— Read: Case Application #2 Not Sold Out on pages 60-61 from the book: “Funda
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— Read: Case Application #2 Not Sold Out on pages 60-61 from the book: “Fundamentals of Management, EleventhEdition, Robbins, DeCenzo, Coulter,” ( on the page below it is the Case)
— Afterward, answer the following two questions:
1. According to the case, what external trends do managers at the movie theater chains have to deal with?
2. How do you think these trends might constrain decisions made by managers at the movie theater chains?
******You must use at least one quote from the textbook: ” Fundamentals of Management, EleventhEdition, Robbins, DeCenzo, Coulter,” cited properly (including page number)******
——Case Application #2 Not Sold Out—————————————————————
Topic: External environment/trends
Competitors in the movie theater industry had hoped that they were through the challenges they’d faced during the economic downturn. Box office revenue (the amount of money generated through movie ticket sales) has been on a roller coaster: 2014, it was $10.36 billion; 2015, $11.13 billion; 2016, $11.38 billion; and 2017, $11.07 billion.60 The numbers of people going to see a movie continue to stall. So, the industry has tried to pump up revenue with high-profile movies, higher ticket prices, and premium amenities.
The number of movie screens in the United States totals a little over 40,000.61 Together, the three largest movie theater chains in the United States account for almost 25,000 screens—and a lot of seats to fill. The largest, AMC Entertainment (based in Kansas City, Missouri) has 11,247 screens, Regal Entertainment Group (based in Knoxville, Tennessee) has 7,315 screens, and Cinemark (based in Plano, Texas) has 5,957 screens. The rest of the screens are owned by smaller, regional companies. The challenge for these companies is getting people to watch movies on all those screens; a decision that encompasses many factors.
What WILL get customers into movie theaters?
One important factor, according to industry analysts, is the uncertainty over how people want their movies delivered, which is largely a trade-off between convenience and quality (or what the experts call fidelity experience). Will consumers choose convenience over quality and use mobile devices such as iPads? Will they trade some quality for convenience and watch at home using streaming services on surround-sound, flat-screen, high-definition home theater systems? Or will they go to a movie theater with wide screens, high-quality sound systems, and the social experience of being with other moviegoers and enjoy the highest-fidelity experience—even with the inconveniences? Movie theater managers believe that mobile devices aren’t much of a threat, even though they may be convenient. On the other hand, home theater systems may be more of a threat as they’ve become extremely affordable and have “acceptable” quality. Although not likely to replace any of these higher-quality offerings, drive-in theaters, analysts note, are experiencing a resurgence, especially in geographic locations where they can be open year-round. The movie theater chains are also battling IMAX Corporation for customers as movie screens get bigger and bigger. The number of these oversized screens built by the three largest theater companies has grown to the point where it almost equals the number of IMAX locations. The movie theater chains have invested in these formats because it can add several extra dollars to the ticket price, resulting in increased revenues.
Another factor managers need to wrestle with is the impression consumers have of the movie-going experience. A consumer lifestyle poll showed that the major dislike about going to the movies was the cost, a drawback cited by 36 percent of the respondents. Other factors noted included the noise, uncomfortable seats, the inconvenience, the crowds, and too many previews/commercials before the movie.
A final question facing the movie theater industry and the major film studios is how to be proactive in avoiding the problems that the recorded music industry faced with the illegal downloading of songs. The amount of entertainment streamed online (which includes both music and video) continues to experience double-digit growth. The biggest threat so far has been YouTube, which has become a powerful force in the media world with owner Google’s backing. But now Amazon, Netflix, and other competitors are flexing their movie muscles as well. To counter that threat, industry executives have asked for filtering mechanisms to keep unlawful material off these sites and to develop some type of licensing arrangements whereby the industry has some protection over its copyrighted film content.
Given these factors, what are the movie theater chains doing? They’re finding ways to make the movie-going experience something special by providing expensive presentation formats that can’t be replicated or accessed in the home, comfortable surroundings (think reclining seats and blankets plus gourmet food brought to you), valet parking, babysitting, beefed-up concession stands, virtual reality pods, and so forth.62 These are just some of the ways that movie theaters are working to keep their seats filled.