3. (1980s) (2006) (1992)
MERCHAN
BIG TOP ARENA RESIDENT
DISE
TOURING TOURING SHOWS
Are show business extensions Diluting its Brand?
IMPLICATION:
• Never had a bad show since we extended out of big-top to different
BRAND VALUE Extension of original show business does not dilute
platforms
Touring Shows and Resident Shows = Most important
brand value so long as full control of creative process &
• Many deal offers since Las Vegas
businesses to Cirque du Soleil.
• Partners allow us to maintain creative & commercial independence
quality is maintained.
• Broader reach and access to new audiences
50 % of
REVENUE 10 % of
40% of Revenues Revenues
BREAKDOWN Largest impact Revenues
on bottom line
Situation Issues & Recommen- Financial KSFs &
Analysis Objectives dations Justification Conclusion
4. Main Businesses Assessment
TOURING RESIDENT
Strategic
Current N. America, Europe, Asia, Concentrated in
Presence Australia, S. America Las Vegas
Alignment with IMPLICATION:
Resident Show = Preferred business for expansion
Mgmt Ongoing tour plans already
in place
Establish permanent foothold
in NY, Berlin, London Sydney
Objectives
beyond management’s current growth strategies.
Financial $20 Million in equipment and Current partner bears this
Initial Capital stage charge
Investment
$100 $150
Ticket Price
$ 30 Million $ 15 Million (Joint burden)
Operating Cost
Situation Issues & Recommen- Financial KSFs &
Analysis Objectives dations Justification Conclusion
5. Resident Business: Strategic Growth Options
Adding shows in Enter New Diversification out
existing markets geographic of show business
markets
Low Risk of
HIGH LOW LOW
Cannibalization
Early Market EARLY EARLY
MATURE
Development Stage Greater Room for growth Greater room for growth
Ability to Capitalize
on Core HIGH HIGH LOW
Competencies
High Market
HIGH LOW LOW
Understanding
Ability for Strategy Minimal: Ongoing
Lacks clear
No longer
Refinement Implementation with intended
market expansion
strong partnership strategy for
strategy
contract management
Situation Issues & Recommen- Financial KSFs &
Analysis Objectives dations Justification Conclusion
6. Resident Business: Strategic Growth Options
Adding shows in Enter New Diversification
existing markets geographic out of show
markets business
Risk of
HIGH LOW LOW
Cannibalization
Stage of Market
MATURE Issues:
Key EARLY EARLY
Development
1. Identifying and IMPLICATION:
prioritizing geographic markets
Ability to Capitalize
on Core enter.
to
Entering New Geographic Markets is the preferred expansionLOW
HIGH HIGH
mode to
Competencies develop our should we establish that are
2. What partnerships Resident Show Business.
Market profitable and sustainable?
as HIGH LOW LOW
Understanding
Ability for Strategy Minimal: Ongoing No longer
Lacks clear
Refinement Implementation with intended
market expansion
strong partnership strategy for
strategy
contract management
Situation Issues & Recommen- Financial KSFs &
Analysis Objectives dations Justification Conclusion
7. ISSUES AT HAND
Where We Are Where We Want to Be
Looking to expand to the Resident shows have
resident business, yet lacks a established foothold in
clear market expansion
Market Identification London, New York and
strategy Sydney with identification of
attractive markets for long
term expansion.
Strong partnership with MGM
Mirage, Las Vegas, but is in Secure new partners to
need of an equally Partnership Model support resident shows that is
favourable partnership model as profitable and sustainable
for future growth. as the MGM Mirage deal.
To date, lacks marketing
vehicles to fully reflect Cirque Successfully communicate
du Soleil outstanding quality
Market and develop new show
outside home market. Penetration contents that are creatively
appealing to the new
markets.
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
8. Strategy Overview
Issues 3-Ps Strategies
Geographic Market I.
Identification Pinpointing
II.
Partnership Model
Path Finding
Market Penetration III.
