First Research US Industry Profile

Advancements in consumer electronics have given rise to a growing variety of at-home entertainment options that compete with those offered by companies in the arts, entertainment, and recreation sector. Smartphones, tablets, gaming consoles, video streaming services, and social media have made it easier to stay busy and have fun without leaving the house. This is especially true of younger consumers, who represent a critical customer base for the industry. To lure people away from their screens, amusement parks, arcades, museums, and other institutions are investing in technology improvements to create novel experiences that cannot be replicated at home. Many organizations are also using sophisticated data analysis applications to improve efficiency and guide decisions on marketing and programming.

Most operators in the industry — such as sports teams, concert promoters, performing arts groups, fitness centers, and golf courses — typically compete for regional customers who live within a short driving distance. However, the industry’s largest companies operate destination attractions that rely heavily on both domestic and international tourism; examples include Disney World, Broadway theaters, and Las Vegas casinos.

Demand is driven by consumer spending and leisure time, as well as demographics. The profitability of individual companies depends on efficient operations and effective marketing. Large companies have advantages in purchasing and access to capital needed to construct leisure and recreation facilities. Small companies can compete effectively by catering to local tastes or offering unique experiences. The overall US arts, entertainment, and recreation sector is highly fragmented: the top 50 companies account for about 20% of revenue. However, certain segments within the industry, particularly gambling, sports, and amusement parks, are more concentrated.

Competitive Advantages:

Pricing — Pricing strategies vary considerably within the arts and entertainment industry, depending on the type of attraction and other factors. Heavy competition from other entertainment options generally pressures operators to keep prices as affordable as possible. However, high demand can drastically push up the cost of admission to events such as professional sports games, hit Broadway shows, and popular theme parks. The rapid growth of luxury fitness studios is also contributing to an affordability gap in the US health club market. Some theaters, museums, and amusement parks offer promotional discounts to maintain steady attendance.

Innovative Attractions — Entertainment and recreation companies are increasing their investments in high-tech attractions in order to stand apart from a crowded field of competitors. Theme park operators are incorporating emerging technologies such as virtual reality and augmented reality into new and existing rides. Museums are also using those technologies to create new kinds of interactive exhibits that feature personalized, location-based content. A growing number of fitness clubs are providing wearable devices to help members track their progress and stay engaged with their workouts, which can boost retention rates.

Licensing Partnerships — Large entertainment and recreation companies often make licensing deals to leverage brand awareness and encourage repeat business. Disney theme parks feature rides based on popular franchises such as Star Wars, Frozen, and Marvel Comics superheroes, while Universal Parks & Resorts successfully introduced Harry Potter-themed sections at several of its properties. All four major US pro sports leagues and many individual teams have co-branding deals with fantasy sports companies like DraftKings and FanDuel in an effort to capitalize on the industry’s explosive growth. High-end boutique fitness chains like Exhale and SoulCycle have partnered with luxury hotel brands to open on-site workout facilities at their properties.

Companies to Watch:

Walt Disney Parks and Resorts owns and operates six of the world’s leading family vacation destinations, including Walt Disney World Resort and Disneyland Resort in the US, as well as parks in Tokyo, Paris, Hong Kong, and Shanghai. The company’s theme parks hosted more than 150 million guests in 2017.

Las Vegas Sands is a major international casino resort operator with two flagship properties on the Las Vegas Strip: The Venetian and The Palazzo. The firm also operates several properties in Macao, China, as well as a resort in Singapore and a joint venture in Bethlehem, Pennsylvania.

Live Nation Entertainment is the world’s largest ticket seller and promoter of live entertainment. The company significantly expanded its ticketing services with its 2010 purchase of Ticketmaster Entertainment. Live Nation owns, operates, or has exclusive ticket-selling rights for about 220 venues around the world; its talent-management arm represents more than 500 musical artists.

The Smithsonian Institution houses about 160 million objects in 19 museums and galleries, most of which are on the National Mall in Washington, DC. It also operates the National Zoo. Roughly 30 million people visit every year to view the Smithsonian's exhibits on art, music, TV and film, science, history, and other subjects.

DraftKings offers daily fantasy sports games in 12 sports and is poised to move into sports betting following the US Supreme Court's decision in mid-2018 striking down a law outlawing sports betting nationwide. Some states have already legalized gambling on sports events, and others have bills in the works.

Major sources of revenue include admission to live performing arts performances (about 15%); fitness and recreational sports center services (about 15%); ... plus: