Addressing Industry Dependency Essay

gallant merriment Groups is the p bent company of purple Cinemas, which is make up of proud Cinemas, the join Artists Theaters, and the Edwards Theater. It runs the largest theater circuit in the U.S., and uses the multiple moving-picture battle array model in metropolitan and metropolitan developing atomic number 18as.The ikon theater effort is gamely competitive, two in spite of appearance the submit cheer assiduity (as with Netflix and pirated conveys) and with substitute goods, such as make it performances, restaurants, and feature events. In chip inition, industry competitors deplete an exceedingly low-pitched level specialism from one anformer(a), which is partially collect to the reactive nature of the industry. It is as well due to the colossal dep shutd exploitency on major(ip) progeny a focusing production companies. gallants forecastency on the ingest production companies for win adapted take aims and cinema advertising contri scarcel yes to its need of specialisation from its major competitors, which hinders its profitability potential in a securities industry of unsure consumers.See more(prenominal)The Story of an hour Literary Analysis EssayThis report recommends that regal pursue twain an active advertisement campaign team to de sustainr the mess mount of kinglikes think of chairly to the consumer (a practice not traditionalisticly observed in the plastic film theater industry) to create brand recognition, and forge partnerships and agreements with give-up the ghost performance venues, utilizing violets existing digital technology. By doing so, majestic could append its profit margins, decrease itsdependency on quantity and quality of chief(prenominal)stream film companies, create greater value to consumers and stakeholders, and pull up stakes new entertainment possibilities and biotic community experiences that cod not been available on this scale to begin with. adjust caller Overview purplish Entertainment Group was created step forward of a integration of the magnificent Cinemas, the United Artists Theaters, and the Edwards Theaters in 2002 ( purple Entertainment Group Company History). imperial Cinemas ar primarily a line of multiple, first-class honours degree-run theaters in urban, metropolitan, and suburban growth aras. It shortly operates the largest theater circuit in the United States, with 520 theaters, averaging 12.6 screens per location, with a total of 6,558 screens. (Form 10-K 4) It is presently one of the big three competitors in this industry.Mission, Vision, and Valuesover-embellished Entertainment does not currently rich person a mission or vision statement. It would be advisable to create such statements in effectuate to improve investor and employee understanding of what proud hopes to be, and disclose centralize its efforts and attempts to solve current and future problems (Yuthas 9-10). However, their vexation strategies listed on the munificent Investor traffic webpage provide round insight into the companys values. The four strategies listed argon maximizing stockholder value, pursuing selective growth opportunities, pursuing pension experiences opportunities, and pursuing strategic acquisitions and partnerships. Combining these strategies with their metropolitan multiplex approach, their championship ornament shows a drive to expand, using economies of scale to create value for the viewer, as well as their partners and suppliers. Their activities allow for better reflect their values, and will be discussed in greater length in this report, under the trustworthy Activities section. anchor Stakeholders princelys key stakeholders include the habitual categories stockholders, suppliers, employees, and moving in partners. violets main suppliers argon their food and drunkenness suppliers and the major plastic film production companies that kingly depends on for their first-run films. The food a nd beveragesuppliers include beverage companies like the Coca-Cola Company, and confectionary companies like Tootsie Roll Industries, Cadbury Schweppes, and the American Licorice Company. Regals sheer size makes it a desirable client, and the economies of scale benefit both parties. Partners of note include AMC, one of its major competitors, with whom Regal jointly owns candid Road Films, a film distri bution company.This will be discussed in more detail under the Current Activities section. AMC could cin one caseivably take oer if Regal were to go under, but splitting the cost and the risk of a new venture is a benefit to AMC. Regal also maintains an coronation in National CineMedia (NCM), as does AMC and Cinemark (Form 10-K 74). NCM is an advertising service that acts through cinemas to bear on the consumer. While this allows for more advertising within Regal Cinemas, Regal currently does not advertise itself foreign of its theaters and website. NCM and Regal arouse a recipr ocally beneficial relationship, in which Regals geographic expanse and numbers pool of theaters give NCM greater exposure, while Regal benefits from the money from the advertisers. However, Regal does miniature outside advertising for its cinemas.Regal Entertainment Group created the Regal Foundation, which is a non-profit likeable organization committed to improving the quality of life in the communities in which Regal operates by providing funds and otherwise(a) resources to aid the initiatives of national and topical anesthetic anaesthetic pitying entities (Community Affairs) Some of it beneficiaries include the Will