Strategy Penetrating
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
10. I. Pinpointing`
OBJECTIVE: To evaluate and identify the truly right markets for CdS
to grow and expand into over the next five years
Criteria for Market Selection & Prioritization
No. of tourists Growth of Average Importance of
annually tourist traffic Spending entertainment
1 London 15.3M -1.90% $804 Moderate
2 New York High
7.6M 23% $638
High
3 Sydney 1.9M 0.90% $610 High
4 Berlin 2.6M 10.50% $296 Moderate
5 Dubai 6.5M 6.80% $500 High
6 Macau 3.9M 28.7% $513 High
7 High
Las Vegas 1.7M 4.40% $750
High
8 Los Angeles 2.7M 5.50% $620
High
9 Tokyo 2.4M 13.80% $644
8.8M -10.20% $551 Moderate
10 Paris
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
11. I. Pinpointing`
OBJECTIVE: To evaluate and identify the truly right markets for CdS
to grow and expand into for the next five years
Risk Consideration
Risk of quality & brand dilution
1 London
2 New York Add a new show in any new market
3 Sydney Recruitment/Training
4 Berlin Over the next 5 years
Development of content
Management still need to provide
support for the current businesses that
have exponentially grown in size and
complexity
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
12. I. Pinpointing`
OBJECTIVE: To evaluate and identify the truly right markets for CdS
to grow and expand into for the next five years
Proposed Expansion Methodology
1
“Slower” Pace Will only be entering top 3 new markets over 5 years not 4 markets
of Expansion as intended by management
2
“Subsequent” Entering each new market and give enough time before moving on
Expansion to the next market rather than “simultaneous” expansion
3
Launch
“Touring” To test market receptiveness and allow the company to develop
show first understanding of the content that fits each market.
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
14. II. Path Finding
1 London
2 New York Non-Gambling Destination
3 Sydney
Main partnership model with MGM Mirage in Vegas that
has served Cirque well could not be implemented
OBJECTIVE: To develop the new type of partnership model that would be as
successful, profitable, and sustainable as MGM Mirage in new markets
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
15. II. Path Finding
OBJECTIVE: To develop the new type of partnership model that would be as
successful, profitable, and sustainable as MGM Mirage in new markets
Exploring the successful deal of MGM Mirage & CdS
Key 2 features that have made this deal profitable and sustainable:
1
The business of Mirage •Share an exclusive clientele group
•Cirque magnet that draw partnership formed, we need
To and Cirque complementsustainability:for the new type ofthe huge traffic & businesses to
ensure the success and
•Mirage : incur full capital investment of theatre for deal with
come up with the business model that would allow us to most closely replicate the Cirque
each other
MGM that contain these two features
2
•Allow for the full control over the creative content
MGM’s trust in our •which is the crucial engine that drives our show successes
ability to create show
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
16. II. Path Finding
OBJECTIVE: To develop the new type of partnership model that would be as
successful, profitable, and sustainable as MGM Mirage in new markets
Proposed New Partnership
Entertainment Complex
One-stop multi-entertainment entity
that include businesses such as a
large size meeting
convention, hotels, golf
courses, spas, bars and night clubs
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
17. II. Path Finding
OBJECTIVE: To develop the new type of partnership model that would be as
successful, profitable, and sustainable as MGM Mirage in new markets
Proposed New Partnership
Partnership Profile
High-end position
Full control over creativity
Strong Financial capability
Long-term growth potential
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
18. II. Path Finding
OBJECTIVE: To develop the new type of partnership model that would be as
successful, profitable, and sustainable as MGM Mirage in new markets
Potential Partners
Sydney
The Burswood Entertainment Complex : largest in Australia, seven
restaurants, eight bars, a nightclub, two international hotels (a luxury 5-star
InterContinental and a 4-star Holiday Inn), a Convention Centre, Theatre
and the Burswood Dome.
New York
Lincoln Center for the Performing Arts : s a 16.3-acre complex of buildings in
the Lincoln Square neighbourhood of New York City's Upper West Side.
London
The Empire: the largest state-of-the-art electronic gaming machines, two
restaurants, a stylish bar, ice cream parlour, nightclub and VIP room.
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
20. III. Penetrating
OBJECTIVE: To develop clear and effective market penetration strategy to
successfully gain strong foothold in new markets
•need to develop deep understanding of each market +
•contents will be well-receptive by the market and target group
1 Content
“Michael Jackson Show”
&
2 Communication Channels
“Cirque du Soleil:
Movie Trailer
World’s artistic legend
Banners
now showing”
Shows during awards ceremony
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
21. Timeline
I. Pin-Pointing 2011f 2012f 2013f 2014f 2015f
Penetration London NYC Sydney
II. Path Finding
Partner Selection
III. Penetrating
Content
Development
Marketing
Activities
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
23. Cost Estimation
Capital Expenditure (Incremental, $mn)
Internally
Production Cost 90 Generated Fund
Total CAPEX 90
Expenses
Rent 79
Long-term
Theatre Operations 66 Debt
Total Expenses 145
Return NPV $52 mn PBP 2.38 years
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial KSFs &
KSFs & Conclusion
Analysis Objectives dations Justification
Justification Conclusion
24. Key Success Factors
Creativity
and
Talent
Partner-
ship
Understan-
ding of new
markets
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial Conclusion
KSFs & Conclusion
Analysis Objectives dations Justification
Justification
25. Conclusion
Issues Strategies
I. Pinpointing
• Select and prioritize the new
market
Market Identification • Enter into London,
Sydney, and New York
II. Path- finding
Partnership Model • Sustainable model:
entertainment complex
III. Penetrating
Market Penetration • Content development for
new markets
• Marketing communications
Situation
Situation Analysis Issues &
Issues and Objectives Recommen-
Recommendations Financial
Financial Conclusion
KSFs & Conclusion
Analysis Objectives dations Justification
Justification
28. Back-up Slides
Situation Geographic market
Why entertainment complex? Strategy of Exclusivity
Entertainment Complex Creative Process
Cannibalization of adding more shows in Recom1. Risk Analysis
Las Vegas Recom 2. Risk Analysis
Why not touch upon the content? Recom 3. Risk Analysis
What is an entertainment complex? Why is the Entertainment
Why not other partners? Complex different?
