The smell of the greasepaint, the roar of the crowd are back!

October 19, 2021

As towns and cities reopen in earnest and get busier this autumn, it’s great to see the curtain lifted on live entertainment again. Our love of opera at Buchler Phillips is well known, but as media disclaimers might say, other performance art forms are available!

That’s not to say that the entertainment industry is out of the woods post-Covid.  There remains no business like show business and both the entertainment and media sectors will always be tough for new operators to enter, extremely competitive and notoriously exposed to the vagaries of shifting fashions, tastes and consumer demand. Creative ‘practitioners’ need sound management and financial advice, while the organisations that hire them are often juggling several disparate streams of talent and production to deliver a stage show, TV series, feature film or publication on tight budgets.

Long periods of lockdown during the Covid-19 pandemic underlined the increasing importance and value of ‘content’ – programmes, box sets and movies for both on-demand streaming businesses and terrestrial channels. The virus provided a silver lining for streamers themselves, boosted by captive audiences swelling subscriptions; however, previously booming producers of content were hit hard by the logistical challenges of filming, leaving them unable to deliver projects despite strong demand from studios and TV companies. Meanwhile, more traditional forms of entertainment, such as theatre, cinema and music venues, were unsurprisingly battered by months on end of empty seats, set against the continued high costs of large properties.

In the short term, the operational gearing of high fixed costs and fast profit improvements coming from revenue increases will be good news as theatres and concert halls return to life. The high proportion of freelance staff working in the industry has been helpful in that respect. But longer term changes in these sectors mean that the sands will continue shifting long after Covid. Print media is shrinking at a rapid pace as newspapers and magazines move online and provide content in real-time. Recorded music sales, which now promote artists’ tours and live events rather than the reverse scenario that prevailed until recent years, are focused on digital streaming instead of physical product. Traditional TV outlets are redefining their relationships with advertisers, as audiences’ consumption of entertainment through a variety of devices becomes less predictable.

Media and entertainment businesses, large and small and across a variety of sub-sectors, therefore face significant challenges balancing revenues and costs for the foreseeable future. Getting their houses in order will involve reviewing some important drivers of their revenues if they are to adapt to rapidly changing landscapes and improve their chances of longevity. These might include:

  • Communications and negotiations with lenders
  • Reviewing financial aspects of contracts in conjunction with agents and lawyers
  • Royalty payments and profit shares
  • Treatment of Intellectual Property and intangible assets
  • Structuring strategic alliances and major contracts
  • Due diligence on potential transactions
  • Reviewing and optimising cost bases – permanent and freelance staff; properties
  • Grant applications to arts bodies

The arts world in its broadest sense has received relatively little support in the last 19 months, so in some ways has a very realistic view of what it will take to get back on track. Nonetheless, there is much to do for businesses that want to make it at least as far as when the fat lady sings.

Written by David Buchler, Chairman and Founder of Buchler Phillips, the UK’s leading independent corporate recovery, restructuring and turnaround firm.

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