Investing in Entertainment
18 01 2008It is obvious that the entertainment industry, not just in Hollywood, but worldwide, is a sure money maker. While diversifying your portfolio you want to invest in industries that show the most promise for profitable growth. Since growth is a good trait for your portfolio to have and the entertainment industry keeps growing by leaps and bounds, the two are a perfect match. With so much profit to be had it is no surprise that everyone is trying to get a piece of the action. US states have even begun to compete for large entertainment companies to locate in their state by offering tax incentives.
Within the broad entertainment industry there are several areas from which an investor can choose to invest; trendy, modern, technological, and traditional. Forms of entertainment fall under all of these categories. The first thing that comes to mind when talking about entertainment is movies. The industry, however, is much more encompassing than just motion pictures. With the exponential growth that has been seen by modern technology, there have been many advances in entertainment, such as video games and online platforms. Conglomerate theme parks amuse tens of thousands of people and vacations allow hard working people to take a break from it all, far away; Kid’s toys are becoming more and more complex. And, yet, the classic, timeless activities, such as theatre and literature are still popular in today’s society. In addition to all these mediums there is the entire music industry, which is blanketed underneath the broader entertainment industry; concerts, CD’s, satellite radio, etc.
Investment decisions seem much easier after one realizes just how broad the entertainment industry actually is. When investing in entertainment stock, an investor should remember the basic investment principles. While the industry as a whole will continue to grow, specific companies in which to invest are not always evident. Just as with stocks in different industries it is better to have quality stocks over quantity, and place a continued focus on diversification.
Within such a large and profitable industry there are bound to be some mega companies. Investing in these companies usually helps keep your portfolio diversified because they usually conduct business in numerous industries. AOL Time Warner is a good example; they have multiple entertainment divisions, such as film, television, recording, media/publishing, etc. If one aspect of the industry, say film, is particularly low one year, there will most likely be an upswing in another form of entertainment, like music. Investing in these large, multi-dimensional companies is a good way to spend less money, yet still ensure that your portfolio stays diversified.
For those who want to do more than just purchase stock and want to take a more active part in the industry, there are many opportunities for venture capital investments. Seemingly, every week there is a new up-start tech company taking the industry by storm; a start-up that flourished through VC funding.