Small Movie Theater-Industry Analysis - Research Paper Example

SMALL MOVIE THEATRE Affiliation SMALL MOVIE THEATER Industrial Review The industry averages for profitability for my market place for the small movie theatre are as follows: 25% structural risk, 25% growth risk and 50% sensitivity risk (IBISWorld, 2015). The movie theater industry is predicted to have an overall risk of Medium-Low over 2015. This is due to the favorable movements in the disposable incomes among the people as well as the number of broadband connections. The structural risk is estimated to be medium-low. There is however a very high level of competition in the move theater industry. This makes the businesses concerned to incur expenses differencing their products and services from those of their competitors as well as keeping their prices low in order to attract customers. This will eventually lead to a decrease in the amount of revenue that these businesses fetch. Their profit margins will also be lower. The existing movie theatre industries are likely to benefit from an increase in the barriers to entry. This means that new players to the industry will find it very difficult to enter the market place. Given the analysis, it is very clear that the idea of New Vision Movie Theatre is likely to fail. Being a new player in the market place and given the expected increase in the barriers to entry, it will be very challenging for it to survive. Losses are likely to be incurred as the research industry averages for profitability are very low for a new player in the market place. Growth risk is expected to be medium over the outlook period. It is predicted that the annual industry income is likely to increase by 1.3%. This predicted rise in the growth risk is very minimal and it will be extremely challenging for new players in the market place to keep up with it. The sensitivity risk on the other hand is expected to be low as compared to the previous year in which it was medium. It is expected that the per capita disposable income rise will decrease in the coming year (IBISWorld, 2015). This means that a small movie theatre industry would be a great business idea that is likely to flourish given this kind of prediction. This is because people will be in a position to spend more on leisure activities like going to watch movies in the movie theaters. The risk factor of external competition is however expected to remain constant. This shows that people will still prefer to view movies at their homes using the available entertainment products such as cables, satellite television and online streaming platforms. People would prefer to watch movies at the comfort of their homes instead of going to the movie theatres. A small movie theatre may not be a viable idea if this risk factor is in place. The number of broadband connections is also expected to rise in the coming year (IBISWorld, 2015). This still means that people would opt to stream and watch movies online. However, the technological changes such as 3D projections in movie theatres will increase the demand for the movie theatres. This is because the 3D movie projection is an experience that can only be gotten from the movie theatres. With this structural risk, growth risk and sensitivity risk analysis, it can be clearly noticed that the validity of a small movie theatre is extremely low. It is therefore necessary for changes to be made if a small movie theatre is to be a viable business. Regulation Review and Legal Concern The location of my small movie theatre business is in Williamsburg, Brooklyn. The business environment is an old warehouse. The form of business that I will set up is LCC. This is because LCC business form has various taxation benefits that are not available to the other forms of business. There are various legal, zoning and licensing concerns that the small movie theatre will have to face. Firstly, it will have to comply with all the legal requirements for the setting up of a small movie industry. This will be as contained in the relevant laws and regulations governing the setting up of small movie theatres and the screening of movies in them. The zoning requirements indicate that the small movie theatre will have to be located in a place that has been legally prescribed for movie theatres. A proper identification of the location is therefore an important factor to consider before setting up this type of business. All these requirements will have to comply with those laid down in Brooklyn. There are general zoning restrictions applicable to all movie theatres, whether small or large. These restrictions pertain to the regulations in regards to specific land uses as identified in a particular region. The small movie theatre will therefore face zoning restrictions depending on the contents of the movies that they will be showing. The restrictions will differ depending on whether the contents are for the general view of both young and adult persons or only restricted to adult persons (Merritt Movie Theatre, 2014). It will also have to get the required licenses from the relevant authorities in order to show the films. There are various types of licenses that can be obtained. The common types of licenses are the most appropriate license for your venue that allows you to screen films and a screening license to show the movie. All these licenses have to comply with the relevant laws and regulations of the location in which the small movie theatre is to be set up. It is of paramount importance that both the venue and the film are properly licensed. This is because it is against the law to screen films without the correct licenses as per the relevant regulations. The old warehouse that is located in Williamsburg, Brooklyn will therefore have to be licensed as it is the venue in which the small movie theatre will be showing its films as well as offering party packages for birthday parties, movie theme parties and playoff parties with big screen for sport funs. This type of a license is known as a premises license. The screening license to be obtained is known as a theatrical license as the small movie theatre will be located in a venue whose sole business is to show films to the public audience. This type of a license is usually paid for after the movie to be shown has been screened. A commercial license is also required. This type of a license ensures that the owner of a small movie theatre can screen films to the general public as well as advertising the screening in the public. It also enables one to charge for the tickets to the movie viewers in advance. With this type of a license, the owner of the small movie theatre can also obtain sponsorship for the screening. He or she can equally be in a position to screen their adverts. Other types of licenses that might be needed are a performing rights society license which will cover the music featuring in the soundtracks of the movies shown and a