What can exhibitors do to improve their performance? To reverse the downward trends in attendance? To improve their profitability at a time when the studios, relying on the box office more than ever, are increasingly looking internationally? Let’s start with a SWOT analysis of the local exhibitor:
* Offer a product that is still relatively affordable for families and patrons
* Product offers an “escape from reality” for consumers in a recessive economy
* The “big screen” experience still cannot be duplicated at home
* High profit margins on concessions and advertising
* Lower cost digital versions of movies available from distributors Weaknesses
* Theatre managers have little influence over revenues and expenses
* Low operating margins
* High operating expenses, i.e. labor and facility costs
* Limited target audience of 12-24 year olds
* Higher expense of digital and 3-D equipment
* Customer complaints of interruptions during movies
* Customer complaints of extended advertising prior to showing of film Opportunities
* Large facility, can be marketed and used for other events
* Lower concession prices and/or expand current offerings to promote higher sales * Introduce more independent films, lower cost, different target audience
* Lower ticket costs for movies after a certain time period from release date to combat DVD competition
* Customer Loyalty Programs
* Promotional Packages – families, “date night”
* Home theater technology more affordable and common
* Theatre release to DVD release windows are getting shorter
* Studios putting investment into international market due to higher profitability
After the SWOT Analysis each theatre must decide on their strategy. This case analysis is made from the point of view of a multiplex or megaplex operation. For these types of exhibitioners I would recommend a combination of Market and Product Development for their existing facilities. Until a successful strategy is formulated, implemented, and proven successful at a current facility I do no recommend expansion. Let’s take a closer look at both of these strategies on how they can be utilized to minimize weaknesses and threats and maximize strengths and opportunities. The grand strategy of market development utilizes a company’s current products, with a few minor low-cost changes to open additional geographic markets and attract new market segments. This one of the few low-cost ways a theater can grow their audience because it is highly unlikely there will be any radical new product developments for this industry.
Currently the target market for theatres is 12-24 year olds. So what can they do to attract different demographics? I think one large opportunity is to introduce more independent films to their line-up. Perhaps dedicate two or three theaters to these films that are less expensive from the distributor and in general attract an older audience. The 40-49 year old market say they attend a movie based more on the story content than marketing hype (Motion Picture Association of America, 2012). Product development strategies can go hand-in-hand with market development. With product development a company can create new features to and adapt or modify current product. One example of this would be to offer more lucrative loyalty programs or attractive packages for families. Some examples would be for patrons to cumulate points for concession discounts or future “free movies” with the paid admission for a specific number of films. The cost of this would be minimal for the theatre owners and could be shared with other theatres within the same chains in a regional area. Offering discounts for concessions is ideal because the profit margin on them is higher than ticket revenues.
They could take a smaller profit margin in exchange for increased purchases. For example, offering $1 off of a large popcorn. The theatre would still make money at a $1 discount and a customer who purchases a large popcorn will also purchase a soda and possibly candy to go with it. They could also offer package deals to families that would include tickets and a preset concession value or product. This would grow the adult demographic of parents who have small children that want to see the latest kids release and be guaranteed concession sales for that group of consumers. Another opportunity for theatre owners is to look at alternative uses for their facilities. The overhead costs of the facility are fixed but could be offset by renting spaces during off-peak hours for events such as business conferences or school events. They could also use their screens to show things other than major motion-picture releases. With digital equipment I’m sure there would be a way to contract with major networks and cable providers to show popular television series finales.
The audiences of these series are hardcore fans. They could market the allure of a big-screen and the opportunity to experience the show with other fans. For example the audience for shows like The Walking Dead, Homeland, and many other popular shows is a huge market. Often these shows air on nights that theatres have low attendance. They could market it with discounts offered for customers who come in costume. Another product modification could be the ticket pricing set up. Perhaps they could lower the price of movies after they have shown for a certain number of weeks and charge a premium for tickets upon initial release. This would maximize initial sales for new releases to those customers who will come see a new movie on the first week to three weeks of a release. These consumers do not want to wait for DVD release and want the big-screen experience so why not charge a smaller premium for these ticket sales? You would have to be careful not to charge too much or consumers will simply not come, the premium has to make sense.
On the flip-side of new release is the issue of studios having shorter time windows between theatrical releases and DVD release. To help capture those consumers who didn’t go to the theatre for the initial release and may decide to wait until the DVD, you could lower the ticket price for pictures that have been out for more than four weeks. By doing this consumers may be willing to spend slightly more than a DVD rental to see the movie sooner and on the big-screen. Ideally, all of these patrons will also spend money at the concession stand where profit margins will help make up for the lower ticket price. Overall this option may not increase revenue but it will increase attendance. These are all low-cost ideas that can help to utilize the resources that exhibitioners already have to generate more ticket sales and promote purchases of the higher profit-margin items. There is not much they can do about the way studios operate or the costs associated with their distributors and their dependence on them but they can do things within their markets to help drive revenue.
John A. Pearce II, R. B. (2013). Strategic Management. New York: McGraw-Hill. Theatrical market statistics 2012. (n.d.). Retrieved from http://www.mpaa.org/Resources/3037b7a4-58a2-4109-8012-58fca3abdf1b.pdf