Case Study Movie Exhibition Industry Essay
1529 WordsMar 28th, 20127 Pages
Strategic Analysis of Movie Exhibition Industry
By: Kim Saline
February 24, 2010
To provide an analysis and make recommendations to increase revenue in the movie exhibition industry.
Ticket sales for movie theaters are at their lowest point since 1996. With the core demographic group expected to grow slower than the US population and with technological advances growing at speeds faster than the industry can keep up, ticket sales will continue to decline if the current business strategy continues to be followed.
Concession sales and ticket sales are the two biggest sources of revenue for a movie theater. Both continue to increase in cost to the consumers and may have reached a price point that is starting…show more content…
They also initiate the contracts with the theaters and negotiate the percentage of box office sales they will receive. Many of the distribution companies are integrating with the production studios because the need for distribution is diminishing with the conversion to digital. This makes these suppliers a strong force.
On the concession side the bargaining power is weak due to economies of scale. Theaters earn most of their profits on concessions so they use their power to reduce their costs from their suppliers.
4. The bargaining power of buyers: The outlook for the target market isn’t favorable for the movie industry because it will not be growing as fast as the overall population. Buyer power is a strong force because of the target market and several other factors including: the undifferentiated product offered, switching to an alternative is simple and low cost, and customers can stay home and watch movies. The consumers are also complaining about concession and ticket costs, along with the advertisements before the film is shown.
5. The threat of substitutes: This is the strongest force of competitive pressure that the movie exhibition industry faces. Not only are they competing among each other but they have to compete with every leisure activity a consumer has to choose from.
Consumers are also investing in home theaters. TV’s are bigger than ever and have digital and 3D capability. As the costs of all the components go down consumers are
The Movie Exhibition Industry: 2010 INTRODUCTION This case is an in-depth study of the motion picture exhibition industry. Emphasis is on value chain dynamics and operating variables that impact the profit potential of movie theater owners. Trends that influence consumer decisions and constraints within the studio-dominated business model are also highlighted for review. The objective of this case is to thoroughly examine industry conditions and key industry participants in order to identify strategic measures that might improve the viability of major exhibitor operations. By profiling the external environment, the industry’s competitive forces, competitor circumstances and approaches, and the standard business revenue/cost structure, strategic alternatives can be generated to address the challenges confronting movie theater owners and to increase their likelihood for success. • Review trends in the general environment that affect the movie exhibition business, and establish their potential to help or harm theater owners. • Assess the five competitive forces at work in the industry environment. Which of the forces threatens the profitability of major movie theaters? What level of competition can be anticipated among industry rivals? • Perform a comparative situation and strategy analysis of the four companies with dominant market share. What are the advantages and disadvantages for each of the industry’s top competitors? • Evaluate the revenue sources and major costs for exhibitors. Discuss how the income structure impacts their financial results. ANALYSIS • Review trends in the general environment that affect the movie exhibition business, and establish their potential to help or harm theater owners. A variety of forces exist in the general environment that is beyond the control of companies competing in the film industry. These external conditions can create opportunities and/or threats that influence firm growth and performance. » Unstable conditions in the domestic economic sector continue to exert financial pressure on consumers. In the past, downturns in the economy led to a rise in theater receipts (in other words, created an opportunity for cinemas to grow ticket sales). However, because of aggressive hikes in ticket prices in recent years and due to an increase in the number and availability of substitute products, expectations for a “recession effect” cannot be certain. Movie Exhibition Industry - 1