1) Case: Cineplex - A Blockbuster Success
In an era of free downloaded music, games and movies, the theatre industry has faced
some unique challenges. Clearly, customers don’t have to visit the theatre anymore to be
entertained. In 2012, Cineplex reported flat attendance. While the same number of people
came to the theatre, there wasn’t any new growth despite an increase in the country’s
population. Some observers have speculated is this the end of an era? How does a movie
theatre stay in business with rising costs and free or low-cost substitutes?
In the last few years, Cineplex has been trying to find new ways to entice customers back
to the theatre by offering new perks and creating a new experience that has been different
from the past.
In 2012, Cineplex began converting its theatres to all-digital delivery in order to reduce
upgrading costs for older technology and to improve the overall sound quality for its
customers. But Cineplex didn’t stop there. Cineplex wanted to change the way people
thought about and experienced the theatre. Cineplex introduced VIP theatres including
reserve seating, enhanced menus, valet parking and an in-seating beverage service. To
reflect these premium services, Cineplex has also changed its ticket prices. The greater
the service, the higher the price. Indeed, 29 per cent of Cineplex’s revenue came from
these premium services. For example, Cineplex also introduced a $50 SuperTicket, which
would include admission to a movie and allow a digital download of the movie at a later
date. Many film distributors such as Warner Bros., Universal Pictures, Sony Pictures and
Paramount Pictures agreed via contracts to participate in this initiative. The downloaded
version would become available around the same time of the DVD version release. This
digital copy would be also be available in Ultra Violet which would allow the movie to
be downloaded and watched on a variety of devices such as desktops, tablets and
smartphones.
President and Chief Executive Officer Ellis Jacob stated in an interview with the
Canadian Press, “The world is changing, the technology is changing…people want things
instantly and they want to be able to watch them on different devices. This provides them
with all those options.” Clearly, Cineplex is looking for new ways to increase home
entertainment sales as the popularity of physical media has begun to fade. Indeed, this is
a new way for the theatre industry to compete with video-on-demand services and other
forms of entertainment.
By 2013, Cineplex purchased a digital signage business called EK3 Technologies Inc. to
diversify and expand its business into a wider media company. EK3 Technologies Inc.
has a long client list including customers such as Walmart, Target, Tim Hortons, Rogers,
Scotiabank and McDonalds.
Test Bank for Karakowsky and Guriel, The Context of Business, 1e
Copyright © 2015 Pearson Canada Inc. 1
, Another strategic move by Cineplex involved an acquisition. In 2013, Cineplex paid $200
million and acquired 24 Empire theatres in the Atlantic provinces and 2 Empire theatres
in Ontario. This change gave Cineplex a new presence in Eastern Canada and resulted in
it becoming a truly nation-wide theatre chain. While there were some Empire theatres
purchased by another company, clearly, this acquisition by Cineplex had eliminated even
more of its competitors.
Many smaller theatres across Canada have already closed their doors due to rising costs
and tougher competition. Vancouver’s Hollywood Theatre is one theatre that was set for
redevelopment, but many community organizers argued it should be saved as a historical
site. In other parts of the country, some community members have even tried to keep
small theatres open and operating. The Kingsway was one example. The Kingsway was
one small Toronto theatre that had closed its doors for 2 ½ years and finally re-opened
after much needed updates. The single-screen theatre now operates to a niche set of
customers who prefer the more small intimate-theatre setting, over the much larger chain
enterprises, but some observers wonder for how long?
In 2013, Cineplex, reported its strongest quarterly profit and revenue in its history. In its
second quarter, Cineplex announced $301.6 million in revenue, compared to $263.7
million in the same period in the prior year.
Cineplex, now the largest movie theatre chain in Canada holds 78% of the market, and
has joined the ranks of other Canadian companies with annual revenues over a billion
dollars.
What will Cineplex be up to next? Cineplex is considering selling its theatre popcorn and
Outtakes food brands in retail stores. According to Jacob, “We have 72 million people
coming through our doors. There’s nothing to stop us from marketing those brands in the
theatre and eventually taking them to shopping malls.”
Read the case “Cineplex: A Blockbuster Success” and answer the following questions:
Identify and discuss Cineplex’s current business-level strategy. Is it working why or why
not?
Answer:
Cineplex’s business-level strategy appears to be a differentiation strategy. It is no longer
just offering the customer the service of playing a movie.
In 2012, Cineplex began converting its theatres to all-digital delivery in order to
reduce upgrading costs for older technology and to improve the overall sound
quality for its customers.
Cineplex introduced VIP theatres including reserve seating, enhanced menus,
valet parking and an in-seating beverage service.