Other remaining casino partners
Deviating away from Big Top Touring
Target Customers
Why drop the Arena show?
Promotion
Showgoers – Target
As of April 2008
Key to Success of Cirque and MGM
29. Management Concern: BRAND DILUTION?
1980s 1992 2006
BIG TOP RESIDENT ARENA
TOURING VENUES TOURING
EXTENSION OF SHOW BUSINESS ON FN SIDE:
Revenue Breakdown • Top line contribution: Important Business
of Cirque du Soleil
10% • Even larger share on bottom line
40% Touring
EXTENSION OF SHOW BUSINESS ON BRAND:
50% Resident • Many deal offers and creative &
Merchandise commercial independence
• Broader reach and access to new
audiences
IMPLICATION:
No Brand dilution from diversifying show base out of
big-top touring performances.
31. Assumptions
Assumptions IS % of sales
Disney(non-casino) Creative Royalty 13%
Seats 1650 Rent 12%
Theater Operations 10%
Average Price $ 120
Show Operations 35%
Construction 52 mn
Production 18 mn
Average Performance per Year 48 weeks
Average Performance per Week 10 times
Occupancy Rate 2011 2012 2013 2014 2015
London 70% 75% 80% 85% 90%
New York City 70% 75% 80%
Sydney 70%
• Average occupancy rate is 90 – 95%
33. New Cost Structure
Old New
MGM - Construction Partner - Construction
- 50% production
CdS - 50% production CdS - 100% production
- 13% creative royalty (CdS) - 17.76% creative royalty (CdS)
- 12% rent (MGM) - 12% rent (Partner)
-10% theatre operations - 10% theatre operations
- 35% show operations - 35% show operations
OPM = 30%, 50 and 50 OPM = 27%, 50 and 50
34. 2011f 2012f 2013f 2014f 2015f Cash Flow
Cash Inflow
Tickets
London 66.53 71.28 76.03 80.78 85.54
WACC
New York City 66.53 71.28 76.03
Sydney 66.53 Wd 36%
Total Inflow 66.53 71.28 142.56 152.06 228.10 Kd*(1-t) 7%
We 64%
Cash Outflow ke 12%
Production Cost 18 18 18 18 18 WACC 10%
Creative Royalty 17.65 9.27 27.53 19.77 38.65
Rent 7.98 8.55 17.11 18.25 27.37
Theater Operations 6.65 7.13 14.26 15.21 22.81
Show Operations 23.28 24.95 49.90 53.22 79.83
Total Outflow 73.57 67.90 126.79 124.44 186.67
Net CF - 7.04 3.38 15.77 27.62 41.43
NPV $52.85
PBP 2.38 yrs
WACC Assumption
• From stern.nyu.edu research
• Average from 3,061 firms in entertainment industry
35. Why entertainment
complex?
• Also provide revenues for partner’s other businesses which are
complementing (draws in traffic), not just sharing revenues for our show
• Average spending per customer increases
• Sustainability lies in: business complement sharing of clientele group
36. Entertainment Complex
Sydney
The Burswood Entertainment Complex : largest in Australia, includes a 24-
hour casino, seven restaurants, eight bars, a nightclub, two international
hotels (a luxury 5-star InterContinental and a 4-star Holiday Inn), a
Convention Centre, Theatre and the Burswood Dome.
New York
Lincoln Center for the Performing Arts : s a 16.3-acre complex of buildings in
the
Lincoln Square neighbourhood of New York City's Upper West Side.
London
Casino at the Empire: the largest casino in London and offers 30 gaming
tables, a private poker room and state-of-the-art electronic gaming
machines, as well as two restaurants, a stylish bar, ice cream
parlour, nightclub and VIP room.
37. Cannibalization of adding more
shows in Las Vegas
• Current 7 shows in Las Vegas is not cannibalizing
•Adding more shows will cannibalize each other at certain point
• Overexploitation of creative ideas
• limited location (stages in Vegas)
• Hence, must look into new markets
38. Why not touch upon the
content?
