6 Critical Risks Facing the Entertainment Industry

New business models, theft of IP, reputation and violent acts are some of the top risks facing the industry today.
By: | August 2, 2018 • 4 min read

In an industry that seeks to captivate, shock, inspire and amuse audiences of every stripe, some risk-taking is certainly essential — but likely among the most difficult to manage. Here are the top risks — some established and some emerging — facing the entertainment industry today:

1) Reputation

In the entertainment industry, a performer’s image is just as important as their genuine talent (if not more so). Bad behavior is punished with negative press, merchandise boycotts and declining sales.

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In worst-case scenarios, stars lose their work altogether. Take the recent example of Roseanne Barr. After successfully revitalizing her original 1990s sitcom “Roseanne,” the new show was cancelled before the end of its first season after the namesake star published a racist Tweet. Not only will the incident cost her future work, but it also eliminated the livelihoods of her fellow cast mates and crew.

ABC, which aired the show, may have saved some face by acting swiftly in its cancellation of the show, but reputation risk generated by TV stars certainly extends to the entities that distribute their content as well.

2) Cyber

Cyber risk takes on multiple forms in the entertainment industry. Streaming services like Netflix, Hulu and Spotify are reliant on uninterrupted service. A cyber attack that renders those platforms inaccessible could anger advertisers seeking a certain amount of visibility and will certainly frustrate viewers paying a monthly membership fee for on-demand content.

Theft and leaking of intellectual property are other top concerns. Netflix and HBO both suffered hacks and subsequent leaking of popular TV show plots in 2017. In 2014, cyber thieves stole large stores of data, which included a full feature film that had yet to be released, private emails between executives that derided colleagues and clients, and financial data including salaries and severance costs.

Losses like these can cause a company to lose market share due to reputation damage and interrupted revenue.

3) Violence

Paris. Manchester. Las Vegas. All are grim demonstrations of the vulnerability of entertainment industry events to violent acts. Anywhere a lot of people are gathered in a confined space, there’s an opportunity for a mass casualty event.

Failure to take [extra precautions] could lead to victims holding event organizers liable for injuries or deaths caused by an attack.

Safety is always top-of-mind for event organizers, but they have had to take greater precautions in recent years as the frequency of attacks seems to escalate. This includes banning backpacks and other bags larger than a purse, conducting random searches, increasing security presence, and developing more detailed emergency response and evacuation plans. Failure to take these steps could lead to victims holding event organizers liable for injuries or deaths caused by an attack.

And while no evidence supports this link, it’s possible that high-profile attacks can induce public anxiety about large crowds for at least a short period of time. Performance and event producers may find ticket sales dipping, especially in the wake of a highly-publicized attack.

4) New Business Models

Advances in technology have help content creators eliminate the middleman and push their work directly to consumers across a variety of platforms. User-friendly production software enables aspiring starts to create high-quality content and deliver it to consumers via YouTube, Instagram, Facebook or their own websites.

Entertainment companies now have to figure out how to diversify and compete on smaller scales.

When anyone with basic technical skills and self-starting ambition can get their creative work in front of an internet audience, the competition heats up. Even established talent has to find new ways to connect with audiences, distribute content, and market themselves. Increasingly, this means interfacing more directly with consumers via social media posts, pushing new content directly to streaming services rather than focusing on physical albums or DVDs first.

More platforms means creators can appeal to niche audiences and established distributors, which traditionally focused on the content and marketing that would appeal to the broadest swath of consumers. Entertainment companies now have to figure out how to diversify and compete on smaller scales.

5) Talent Risk

The success of most entertainment companies is dependent on its stars. The artists and performers that audiences pay to see and listen to. But when so much of an album, a movie or television shoot, or a concert revolves around an individual, that individual presents as much risk as opportunity.

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If for any reason a star can’t fulfill his or her duties, production companies have to scramble for a Plan B. Those reasons can encompass everything from sickness, injury or death to pregnancy to arrest to something as simple as getting stuck an at airport. Entertainment companies typically carry cast insurance to cover extra expenses associated with executing Plan B, but changing plans last-minute can introduce or elevate other existing risks.

Entertainment companies typically carry cast insurance to cover extra expenses associated with executing Plan B, but changing plans last-minute can introduce or elevate other existing risks.

Take Gal Gadot, the leading actress who was five months pregnant while shooting some additional scenes for “Wonder Woman.” While she wasn’t preforming any dangerous stunts, safety nonetheless becomes an even greater concern. And more work was needed on the back end to hide her growing belly. According to Entertainment Weekly, “the costume department had to cut a section out of the front of her costume and replace it with green cloth so her figure could be altered in postproduction.”

6) Third-Party Liability

Entertainment companies, whether in the business of producing or distributing content or putting on shows, regularly contract with third parties to get it all done. As such, they bear responsibility for providing safe work environments and for protecting contractors’ and vendors’ private data, which results in third party liability exposure.

Especially when it comes to events like concerts or festivals, organizers can also be held liable for any property damage caused by spectators. &

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]