Test Bank for Karakowsky and Guriel, The Context of Business, 1e
Copyright © 2015 Pearson Canada Inc. 2
In an era of free downloaded music, games and movies, the theatre industry has faced
some unique challenges. Clearly, customers don’t have to visit the theatre anymore to be
entertained. In 2012, Cineplex reported flat attendance. While the same number of people
came to the theatre, there wasn’t any new growth despite an increase in the country’s
population. Some observers have speculated is this the end of an era? How does a movie
theatre stay in business with rising costs and free or low-cost substitutes?
In the last few years, Cineplex has been trying to find new ways to entice customers back
to the theatre by offering new perks and creating a new experience that has been different
from the past.
In 2012, Cineplex began converting its theatres to all-digital delivery in order to reduce
upgrading costs for older technology and to improve the overall sound quality for its
customers. But Cineplex didn’t stop there. Cineplex wanted to change the way people
thought about and experienced the theatre. Cineplex introduced VIP theatres including
reserve seating, enhanced menus, valet parking and an in-seating beverage service. To
reflect these premium services, Cineplex has also changed its ticket prices. The greater
the service, the higher the price. Indeed, 29 per cent of Cineplex’s revenue came from
these premium services. For example, Cineplex also introduced a $50 SuperTicket, which
would include admission to a movie and allow a digital download of the movie at a later
date. Many film distributors such as Warner Bros., Universal Pictures, Sony Pictures and
Paramount Pictures agreed via contracts to participate in this initiative. The downloaded
version would become available around the same time of the DVD version release. This
digital copy would be also be available in Ultra Violet which would allow the movie to
be downloaded and watched on a variety of devices such as desktops, tablets and
smartphones.
President and Chief Executive Officer Ellis Jacob stated in an interview with the
Canadian Press, “The world is changing, the technology is changing…people want things
instantly and they want to be able to watch them on different devices. This provides them
with all those options.” Clearly, Cineplex is looking for new ways to increase home
entertainment sales as the popularity of physical media has begun to fade. Indeed, this is
a new way for the theatre industry to compete with video-on-demand services and other
forms of entertainment.
By 2013, Cineplex purchased a digital signage business called EK3 Technologies Inc. to
diversify and expand its business into a wider media company. EK3 Technologies Inc.
has a long client list including customers such as Walmart, Target, Tim Hortons, Rogers,
Scotiabank and McDonalds.
Test Bank for Karakowsky and Guriel, The Context of Business, 1e
Copyright © 2015 Pearson Canada Inc. 1
, Another strategic move by Cineplex involved an acquisition. In 2013, Cineplex paid $200
million and acquired 24 Empire theatres in the Atlantic provinces and 2 Empire theatres
in Ontario. This change gave Cineplex a new presence in Eastern Canada and resulted in
it becoming a truly nation-wide theatre chain. While there were some Empire theatres
purchased by another company, clearly, this acquisition by Cineplex had eliminated even
more of its competitors.
Many smaller theatres across Canada have already closed their doors due to rising costs
and tougher competition. Vancouver’s Hollywood Theatre is one theatre that was set for
redevelopment, but many community organizers argued it should be saved as a historical
site. In other parts of the country, some community members have even tried to keep
small theatres open and operating. The Kingsway was one example. The Kingsway was
one small Toronto theatre that had closed its doors for 2 ½ years and finally re-opened
after much needed updates. The single-screen theatre now operates to a niche set of
customers who prefer the more small intimate-theatre setting, over the much larger chain
enterprises, but some observers wonder for how long?
In 2013, Cineplex, reported its strongest quarterly profit and revenue in its history. In its
second quarter, Cineplex announced $301.6 million in revenue, compared to $263.7
million in the same period in the prior year.
Cineplex, now the largest movie theatre chain in Canada holds 78% of the market, and
has joined the ranks of other Canadian companies with annual revenues over a billion
dollars.
What will Cineplex be up to next? Cineplex is considering selling its theatre popcorn and
Outtakes food brands in retail stores. According to Jacob, “We have 72 million people
coming through our doors. There’s nothing to stop us from marketing those brands in the
theatre and eventually taking them to shopping malls.”
Read the case “Cineplex: A Blockbuster Success” and answer the following questions:
Identify and discuss Cineplex’s current business-level strategy. Is it working why or why
not?
Answer:
Cineplex’s business-level strategy appears to be a differentiation strategy. It is no longer
just offering the customer the service of playing a movie.
In 2012, Cineplex began converting its theatres to all-digital delivery in order to
reduce upgrading costs for older technology and to improve the overall sound
quality for its customers.
Cineplex introduced VIP theatres including reserve seating, enhanced menus,
valet parking and an in-seating beverage service.
Test Bank for Karakowsky and Guriel, The Context of Business, 1e
Copyright © 2015 Pearson Canada Inc. 2
