategists in entertainment need to be especially attentive to timing, whether it be deciding on a theatrical release date or when to launch a superstar’s mega-tour. Nowhere is timing more pressing than in entertainment, tied up as the field is with technology and where opportunities and obstacles can shift seemingly overnight on the public’s often fickle tastes.

Spanning the Globe

In addition, skilled financial strategists in entertainment today need to be knowledgeable about markets far beyond domestic ones. The right international moves can turn a failing project around or boost a successful one even higher, but the need for global acumen adds another layer of complexity to the field.

Strategic Finance in Entertainment – Driving Success From the Top Down and Middle Up

Beyond the Back Office

While all strategic finance experts understand the basics of back office accounting, back office accountants are more concerned with tracking costs, collecting revenue, paying bills, and meeting basic accounting requirements than they are with tying financial elements together into a coherent, guiding strategy that powers a company boldly forward. Strategic finance in entertainment is the realm of the visionary who makes overarching, potentially company-defining decisions in conjunction with creative leadership.

Informed by the Middle

That said, one might be inclined to think of strategic finance decisions as those being made solely at the top. While a heavy hitting, often publicly recognized C-level financial strategist may be the norm for today’s leading entertainment companies, not all successful strategy originates here. In an industry with so many diverse sectors, division level strategists can deliver insights and recommendations that significantly shape senior level vision.

However, not all entertainment companies can afford to have – or can find – experienced financial strategists for every division. Even if these positions are filled, people can leave or transition to other roles. In all of these instances, outside consultants can serve to fill staff or knowledge gaps that might otherwise have serious strategic repercussions if left unaddressed.

On Division Level Input

According to strategic finance specialist Alex Chang, information gleaned from this division level can be pivotal. “A top level strategic finance leader may have the vision and creativity to identify opportunities across different verticals (e.g. Amazon and Netflix), produce content, and build infrastructure to exploit/distribute content, but he or she will nonetheless benefit enormously from the input of divisional strategic finance heads, those who dig in deeply on specific subjects every day and can help take C-level vision to another level.”

When division level strategic expertise is lacking or absent, Chang describes how consultants can step in: “Among other services, consultants can share insights with salespeople to help them make better decisions and structure stronger deals, all while offering strategic perspective on types of shows, pros and cons of certain markets, property valuation, building sound financial models that estimate return on investment – and so much more.”

Chang also notes the importance of a fresh perspective coming from someone who might see things a bit differently and bring new ideas to the table. “For example, a consultant might come in and see the benefit of taking a short-term loss in order to gain entry into a new market like China that will ultimately deliver enormous long-term profits,” he explains.

As Chang sums up, “Few fields are as exciting – and as demanding – as entertainment. With sound financial strategy in place, whether from in-house talent, top notch consultants, or a combination of the two, a company can weather the inevitable ups and down that come with such a fluid and dynamic industry.”

Want to read more?

Be on the lookout for our upcoming post offering Distribution Finance in Entertainment, or sign up here to have blog updates delivered straight to your inbox. If you’d like to learn more about how 8020 Consulting can help your entertainment company with strategic finance, you can also contact us.

For tips on making your entertainment studio more competitive, you can also download our free operational finance in entertainment ebook. It offers best practices and other advice for better decision making. Just click the button below to get your copy:

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