rotman strategy case competition
DESCRIPTION
Finalist in Rotman MBA Case CompetitionTRANSCRIPT
Team CinergyAlaina Boyer, Jay Burke, Brendan Cochrane, Pramod Jindal & Beam Ukarapong
2
Recommendation
ProblemShould Cineplex focus on building its download business or reinvest in its theatre business?
RecommendationCineplex should reinvest in its core competencies within the theatre experience, while expanding the complementary entertainment services it offers
Major Insights• Exhibition theatres have problems – we CAN fix them• Cineplex is REALLY good at its core competencies• We can PLAY in the Digital sandbox, but…
Fixing Problems Core Competencies Digital Sandbox
3
Exhibition Theatres have problems – we CAN fix them
Convenience4-hour outing for a 2-hour movie is inconvenient
Why does this happen?Need to get there early for good seats and line-up for food
ProposalCinExpress – a service to reserve your seat, pre-order food & beverage and pick-up your order from designated line
Costs• Initial confusion amongst non-reserved seating patrons• Dedicated staff for express line• Enhance current website/app/interface to incorporate CinExpress
Benefits• Higher revenue from increased ticket price (+$2.00/seat)• Pre-ordered food = guaranteed sale
Fixing Problems Core Competencies Digital Sandbox
4
LoyaltyScene Membership card and Loyalty Program: very successful
How to use Loyalty to our advantage?• Incentivize new members - free upgrades • Retain members with Milestone Rewards • Birthday and anniversary promotions• Expand point-redemption partners
Costs• Additional free movies• Loss of 10% concession revenue (Scene discount)
Benefits• Increased membership: more theatre footfalls and concession spending• Free word-of-mouth advertising
Exhibition Theatres have potential – maximize it
Fixing Problems Core Competencies Digital Sandbox
5
Exhibition Theatres have scope for improvement
Social Media PenetrationA Facebook page isn’t enough
Why should this change?Transition from offline to online social experience
How will we correct this?Ability to post updates after ticket sales and reviews post-show
Costs• Programming/development costs
Benefits• Brand recognition (each auto-generated posting has Cineplex brand
embedded)• Free social media advertising will reach broader audience & tech-savvy
users
Fixing Problems Core Competencies Digital Sandbox
6
Leverage our Core Competency: Theatre Experience
Broad ExperienceExperience beyond our best movies: complete entertainment experience
Our ProposalContinue to invest in alternative programming, games, liquor-licensed VIP as well as non-peak theatre usage
Actions• Theme nights • UFC events• Customized events
Costs• Licensing, capital expenditures and labour
Benefits• Increased ticket revenue• Additional reasons to visit a multiplex• Increased share of wallet from customized-event clients
Fixing Problems Core Competencies Digital Sandbox
7
Leverage our Core Competency: State of the art technology
TechnologyWe have the best technology. Home theatre solutions cannot simulate a real theatre experience
ProposalContinue to invest in:• UltraAVX• Complete digital screen and 3D projection upgrade by 2012 as planned• Canadian Digital Cinema Partnership
Costs• No change from current reporting
Benefits• Provide enhanced customer experience• Maintain competitive advantage over digital
Fixing Problems Core Competencies Digital Sandbox
8
Leverage our Core Competency: Studio Relationships
Studio RelationshipsWe have the best new movies you can’t find online
Proposal• Leverage leading market share position to acquire best titles• Extend relationship to re-release patron favourites
Costs• No change from current reporting
Benefits• Maintain competitive advantage over digital• Preferential treatment and flexibility
Fixing Problems Core Competencies Digital Sandbox
9
We can PLAY in the digital sandbox
But…• Non-core business• High switching costs for legitimate users• Low switching costs for illegitimate users• Fierce competition• In pipeline “UltraViolet”- new technology, same players
Cost• Advertising costs for brand promotion• Increased redemption of Scene points (affecting core margins)
Benefits• Additional revenue stream • Allows entry into new market• Leveraging Scene loyalty
Fixing Problems Core Competencies Digital Sandbox
10
Risks associated with our Recommendations
Overall Risks to the Industry• Busier life style – not enough free time for movies• Recessionary fears – reduced leisure budget