temporary event notice license if there is need for the sale of alcohol during the screening of the movie/film (Moneo, Basualdo, Findlay & MacDermott, 2008). Competitive Analysis The competitive landscape will be based on both internal and external competition. The key competitors are the large movie theatres in the market place. They would be competing in the offering of films and concessions (IBISWorld, 2015). They would also be competing in the prices that they set for their tickets as well as the quality of their auditoriums (Merritt Movie Theatre, 2004). These competitors have both strengths and weaknesses. The biggest strength is the popularity of the films that the large movie theatres feature as compared to those of small movie theatres. They would also have a higher chance of securing a license to exhibit a season’s biggest hit as well as featuring 3D movie. The only weakness that these competitors would be having is setting high prices for their tickets which are likely to hinder movie viewers from going to them (Moneo, Basualdo, Findlay & MacDermont, 2008). It is also noteworthy that large movie theatres have a large market share as compared to the small movie theatres. New Vision Movie Theatre can take the market share that they own by setting low prices in first release movies so as to attract more movie viewers. They would also include other offers in addition to the movie ticket, for example, the offering of drinks and popcorns at a discount. If the small movie theatre is successful, the large movie theatres and other competitors are likely to stop their success by creating and expanding customer loyalty programs. Some of these programs would be like the Regal Crown Club that offers concessions to their movie viewers on the purchases that have been made. They would also stop the success of the small movie theatre by making improvements and expanding their offerings so as to attract new movie viewers as well as retaining the ones that they already have. The indirect competitors to this proposed small movie theatre would be home theatre systems and DVD players. This type of competition would also arise from the streaming of movies online, use of video game consoles as well as through sports. These indirect competitors reduce my prospects of setting up a small movie theatre. This is due to the fact that they will be competing with my movie theatre for a share of the disposable income from households that is spent on entertainment. They also reduce the demand for movie theatres as movie viewers are more comfortable watching the movies that they want from their television sets, smartphones or computers instead of going to the movie theatres. The indirect competitors also offer me other prospects, for example they would be going after my customers through the offering of DVD purchase offers at low prices. They would also be offering digital broadcasts and to keep up with the competition my small movie theatre will also have to have a digital cinema as expensive as it may be. SWOT Analysis My company’s major strengths are that it is a cheaper option for families and entertainment is always in demand even in recession. Other strengths are the unique experience that it will be offering to the movie viewers as they will not only be watching movies but they can also hold their parties and events in that venue. The movie viewers are also in a position to be afforded the privacy that they require. It is also important to note that the entertainment industry is expanding rapidly and the opening up of a small movie theatre will be strength in its own right. The weaknesses however are that the profits obtained in a small movie theatre are less as compared to those obtained in large movie theatres and studios. Small movie theatres are also run by conglomerates forcing them to closing (Hempstead, 2012). The advertising powers and the offer of concessions by small movie theatres are equally low as compared to the large movie theatres. Other weaknesses are that the ticket prices are quite high and the theatres will not always be booked. There are also safety concerns to the movie viewers and the presence of numerous competitors both from the direct and the indirect competitors. These small movie theatres have the opportunity of expanding either locally or internationally. They also have the opportunity to offer different programs such as sports, musicals and plays instead of featuring only movies. They also have the opportunity to develop 3D capabilities with technological improvements as well as do research work to improve the prevention of piracy. The other opportunity is that there are a growing number of theatre enthusiasms which means that the small movie theatre is likely to get customers to view its movies. The small movie theatre can also make internal improvements in order to change the demands and preferences of its customers and therefore attract more customers. Apart from this, the small movie theatres have a chance of getting niche markets like independent films, classic films and film festivals. The small movie theatre can also make changes that will help to weaken its competitors or even better enough lead to their closure (Bowser, 1990). The threats facing the small movie industry is the fact that there is no longer need for people to go to the movies as they can watch them on different platforms from the comfort of their homes. There are also other forms of entertainment apart from movies which offer new competition to the small movie theatre. There would also be novel options that will make prospects fill the need that the product offered but the small movie theatre addresses in a whole new way, for example online buying or new technologies that decrease the need for the offering of the small movie theatre (Hempstead, 2012). It is also a threat that the old competitors would be improving or expanding their offerings (Moneo, Basualdo, Findlay & MacDermott, 2008). Other threats would be the immense saturation experienced in the movie theatres, competitions from well-established movie theatres; online streaming of movies and the changing views of consumers that going to the movie theatres is quite expensive. These strengths and opportunities can be used to mitigate the threats and weaknesses by offering creative advertisements and developing brand loyalty (Bowser, 1990). References Bowser, E. (1990). The transformation of the cinema, 1907-1915. Berkley: University of California Press. Hempstead, N. Y., (2012). Market feasibility overview: Movie theatre. Community Land Use + Economics Group, LLC. IBISWorld, (2015). IBISWorld industry risk rating reporting: Movie theatres in the US. Merritt Movie Theatre, (2014). Business plan. Merritt: Merritt Community Cinema Society Moneo, C. Basualdo, M., Findlay, I.M & MacDermott, W. (2008). Broadway theatre membership assessment. Community-University Institute for Social Research Read More