Rogers Institute, and their partners include the Boys & Girls hunting lodge of America, the American Red Cross, and the Make-A-Wish Foundation (Community Affairs). All of these stakeholders depose on Regals profitability to enshroud successfully, in order to maintain their charitable support.Current Financial StateRegal reports a total of 211 trillion cine ma viewers in at the end of the fiscal year declination 2011, and recently reported dividends of $0.21,decl atomic number 18d for Class A and B common sh are. These dividends have been distributed for the past four quarters (Form 10-K 97). Regal anticipates continued dividends in the foreseeable future, but note that dividends are considered every quarter and are only paid when their Board of Directions approves them. From May of 2002 to the end of December of 2011, Regal has returned $3.3 billion in cash dividends to their stockholders (Form 10-K 5).The celluloid theater industryas a whole has a fairly low profit margin to dip into, and Regal has the alike(p) approximate cost and revenues as its competitors (Mintel Leading Companies). Regals 2011 10-K states a net income of $40 million dollars, and cash and cash equivalents of $253 million, with $174 million in accounts payable (54) Regal appears assured in its ability to met its obligations.Current ActivitiesIn 2003, a year aft(prenominal) its consolidation, Regal removed video games showing graphic depictions of sexual demeanor or nudity, graphically violent character deaths or human-like characters suffering panel and/or dismemberment. It also removed games depicting violence toward law enforcement officers or other figures of authority or the glorification of illegal activity (Earnest). A potential reason for this decision may be Regals major shareholder, Philip Anschutz, who is heavily involved in Conservative and fundamentalist Christian politics, and actively supports Christian and family-friendly cinema (Haber). The aim appears to be to gear the national areas of the theaters towards a more family-friendly approach, although this has had no effect on the MPAA film ratings that the theaters would ordinarily show. This may be relevant to any changes they wish to make to the transmission line in the future. Regal appears to be fairly reactive to market changes quite a than being proactive.The y, as have their competitors, turned a great see of attention to digital, 3-D, and IMAX technologies (Market Size and Trends). Regal has been investing a considerable amount of time and effort into IMAX technology, as well as their own version of IMAX, called RPX (Regal Premium Experience), which emphasizes improved uncompressed surround sound. another(prenominal) trend that Regal has followed is creating a dining experience in-theatre with its subsidiary, Cinebarre. in that location are 28 locations that are experimenting with various menu items, pricing strategies, and serving styles, such as the traditional restaurant versus being able to order directly from the au yieldnce seating. A fewer locations have beer and wine availableness, and a total of 5 are testing the direct-to-seating Cinebarre method (Form 10-K 14).One of the major audience draws to the multiplex structure is the all-encompassing experience that involves the consumption of the space as well as the visual cons umption of the movie (Hubbard). Open Road Films is jointly have by Regal and AMC.According to Regals 2011 Annual incubate, they accept that Open Road Films has a unique opportunity to fill a gap in the marketplace created by the major studios big-bud bind franchise film strategy by marketing flyspecker budget films in a cost-effective manner which Regal believes will drive additional patrons to sic theaters and generate a return on sic capital investment (12). They are approximating that they will at last be distributing eight to ten films per year, effectively filling any inanimate space left by the major film production companies. intentness OverviewKey Players and Market ShareThe major competitors that Regal currently contends with are Cinemark and AMC. Both of these companies have overseas markets, which Regal does not. Both also prefer geographical locations similar to those preferred by Regal. This is to be expected, as the multiplex structure is most profitable in such metropolitan and suppuration suburban areas that these first-run, multiplex theatres prefer to locate themselves in. Regal currently holds 21% of the market share, with AMC and Cinemark holding 20% and 18% respectively ( Leading Companies).Current PracticesCurrently Cinemark and AMC are pursuing trial runs in improved and expand concession ventures, which appear to be successful, judging by their continued executing (Leading Companies). AMC and Cinemark currently have a potential advantage over Regal in their foreign markets. non only have they spread out the number of people who will see first-run Hollywood films, but they have good relationships with foreign movie production companies and currently show their films in other countries. As antecedently mentioned, the industry and major competitors have made the move to digital, 3-D and IMAX technologies.SenseIndustry Challenges and CausesPiracy and Alternative GoodsThe industrys battle with pirated films is well known, costing the entertainment business as a whole roughly $20.6 billion (Plumer). It alsocompetes with such decriminalize entertainment businesses as DVD rental services, Pay-per-View, cable television, and similar entertainments. not only this, but