Convenience, Loyalty and Social Media• Customers not receptive to reserved seating lost revenue• Potential breach of privacy in Loyalty program• Maintaining higher service delivery levels
Event Experience• Additional improvements not aligned with customer values• Changing customer tastes• Year without blockbuster movies
Digital Sandbox• Ongoing piracy concerns• Competing against new innovations by established digital competitors• Digital players enter theatre business
Fixing Problems Core Competencies Digital Sandbox
11
Summary
RecommendationCineplex should reinvest in its core competencies within the theatre experience, while expanding the complementary entertainment services it offers
Major Insights• Exhibition theatres have problems – we CAN fix them• Cineplex is REALLY good at its core competencies• We can PLAY in the Digital sandbox, but…
Fixing Problems Core Competencies Digital Sandbox
12
Thank youQ&A
13
Reserved Seating Cost/Benefit Structure
Brand new chairs 300.00$ Chair covers 35.00$ Total Seats to Change 60 Total Seats to Change 60TOTAL NEW SEAT COST 18,000.00$ TOTAL NEW SEAT COST 2,100.00$ Replacement Labour Cost 100.00$ Replacement Labour Cost 100.00$ Hours to replace 60 seats 15 Hours to replace 60 seats 15TOTAL LABOUR COSTS 1,500.00$ TOTAL LABOUR COSTS 1,500.00$ GRAND TOTAL COST 19,500.00$ GRAND TOTAL COST 3,600.00$
Premium for Reserved Seating 2.00$ Premium for Reserved Seating 2.00$ Average Show Rate 4 Average Show Rate 450% occupancy 30 50% occupancy 3075% occupancy 45 75% occupancy 4580% occupancy 48 80% occupancy 4885% occupancy 51 85% occupancy 51TOTAL REVENUE at 50% sales 240.00$ TOTAL REVENUE at 50% sales 240.00$ TOTAL REVENUE at 75% sales 360.00$ TOTAL REVENUE at 75% sales 360.00$ TOTAL REVENUE at 80% sales 384.00$ TOTAL REVENUE at 80% sales 384.00$ TOTAL REVENUE at 85% sales 408.00$ TOTAL REVENUE at 85% sales 408.00$
Cost/Revenue @ 50% 81 days Cost/Revenue @ 50% 15 daysCost/Revenue @ 75% 54 days Cost/Revenue @ 75% 10 daysCost/Revenue @ 80% 51 days Cost/Revenue @ 80% 9 daysCost/Revenue @ 85% 48 days Cost/Revenue @ 85% 9 days
Reserved Seating Reserved Seating
Increased Revenue Increased Revenue
Payback Period Payback Period
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Scene Membership Growth
Q3 '07 Q3 '08 Q3 '09 Q3 '10 Q3 '110.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0.4
1.2
2.0
2.6
3.2
Scene Membership(in millions)
No. of Members
Y/Y Growth 23%(2010-2011)
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Internal Activities and Capabilities
Source:
Plane Beakers Boat
Valuable Rare In-imitable
Movies (Exhibition) - showtimes, convenience 3 2 2
Movies (Digital) 1 1 1
Loyalty (Scene) 3 2 3
Merchandise (zoning) 30% 3 1 1
Alternative 3 1 1
Media (ads) 3 2 1
Media (magazine) 2 1 1
Social media 3 1 1
Premium (seats, sounds, VIP) 3 1 2
Interactive (App) 3 1 1
Vendor relationship (food/aeroplan) 3 1 1
Technology (3D/IMAX) 3 3 3
Popcorn 3 1 1
Previews 2 1 1
Partnership (Scotia) 3 3 3
CDCP (Empre) 3 3 3
Night-out package 2 1 1
In-house brand (OutTakes) 2 2 1
Locations 3 3 3
Studio Relationship (having the best movies) 3 2 3
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Blue Ocean Analysis of Cineplex (Current), Cineplex (Proposed), Cineplex Anywhere and Digital Download
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5 forces: Exhibition Entertainment
Source:
Substitute – high, and getting worse• More activities
Buyer – moderate• Switching costs low, consumer influence mod
Supplier – moderate• Avatar high, others low
Barriers – High• Huge Capex
Rivalry – Low• Cineplex 66%
18
5 forces: Anyway to Watch a Movie at Home
Source:
Substitute – High• Tons of other options
Buyer – Moderate, and getting worse• Can influence the price (Netflix)• But there are potential switching costs (Rogers On Demand, buying an Xbox)• Getting worse because of increasing piracy
Supplier – Moderate• For legal activities, high• For illegal, low
Barriers – Moderate• For legal activities, high• For illegal, low
Rivalry – High• Tons of ways to get a movie at home
19
Industry Analysis
Out of home- Movie- Plays/operas- Sports events- Recreational activities- Dining- F&F
- Coffee- Community
- Arcades- Nightlife- Culture- Shopping
At home (Electronic)- TV- Movies- Computer- Video games- Music- Internet- Social media
At home (Non-electronic)- Board games- Card games- Reading- Quiet time- Exercise- F&F- Cooking
Anyway to get movies at home
Exhibition Entertainment in
Canada