What Is an Entertainment Company in 2021 and Why Does the Answer Matter?

In the 1960s, Theodore Levitt, a resident economist and professor at Harvard Business School unveiled his theory of “marketing myopia”. Specifically, he postulated that too many companies define themselves through their products rather than the need(s) they fulfill (this idea has been largely remixed as “job to be done” theory). This mindset exposes these companies to displacement and disruption. The classic example here is the petroleum industry, which, in its obsession with fossil fuels, has missed out on solar, nuclear, geothermal, etc. Another focuses on the major railway companies of the early 20th century, which missed out on buses, cars, and trucking due to their focus on trains not transportation.

Management theories go in and out. The 1990s were particularly harsh on conglomerates, most of which struggled to show the benefits of strategy creep. Synergies sounded good and marketing myopia bad, but ultimately, most blue-chip companies delivered greater shareholder returns through focus rather than tackling uncertain (if occasionally insurgent) adjacencies. The digital era has made conglomerization a little more popular (e.g. Amazon), yet for the most part, market leaders tend to be specialized (e.g. Facebook not Google+, Shopify and Stripe not Amazon Pay, TikTok not Instagram, Tinder not Facebook Dating).

These ideas are interesting when one considers the modern-day entertainment industry. Historically, we defined an entertainment company around its core offering. Marvel was a comic book company, Mattel a toy company, ESPN a sports network, etc. When people think of the classic Disney flywheel — which Walt himself devised in the 1950s and which is the current obsession of every Hollywood executive today — they typically misremember the center of this flywheel as “IP”. It was actually “Creative Talent of Studio / Theatrical Films”. Even Walt described Disney as a movie company.