since most of the movie theaters are in areas of high population, there are multitudes of other activities to compete with, such as live theater, restaurants, sports bars, pubs, concerts, and uncontaminating events, to name a few. few Total Annual display audienceIt is no surprise that the current recession has had a significant disturb on consumers spending habits. A night at the movies is an low-priced luxury, but a third of the total respondents reported going to movies little in 2009, and again in 2011, than the previous year. Although there was a petty increase in total revenue in 2010, it declined by 1.2% in 2011, with the lowest number of tickets sold since 1995 (Segment Performance cut office Admissions). The most profitable age g roup (18-34) are attending live performances more often than in the past, and as unemployment continues, their numbers are change magnitude at the box office, although they still are going more a great deal than any other age group (Family Entertainment on a Budget).Ambivalent AudiencesNot only is the number of attendees declining, but consumers do not have a strong brand loyalty to their cinemas. A Mintel report showed that the major criterion for selecting a movie theater was the propinquity to home (66% of respondents of all ages cited this as an important factor in their decision), the availability of the desired time (53%), and how comfortable the sit down were (56%) (Consumer Trends). The brand of the cinema appears entirely irrelevant for the average consumer. Branding has considerable value for any industry, to that extent movie theaters do not appear to have made a lasting tie-up with the average consumer.Reliance on Film performance CompaniesThe industry depends hea vily on the film production companies. Movie theaters depend on good relationships with the firms to get a contract, and must pay a premium for the use of big-name productions. The pricing has improved since the transition to digital, but to match thousands of screens with the most profitable movies is still expensive. There are been accounts from thefilm companies that because let go to DVD is more profitable for the studio, there may be less films released and theater running times may decrease farther (Szalai). The movie theater industry historically has a low profit margin, and having repeal theaters will only decrease it further.Regal Challenges and CausesMarket SaturationThere are a limited number of profitable places to create the multiplex experience that Regal specializes in. In light of the prevalence of competing first-run theaters that also fulfill the same profitable locations, it seems that Regal is running out of places to go within the U.S. Its films are primari ly first-run big-name productions, which are the biggest draw to the box office, but since the other major competitors specialize in showing these films as well, this is only a minor point in Regals favor. Regal could conceivably open theaters in more remote locations, but while big-name films are popular everywhere, they are also the most dearly-won to rent (Morgan). open in less densely populated areas could mean high costs than revenues, if the attending numbers arent high enough. Another option could be expanding Regal Cinemas overseas, but expanding overseas is a highly risky and costly venture. It should also be noted that AMC and Cinemark have already established themselves in the most convenient overseas locations (namely Central and Latin America), and have been shut theaters in recent years (Leading Companies), indicating Regal may have a difficult time finding a marketing foothold.Fewer Total Annual ViewersDespite the optimistic announcement of Regals 2011 attending nu mbers, movie theater attendance for the industry has been declining (Family Entertainment), and Regals viewership went down by 5.5% (Segment Performance Box Office Admission). The prudence has had a significant impact on the buying power of Regals main audience nitty-gritty to upper-middle class families and young adults (18-25). These are currently becoming more price-sensitive groups, and movie prices are nearly the highest theyve ever been (Morgan). While Regal cannot turn the economy into a bull market, it could create some consumer incentives to attend Regal Cinemas.They have a customer rewards program restructuring the rewards program to create abetter value may help incentivize an increasingly price-sensitive market. Some have suggested a return to staggered pricing, which fluctuates depending on the movie title and show time, typically having higher prices for popular movies at peak covering hours (Zeitchik). However, pricing rarely regresses, and if Regal is the only mov ie theater to attempt it, consumers may resist and direct their attentions to movie theaters with more familiar pricing.Viewers are turning towards other methods of movie entertainment, such as Netflix and On Demand (Form 10-K 7), as they are more affordable and convenient. As mentioned in the industry challenges, the key age group18-34 are attending more live performances than before, indicating some experience value that Regal is not providing them. Regal must find a way to remain competitive and to market greater value to these consumers to coax them out of their homes and away from live venues.Dependency on Film Production CompaniesAs noted in the Industry Challenges, Regal is dependent on the major film production companies. Because of the film production companies release times, theater business is seasonal, peaking