• Already the core competency: creativity
• outstanding stage directors thru the recruitment process
• devoted to research and development/ innovation
39. What is an entertainment complex?
An entertainment complex is an one-stop location, multi
entertainment businesses entity that includes a hotel, golf course, day
spa, several restaurants, bars and nightclubs.
40. Why not other partners?
• Real estate partner will not realize the benefits of increased revenues for
their own businesses
• Only get revenue from share of show ticket revenues less value
proposition for them comparing to the casino, other projects may be as or
more attractive to them
hence, less sustainable
41. Other remaining casino partners
• Already partnered with major casinos
• There are other casino partners however with a much lower traffic
• In the long term, growth through casino that pose lucrative opportunity +
complement our image is limited. Our concern lies in our long term
sustainable growth
42. Deviating away from Big
Top Touring
Concerns:
• not the same experience
• we raised our brand and gained recognition, attract many deals since Las
Vegas
Reasons:
• Core brand value: quality of the show
• Lower Initial investment
43. Target Customers
• High income, mainly adult not children
• Family / Adult theme
• Show content is different according to the locations
45. Promotion
Promotion vehicle
• Cirque du Soleil name rather than the artists
• don’t have to pay huge salaries for famed performers
• can capitalize on its name and leverage to new shows across various markets
46. Showgoers - Target
• Sophisticated
• high incomes
• draw and analyse target profile
• only 20% of showgoers actually stay at casino hotel that hosts the show but
• showgoers drop an average of $30 apiece on dinner or drinks at the hotel
“Cirque du Soleil Effect”
• Increase on ancillary activities of casino
• Cirque has made a clear difference : the NY-NY resort experienced 23%
increase in net revenues due to Zumanity show
• MGM cited increased with visitor traffic generated by Ka at MGM grand, Las
Vegas for boosting slot revenue at that resort by 13%
• Expected traffic from “Love”, 12.5 million for 2006, 25 million EBITDA
47. As of April 2008
6 big top touring shows:
2 in N.A.
2 in Europe
2 in Japan
1 in S.A.
7 resident shows
5 in Vegas
1 in Orlando, Florida
1 seasonal show in NY
4 years deal with Madison Square Garden Entertainment (to produce WinTuk)
Seasonal: every autumn for period of 12 weeks @ Wamu Theater, NY, Madison Square
2 Arena touring shows
1 in Europe
1 in N.A.
48. Key to Success of Cirque
and MGM
•Willingness of Wynn to hand over full creative control
• drawing power of Cirque and effect to increase revenue in other part of MGM’s
business e.g. Ancillary revenue
• MGM Mirage large presence/control in Vegas market and provide Cirque with
extensive access to showgoers
• Cirque has developed deep understanding of Las Vegas market
•MGM sees Cirque as more than just a content provider but truly a partner on every
front
•“Open Book” policy, mutual trust and respect
• profitable model to both: high/premium ticket pricing, huge traffic, lower
investment to cirque, increase MGM’s ancillary revenue (slots and restuarant)
50. Strategy of Exclusivity
• Resists temptation to duplicate productions (no different troupes presenting same
show
• wanna see “o” go to Las Vegas add value to partner
51. Creative Process
• Creativity = cornerstone of its success
• Has always put creativity first reinvested >40% in creative process
• is better positioned than ever to keep its competitive advantage in show business
• chosen not to outsource any activities unwilling to compromise on quality and
artistic integrity
PROPOSED STRATEGY
1. Full control over content creation
2. Creative talent recruitment
3. Maintaining environment that is conductive for creativity generation
52. Recom1. Risk Analysis
• The chosen markets do not response well to Cirque du Soleil
• External factors : Economical factor, recession
•Brand dilution due to overextending the show
53. Recom 2. Risk Analysis
• Partners do not conform with the contract
• Inability to find the partners that fit with the selection criteria
54. Recom 3. Risk Analysis
• Ineffective marketing channels
• The content doesn’t suit well with the market
• Market perception of Cirque du Soleil brand value is not as strong as in home market
55. Why is the Entertainment
Complex different?
• Since this is not a gambling operator like MGM
• Some adjustments will have to be made in terms of revenue-cost structure
• Due to different value proposition under this model
•For MGM, it benefits mainly from not just the share of performance revenue but
also the huge increase in ancillary revenue of its other businesses
•However, for entertainment complex, our partner will be benefiting mainly from
just the share of show performance revenue and less on increase in revenue of
other businesses
- Example: Less Cirque effect on golf course and hotel
Notas del editor
KSF: partner, understanding of new market talent, creativity (content and talent which has alwaysbe the cornerstone of our success
Select and prioritize the new market given consideration the brand dilution effect and overextension successfully identify sustainable partnership model outside of the casino
Maintaining environment for creKSF: partner, understanding of new market talent, creativity (content and talent which has alwaysbe the cornerstone of our success