Review trends in the general Theatre environment
Many forces exist in the movie film industry. For example, exhibitors have invested an estimated $1.6 billion since 2005 to converting theatres to digital projections. The benefit of digital projection is that there is decreased cost in distribution. Also, it has the capability of showing alternative content and has 3D capabilities. Despite the enormous amounts of investment made, exhibitors are yet to make financial benefits because the attendance has been decreasing. The domestic economic sector still faces unstable conditions, and this has continued to exert financial pressure on consumers.
Americans remarkably spend a lot of time which is estimated to be around 40% on entertainment. One of the most popular forms of Entertainment in America is watching movies though this should be viewed as a plus for the exhibition industry. The reality is opportunities of seeing movies outside cinemas have increased drastically. Also, the average rate of film attendance has been falling
Competitive forces in the exhibition industry environment
The leaders in the exhibition sector are much diversified and face a very little threat to their market position from new entrants. However, there are emerging technologies that are helping to change the competitive environment thus increasing the competition. There are many alternative methods of viewing films. Also, consumer demands are shifting and tilting towards online entertainment platforms and the mobiles. Moreover, the cost of cinemas is high, and this has created concern and challenge due to the current economic conditions
Perform similar situation and strategy analysis four the four companies with the largest market share
The major film companies are Regal, AMC, Cinemark and Carmike. The value chain analysis for the four is similar in many aspects with little differences. All of this four movie theatres obtain equipment needed to show a film. This includes buying the movies, and the devices necessary for the films to be viewed. The differences include, for example, Regal Cinema primary focus is on a mid-size market and uses megaplexes and multiplex which accounts for an average of 12 screens per location. The advantage of using megaplexes is that it attracts viewers because most are attracted to seeing films in great halls (Wozniak, 2013).
AMC, on the other hand, concentrates on urban areas and those with large populations. Mostly, it focuses on 3D, IMAX, which has helped the company achieve the highest prices of a ticket which average at around $9.04 (Wozniak, 2013). Cinemark and Century brands serve smaller markets and even operate as the only theatre in over 80% of its market. The fact that it operates in smaller dimensions has made it have significant disadvantage making its ticket prices to be lower when compared to the other major chains. Carmike, on the other hand, serves small to mid-sized markets, and population it targets is less than 100,000. The disadvantage of Carmike is that it offers very few alternative entertainment options and have fewer screens.
Evaluate revenue sources and significant costs for distributor
Exhibitors’ primary sources of income are the box office receipts, advertising and concessions. The sale of tickets accounts for 2/3 of revenues for exhibitors. However, the profit is slight because of the power of the studios. The earnings retained by theatres increase weekly, for example, the first weeks of showing 80-90% gross profit goes to studios. Advertising revenue has been increasing because exhibitors have concentrated in this area, to compensate for the small margins from ticket sales. Concessions, on the other hand, account for nearly 30% of revenues, and it is sometimes the only source of profit for exhibitors. It is influenced by pricing, attendance and material cost.
Summary
The four companies should consider international expansion as one of their largest and top priorities. Also, the companies should consider a strategy of partnering together and even starting their independent movie studios to improve their performance in the market. Regal, which still only operates within the US, should consider expanding its business to Canada, and all the four should diversify their operations and even include dining amenities in all locations.
References
Wozniak, K. (2013). Vertical restraints in the movie exhibition industry. New York University, Graduate School of Business Administration.
