Use Predictive Models to Lower Risk Profile of Media Companies
Don’t know if this has been talked about a lot before, so here it goes. There are flaws in the logic so hit me back if there’s a better way to think about this…koe@TechMediums.com.
What if traditional media companies were able to use predictive models to lower their inherent risk profile?
So, think of media companies (like Disney, EA, Bad Boy) as a series of formal start-up ventures, where the business model requires the constant formation of start-ups (e.g.., new artists, games, movies) to make money.
However, unlike normal start-ups, each media start-up utilizes common administrative systems like legal, accounting, marketing, etc., and, for the most part, they are more efficient, since this is what they do day-in and day-out.
Some of these businesses already have a library of content (franchises like Madden, or Disney’s Classics) that they milk to lower the risk profile – making the business model more like software - build it once and charge “rents” and/or offer updated versions for a fee.
But unless you have people who consistently pick out winning “ventures” (Diddy, Clive Davis and DJ Drama come to mind), then you’re at a much higher risk.
So what if predictive models (PM) could be used to lower the risk profile by refining the kinds of potential audiences, venues, alternative media, (like video games for film or music), price points, additional merchandise that could be sold to fans?
Predictive models use a series of data (like whether someone buys a product on sale, what day, what kinds of products, etc.) to anticipate future behavior, like other products they would buy or what day they’d buy in on. It’s a way to drastically improve the click-through rates of customers. Obviously, the most widely known models are the ones used by Netflix and Amazon. Insurance companies have been doing this for years, though, in determining likelihood of getting into accidents or dieing.
So how can it be applied to media?
Example questions that can be answered:
· Music -
o What extras, if any, should be given away with the CDs?
o Should CDs even be made?
o Would demand increase by offering the music for free (then charge for concerts and merchandise) or charge for music, lower price for concerts or no change?
o What kind of merchandise should be sold?
· Movies –
o Should advertising be 100% online?
o What other product tie-ins could be developed?
o What products should be licensed?
· TV -
o Which shows or episodes should be broadcast on internet only?
o What other product tie-ins could be developed?
o What products should be licensed?
Notice that none of these deal with content. Entertainment is such a different animal. You can do all the right research - type of movie to produce, the actors and directors to hire, etc, - and still fall flat because the actor didn’t put in his/her best performance, etc., etc.
Nonetheless, constant research, polling – on and offline, are critical to gaining as much detail as possible.
So not only is 