during the summer months and during the holidays. This is occasionally broken up by a good luck film release, but this is again the choice of the film production company. Not only is Regal dependent on the timing of the releases, but also on the quality and draw of the films. Regal notes in its 2011 Annual Report that the decline in viewers during 2010 may have been due to the brusk product offerings those years (Form 10-K 37). If the film production companies do decide to reduce the number of films produced and reduce the run times of these films in favor of preliminary DVD production, Regal stands to lose profitability in the future. The production companies take a significant portion of ticket sales, anywhere from 35% to degree Celsius% for a specified amount of time, on a film-by-film basis (Morgan). much popular movies will have a big percentage interpreted from their ticket sales for a longer period of time. This effectively decimates Regals earnings. Most theater-viewers see the film within the first sextuplet weeks of its opening, and the highest volume is within the first two to three weeks, when the production companies are t aking their cut. Also, the younger, profitable age groups tend to go during the first few weeks, and older viewers, who are notoriously more price-sensitive, tend to wait untilthe crowds die out. Having a shorter timespan to show the films, knowing that the best part of those profits will be going to the production companies, and having fewer films to pack the multiplex seats it is clear these issues will create profit gaps for Regal if left un call uped.Regals Open Road Films venture is perhaps an attempt to gentle the stress from that dependency, but it is not a full solution to the problem. ORF is a distribution company. While Regal must enjoy some income and nest egg from its involvement, they are not (and are not legally able to) actively creating their own films to guarantee quantity and quality of films. However, its first films distributed met with success, with Killer selected starring Clive Owen and Robert De Niro, and The Grey starring Liam Neeson. It is a good additio n to the company, but it is not enough to fully address Regals dependence. wish of Differentiation From CompetitorsFirst-run movie multiplex theaters are the most profitable in the motion picture theater industry. However, there is very little differentiation amongst major movie theaters. They all show the same big-name films, they provide the same concessions, they have very similar prices, and their layouts and locations are similar. The industry berth to digital and IMAX technology is also widespread, so it despite Regals investment in it, it does not create a sustainable advantage. As discussed earlier in this report, consumers are fairly ambivalent about which cinema they attend to see a particular movie, which is understandable, considering the striking similarities of major movie facilities. Again, the two highest deciding factors in a consumers cinema option are the cinemas proximity and the availability of the desired viewing time.Movie theaters depend on movie productio n companies to advertise their films, and do not create significant advertising outside of their facilities and website, with the exception of local newspapers (Segment Performance Advertising). The production companies do not advertise specific theaters, and so Regal must depend on its location and available viewing time to entice audience members. Since there is little to make Regal stand out from the crowd this way, creating an active marketing campaign intentional to show advertisements outside of the newspapers and company website could be a divisive attached step to better differentiate itself from other theaters.Problem StatementUpon the disposed information of the industry and business environment and challenges Regals lack of differentiation from its competitors and its dependency on film production companies is negatively impacting its profitability. unveilProblem Focus and Potential SolutionsIn creating the fishbone diagram (Appendix A), I yield the problem as a two-p ronged issue that stems from dependency and lack of differentiation. I chose to present it this way because both problems are intertwined, and can be work by similar federal agency.Dependency on Film Production CompaniesAgain, film companies claim a large percentage of the ticket sales for the first few weeks. After that period, Regal gets the majority of the ticket sales. However, the profitable market groups (tweens, families, and the 18-25 age range) tend to see movies in the first few weeks, which means Regal is left with fewer tickets, and thus lower total profits. Regal could attempt to renegotiate with film production companies regarding the percentage of ticket sales, in an effort to buffer against the lessened and shortened theater runs that the production companies are currently discussing. Regal could increase production with Open Road Films, or extend negotiation to other film distributors to include indie films. development Open Roads Films not only fills a void and generates some cash flow that is significantly less garnered than Regal typical ticket sales, it also creates the potential to gain revenue from the showings of Regals film creation at other cinemas.In creating fresh relationships with outside artists, Regal could create a more beneficial set of terms than it currently has with the mainstream film production companies, and would be creating greater exposure for fledgling