Beyoncé’s risk investment | AbstractA case study which taps into the high risk investment the American singer Beyoncé took to produce her fifth album in a non-traditional way.
Reine Kolle (瑞丽)
Student ID: 1120150914 |

Beyoncé’s risk investment | AbstractA case study which taps into the high risk investment the American singer Beyoncé took to produce her fifth album in a non-traditional way.
Reine Kolle (瑞丽)
Student ID: 1120150914 |

Beyoncé’s Risky Investment

Overview

As part of our curriculum education we were asked to find a short case study that we thought to be of an interest in investments. Thus, this paper will discuss concisely the Harvard case study; written by Anita Elberse and Stacie Smith (2014), on the American singer Beyoncé and how much of a business gamble her project really was. The reason I find this case to be of interest is because of its depth into risky decision making and the uncertainty of expected results in investment. The approach of this case study is an analytical approach. This approach does not identify problems but it examines the case in order to understand what has happened and why.
Key word: risk-return tradeoff Case study

In December 2013, music superstar Beyoncé is about to surprise her fans with the release of her self-titled album. The team at her company Parkwood Entertainment, which general manager Lee Anne Callahan-Longo described as "a management, music, and production company that is owned and at the highest level operated by an artist," had chosen to release the entire album at once and exclusively via the Apple iTunes Store, without any prior promotion-a significant, and potentially very risky, departure from how music was traditionally released. Sony Music's label Columbia Records, with whom Parkwood partnered on recorded-music activities, shared the costs-and therefore also the risk-of the album, which had been one-and-a-half years in development and was a particularly expensive proposition because of the many videos. How would fans and music industry insiders react to the daring launch, unveiled via Beyoncé's Facebook and Instagram accounts? Would the album be able to find a large enough audience even without traditional promotional activities?

Review

Columbia reports that Beyoncé’s self-title album actually sold 828, 773 copies in its first three days; by the time the year was out it had sold 2.3 million units worldwide. The album became the fastest-selling album ever worldwide in iTunes store—according to iTunes and Columbia records (Caulfield, 2013). The case study scrutinizes the work that went into Beyoncé’s fifth album released via iTunes with no promotion. Anita Elberse (2014) described it as “a significant, and potentially very risky, departure from how music was traditionally released”.
Before discussing the risky decision she took, I would like to state the definition of investment environment. Referring back to my lecture notes; investment environment encompasses all actions that you can take as your investments and all factors that can affect the benefits of your investment (Dongsheng, 2016).
Beyoncé’s actions—producing a secret album with no promotion—and all the factors that were involved such as; disclosure agreement, and being extremely careful for the album not be leaked, did indeed affected the benefits of her investments positively as it yielded much success and appraisal. However, despite the worldwide success of this album, it should be noticed that Beyoncé’s decision was a risky gamble. This high risk investment, therefore, engendered the following questions “what if the album was leaked?” or “what if this non-traditional way of releasing an album with no promotion did not succeed?”. These questions can be answered by the risk-return tradeoff principle.
The risk-return tradeoff is the principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with low potential returns, whereas high levels of uncertainty (high-risk) are associated with high potential returns (“Risk-return tradeoff”, n.d., para. 1). According to the risk-return tradeoff, when it comes to investing one must be aware of his/her personal risk tolerance and must considered two main factors; the risk you are prepared to take and, the return you are willing to accept. Risk is the likelihood that your investment will fluctuate in value and the earnings may be less than you expect, possibly even negative. Return is the rate by which your investment changes. Referring back to the above questions risk and return go hand in hand and the relationship between them is something that need to be considered; over the long term, higher returns are usually associated with higher risk.
Therefore, Beyoncé personal risk to tolerance is determined by an aggressive investment, which though may provide much higher level of volatility, it has however the potential of higher returns. It is safe to say that she gambled and won.

References
Caulfield, K. (2013). Beyoncé breaks U.S. iTunes Sales Record, Sells 617,000 in Three Days. Retrieved from whttp://www.billboard.com/articles/news/5839818/beyonce-breaks-us-itunes-sales-record-sells-617000-in-three-days keith Caulfield 2013
Elberse, A., and Smith, S. (2014, August 28). "Beyoncé." Harvard Business School Case 515-036. Retrieved from http://www.hbs.edu/faculty/Pages/item.aspx?num=47985
Dongsheng, Z. (2016). Advanced Investments [PowerPoint presentation]. Dalian Maritime University
Risk-return tradeoff. (n.d.). In Investopedia. Retrieved from http://www.investopedia.com/terms/r/riskreturntradeoff.asp