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In: Finance

How can TV Networks and Broadway plays use revenue management? "Revenue management is an extremely important...

How can TV Networks and Broadway

plays use revenue management?

"Revenue management is an extremely important concept within the hospitality industry, because it allows hotel owners to anticipate demand and optimise availability and pricing, in order to achieve the best possible financial results"

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Expert Solution

Revenue Management involves analyzing the consumer behavior, managing the orders in an optimized way, billing & invoicing, and revenue recognition in order to maximise revenue growth. I am referring to TV Networks and Broadway Plays as Entertainment and Media in a summarized way as it is difficult to dig too deep in each of the segments.

Digitalization has invariably redefined the global entertainment and media (E&M) ecosystem. Content has become more immersive and available on demand. Digital platforms have increased, creating more direct and personalized distribution. The competition for the number of users and spending has never been more intense. All these developments have significantly affected the flow of E&M revenues. Gone are the days when TV networks, film studios, or companies of any kind could survive on one, two, or even three reliable revenue sources. Today, profitable growth increasingly depends on having five, six, or even more revenue streams. Companies in every E&M sector are launching podcasts, live events, creating subscription offerings, producing video for consumers and brands, and expanding e-commerce and product licensing efforts. TV networks and film studios are developing streaming video services. Sports leagues and video game companies are converting to ee-sports.This has lead to expansion of business, building new revenue streams in new locations. Many successful E&M companies have always benefited from multiple revenue streams: advertising and carriage fees; popcorn and tickets sale for cinema owners; single-copy sales, subscriptions, and advertising for newspaper and magazine publishers.

Building new revenue streams is a challenge and requires making significant changes to the operating model, strategy and culture of these companies.

Following are some of the ways in which a E&M Company can USE Revenue Management.

Pricing Strategy
The core of a revenue management strategy is selling the right product to the right customer at the right time for the right price. Your company may decide to price against your competitors but the most value comes from pricing strategies that closely follow market conditions and demand, especially at a segmented level. A successful pricing strategy and analytical customised pricing tactics, can drastically improve your firm's profitability.

Inventory
In order to increase market share and to overcome weak demands you can lower the prices of products by giving discounts and thus increase your revenue. And where demand is strong for a product, you can overbook and maximizs revenue by utilizing full capacity.

Channels
Different channels often have different costs and margins associated with those channels. When faced with multiple channels to retailers and distributors, revenue management strategies can calculate appropriate levels of discounts for companies to offer without losing integrity with respect to the public perception of quality.

Promotion
Promotions allow companies to sell higher volumes by discounting the price of the products for a short period of time. Revenue management strategies measure customer interest and response to promotions in order to strike a balance between volume growth and profitability. An effective promotion helps maximise revenue when there is uncertainty about the distribution of customer willingness to pay.

Use of Models
Various modelling techniques can be used to forecast future revenue based on different variables that affect the industry. Modelling software helps recognise the impact on revenue in future based on desired strategy. Also use of sensitivity analysis helps to gauge the change in revenue with respect to change in any of the key variables. Forecasting has become key to decide on future scope of business and expansion policies.

Monitoring and Control
A firm shall continuously evaluate the developments of the market and the kind of products, services, prices and processes that needs updation. A dynamic market requires frequent evaluation of the firm's performance, policies and procedures.


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