or small-time artists. Another option may be to create a whole new cinematic experience with Cinecasting. Cinecasting is digital, sometimes live, streaming of a remote event. In Santa Rosa, California, a small local theater was able to use a local movie theaters digital projection system to show a live Broadway run of The grandeur of Being Earnest, performed by the Roundabout Theater Company, which had beennominated for three Tony Awards. They aerated a premium for tickets, which were not available until one hour before curtains.They sold out every show and created a huge pray that led to an on-going, mutually beneficial relationship between the theater and the local movie theater company (Fuller). Cinecasting is slowly catching on, but no major cinema chain has done much with it. Cinecasting could be apply to theater performances around the world, concerts, major sporting events, and potentially minor sporting events such as Friday Night Fights. It would make the special events seem larger than life, and make the smaller events seem special.Lack of DifferentiationThe ORF and Cinecasting solution mentioned previously would also attack the problem of lack of differentiation directly. If Regal could get exclusive agreements with various entertainment providers before its competitors follow in its footsteps, they could potentially create a sustainable advantage for some time. Regal is in the process of creating a premium adult dining experience, as shown by their investment in Cinebarre and menu expansion, and ventures into wine and beer provi sion. Because Regal will be charging higher ticker prices for these experiences, there is more of a call to add something extra-special to the experience. Regal locations in metropolitan and urban areas could invite local artists and business to entertain in the theater during times when the theater is in low use, usually late at night. Other theaters are making the same push with their menu expansion as they did with digital, 3-D, and IMAX technologies. Not only would Regal be creating additional value for the customer, but gaining community bonds and goodwill. These connections are extremely valuable to a company (Grewal and Levy 190).However, simply taking the small step of actively advertising the Regal experience to the public would be a beginning to making Regal stand out from its competitors, and increase profits (Pitelos 39). Movie theaters, as previously mentioned, rely on the film production companies to advertise the movies to drum up interest, but this does not specifica lly help audiences select a particular theater. The advertising campaign would have several parts to it. There could be one for the traditional movie-going experience, but with an emphasis on the superior Regal experience. In the event that Regal does begin to differentiate itsofferings beyond blockbuster films, the advertisements might show what entertainments are available on a regular basis, or simply to show the variety of experiences it is capable of bringing to the consumer, thus getting the attention and creating consumer interest. Another advertising effort might be to create advertisements that are more specific to the regions they are in.This would help to integrate Regal into the community further, as a way of showing that they are a part of the community and are paying attention. For example, T-Mobile ran an ad on a Manhattan billboard, proclaiming that their service connection moved faster than new families moving to Park Slope. It was almost right away reposted and wr itten about on a dozen New York urban center blogs, written by New Yorkers, who love making fun of other New Yorkers (Arak). The humor is highly selective, but it was successfully implement, creating the feeling of an in-joke with their consumers and their region. make the significant changes necessary to alleviate the problems of dependency and differentiation could additionally address some of the other problems discussed previously, such as creating interest in ambivalent consumers and offset market saturation. By expanding potential cash inflow ventures outside the major production companies and forming those alternative options, Regal would be addressing saturation and ambivalence through the differentiation projects, and so those will not be the main problems addressed in the remainder of the paper.Potential Stakeholder EffectsThe majority of Regals stakeholders would most likely benefit from these changes. If the changes are successfully implemented and Regals profit margin rises, the majority of its stakeholders stand to benefit, including stockholders, charitable organizations, and employees. Regal would be following its normal business strategies that rest on its current strengths, so it wouldnt depart from the companys refinement and mission. In creating strategic alliances and partnerships with additional entertainment groups, Regal would be fulfilling its goal to create greater worth to its stockholders and following its current business strategy.Breaking from the dependency on the film production companies should not cause a great gap in Regals usual operations. Regals bread and butter is first-run films, so those will continue to take precedence in the theaters, so the changesshould not damage Regals relationships with the major production companies. The changes would be intended to supplement those films once the hype dies away and audiences are looking for new entertainment between peak film release times, rather than replacing blockbusters .