There is no denying the sheer magnitude of the entertainment industry worldwide – and it shows no sign of slowing down. When deciding what industry to invest in, naturally, you want to choose the most promising and profitable area in which to put your hard-earned money. Growth is an indicator of a healthy business, which would make the entertainment industry an excellent choice. Yet, when business is booming everyone wants a piece of the winning revenue pie. For example, entertainment companies are home to some of the most high-tech and high-paying jobs. Numerous states in the U.S. have begun to compete for these jobs with statewide tax incentives geared to attract entertainment firms to their location. If governments are competing for the opportunity to reap the rewards of the industry, it is natural to expect a similar competition for the best investment opportunities.
To be sure you have an edge over the competition you have to zero in on what type of entertainment in which you want to invest. Trendy. Modern. Technological. Traditional. There are forms of entertainment that fall under all of those categories. The old saying, “there’s no business like show business” still rings true, but, today, entertainment is such a broad commercial business, encompassing more than just Hollywood and the silver screen. Original film and television productions are increasing in both quantity and quality across the globe. Modern technology has led to the creation of the ever-growing video game and online entertainment venues. Huge enterprises like theme parks amuse the masses. Vacations help travelers get away from it all. Kids are occupied with a wide-range of toys. Yet the timeless, classical forms of fun such as a night at the theatre and reading a good book are still popular. The successes of Wicked and Harry Potter are a testament to that. Don’t forget the entire music industry – iTunes, CDs, concerts… it’s all entertainment.
After realizing how vast this glamorous industry is, it makes investment decisions so much easier. Making investments in entertainment does not mean that basic investment principles should be thrown to the wind. Despite the growth and success of entertainment firms, nobody really knows what company is going to shine or what part of the industry is going to soar above expectations. Play it safe and be conservative – choose quality entertainment stocks over quantity, and remember keep your portfolio diversified. There’s no reason to change your portfolio to include only entertainment related stocks and bonds.
When considering a diversified portfolio, it is important to realize that many entertainment companies are internally diversified. Take AOL Time Warner, for example. They are a company with multiple entertainment divisions: film, television, records, media/publishing, etc. If ticket sales for films are uncharacteristically low one year, there will hopefully be more people listening to music or reading magazines. There is also the whole other technology side to the company to consider, as well. This type of diversification is common among the entertainment powerhouses. Powerhouse companies like Sony and Disney have established their business in multiple areas of entertainment, and even industries outside entertainment, to balance their success.
Investing in the entertainment sector can be more than just purchasing stock. For those searching for a more venture capitalist approach, there are numerous promising digital media and traditional media companies looking for financial backers. YouTube and MySpace were once such start ups, and their acquisition illustrates just how viable – and profitable – new media opportunities can be. Finding a winning investment opportunity takes research, but also some luck with being at the right place, at the right time. Whether you choose to invest by acquiring content, building a future hotspot, funding a production, or anything else – remember that your investment has to be something you professionally believe will take off.