Concert Master
Question 1:
Our client is Concert Master, a well-established global entertainment company with its main business in organizing live concerts. With its extensive resources and industry connections, Concert Master sees a significant opportunity in leveraging digital platforms to host concerts accessible worldwide, and plan to first launch a series of virtual concerts in the US. Considering Concert Master’s reach and the US audience for digital entertainment, how would you estimate the potential size of the customer base for their virtual concert services?
Possible Answers to Question 1:
First, we start with the total population of the United States, which is approximately 330 million people. This forms the base for our calculations. Next, we estimate the portion of the population that enjoys attending concerts. Concerts attract a diverse audience, including both younger and older demographics. For this assumption, we consider that about 40% of the US population is interested in attending live concerts.
This translates to 330 million×0.40=132 million. So, we have 132 million people who are potential concert enthusiasts. Out of those interested in live concerts, we assume the younger generation is more likely to try virtual concerts. By roughly splitting the population into four generations, we focus on Gen Z & Millenials which we assume accounts for 50% of the 132 million concert enthusiasts, giving us 66 million potential virtual concert attendees.
From here, we assume 20% are interested and willing to pay for these virtual concerts, resulting in a final potential customer base of 66 million×0.20=13.2 million
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Question 2:
Concert Master is setting the ticket price for their virtual concerts in the U.S. at $25 each. The potential market is segmented by different age groups, each with varying purchasing behaviors:
Age Group 18-25:
Proportion of Total Market: 40%
Average Tickets Purchased per Year: 2
Age Group 26-35:
Proportion of Total Market: 35%
Average Tickets Purchased per Year: 1.5
Age Group Over 35:
Proportion of Total Market: 25%
Average Tickets Purchased per Year: 1
With this information, calculate the potential annual revenue from ticket sales
Possible Answers to Question 2:
Let’s assume the total interested market size (total number of potential customers) is 13M from the first question.
Age Group 18-25:
Proportion of Total Market: 40% of 13M
Average Tickets Purchased per Year: 2
Revenue: 0.40 x 13M × 2 × $25 = $260M
Age Group 26-35:
Proportion of Total Market: 35% of 13M
Average Tickets Purchased per Year: 1.5
Revenue: 0.35 x 13M × 1.5 × $25 = $170M
Age Group Over 35:
Proportion of Total Market: 25% of 13M
Average Tickets Purchased per Year: 1
Revenue: 0.25 x 13M × 1 × $25 = $81M
Total revenue = $260M + $170M + $81M = $511M
Question 3:
What could be potential risks or challenges that Concert Master may face in launching their virtual concert business?
Possible Answer to Question 3:
Platform Reliability: Risks of platform downtime or technical glitches during live performances.
Cybersecurity Threats: Potential for data breaches or cyber attacks compromising user data and payment information.
Securing Talent: Challenges in attracting well-known artists to participate, especially if the concept is new or unproven.
Content Licensing and Rights: Legal complexities involved in broadcasting music, especially internationally.
Competition with Traditional Concerts: Post-pandemic, the competition with live, in-person concerts as they resume more broadly.
Question 4:
What would be your final recommendation to the client?
Possible Answer to Question 4:
Concert Master’s venture into the U.S. virtual concert market presents a promising opportunity, with a potential market size of 13 million users and projected annual revenue of $511 million. Success will depend on targeted marketing, strategic artist collaborations, and leveraging digital platforms popular in the U.S.
Recommendation:
Advance with the U.S.-focused virtual concert series, employing tailored marketing strategies, engaging with popular U.S. artists, and ensuring a high-quality online concert experience. Emphasize social media engagement and partnerships with U.S.-based platforms to maximize reach.
Risks:
Concert Master will need to manage technical issues such as avoiding glitches and protecting user data. Potential risk of also competing with traditional concerts.