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“The Movie Theatre Industry” 1. Describe the five competitive forces in this industry. There are many things that the movie industry competes with. However, most extracurricular or leisure activity such as college or professional sports is considered a competitor in the movie industry. Interesting enough, research has found that people who rent and/or buy DVD’s and videos are more likely to attend movies at the theatre than those who don’t rent or purchase. DVD and video rental stores are still a serious competition to the movie industry.
Record movie rentals throughout America have been recorded by such giants as Netflix, Blockbuster and Wal-Mart. Customers seem to be attracted to “no late fees”, low cost renting, and the personal convenience of watching a movie in the comfort of their own home. Sales of DVD players has also risen with a record 80% of US households reportedly owning one of these devises. With more people spending time at home and with family, as well as more Americans watching what they spend, it is sensible that more and more households would embark upon purchasing another convenience item such as a DVD player.
Also, with the average price down to around $100. 00, it is logical that the DVD player will only become more popular. Home theatre systems have also made a large impact on the theatre industry. In 2005, this technological advancement was the most sought after electronic system for new homes. It seems that consumers have finally said no to the rising price of movie tickets and concession stand snacks and beverages. Furthermore, with the introduction of high definition television (HDTV), picture and sound quality in a confined cozy living room is a better attraction than that of sometimes loud and crowded theatre seating.
Cable and Satellite Television has also made its mark on the industry. Between 2002 and 2006, cable TV subscriptions grew 17%. In the US alone, there are over 9,000 cable providers supplying more than 400 television stations to viewers. There are also numerous supplement packages available to customers including pay-per-view and recordable programming. Another impact comes from the movie industry itself. Major movie studios are now releasing “direct-to-DVD” titles of recent movies to satisfy consumers.
New Line Home Entertainment’s Kevin Kaska tells us, “There’s just not enough time in the day to get out to the theatre. We offer people more titles and they can stay home” (Hellriegel, 2008, p. 146). Analysts have found that move studios can increase profits by releasing movies in the theatre and on DVD simultaneously. 2. Is this a good industry to enter? Explain why or why not. While revenue and profit margins may be high compared to retail and food and beverage industries, there seems to be much uncertainty with the future of theatres throughout America.
Since market research has shown the four major areas of concern among moviegoers are the film itself, theatre locale, movie show times, and the cosmetics or quality of the theatre, it only makes sense that any type of theatre new construction would entail extensive financial backing and a great location to build. Major theatre corporations control more than 50% of all movie screens. Additionally, the last decade has seen countless mergers and acquisitions within the arena.
With this monopolization in mind, it seems the movie industry will be controlled by only a few theatre corporations in the future. Reducing the number of screens per theatre building could bring in more viewers per show but I doubt that it would be feasible considering our demand for multiplex theatres and variety. The consumer seems to like movie variety and selections but doesn’t like paying the price for it. It is a good industry to enter if you have the funds at present. I don’t think movie theatres will go by the wayside the way the outdoor drive in theatre did.
However, I do think that downsizing and new construction slow-downs will come to play within the theatre industry in the near future. 3. How have demographics affected this industry? Demographics have affected a variety of things including the proximity of other nearby theatres, box-office ticket estimations, advertizing, and timing of new releases. It seems timing tends to be a major factor throughout the industry. When a movie is released and how it is advertized or promoted can make a world of difference in exposure and ticket sales as well.
Ticket prices are also determined by location, among other things. Concession sales and profits are also dependant on the area and location of the movie theatre. However, in some regions, AMC in particular, entered a joint venture with Frito-Lay, Burger King and Ben & Jerry’s in allowing outlets in some of their theatres to increase concession profits. Reference Hellriegel, D. , Jackson, S. E. , and Slocum, J. W. , Jr. (2008) Managing: A competency-based approach (11th ed). Mason, OH: South-Western College Publishing. ISBN 0324421400