Cineplex should reinvest in its core theatre business while expanding complementary entertainment services. Major insights include: Exhibition theatres have problems that can be fixed; Cineplex excels at its core competencies; and it can participate in digital distribution but should focus on its core strengths. Recommendations center on improving the theatre experience through reserved seating, loyalty programs, and social media while continuing investments in technology, events, and studio relationships.

1. Team Cinergy
Alaina Boyer, Jay Burke, Brendan Cochrane, Pramod Jindal & Beam Ukarapong

2. Recommendation
Problem
Should Cineplex focus on building its download business or reinvest in its
theatre business?
Recommendation
Cineplex should reinvest in its core competencies within the theatre
experience, while expanding the complementary entertainment services it offers
Major Insights
• Exhibition theatres have problems – we CAN fix them
• Cineplex is REALLY good at its core competencies
• We can PLAY in the Digital sandbox, but…
Fixing Problems Core Competencies Digital Sandbox
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3. Exhibition Theatres have problems – we CAN fix them
Convenience
4-hour outing for a 2-hour movie is inconvenient
Why does this happen?
Need to get there early for good seats and line-up for food
Proposal
CinExpress – a service to reserve your seat, pre-order food & beverage and
pick-up your order from designated line
Costs
• Initial confusion amongst non-reserved seating patrons
• Dedicated staff for express line
• Enhance current website/app/interface to incorporate CinExpress
Benefits
• Higher revenue from increased ticket price (+$2.00/seat)
• Pre-ordered food = guaranteed sale
Fixing Problems Core Competencies Digital Sandbox
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4. Exhibition Theatres have potential – maximize it
Loyalty
Scene Membership card and Loyalty Program: very successful
How to use Loyalty to our advantage?
• Incentivize new members - free upgrades
• Retain members with Milestone Rewards
• Birthday and anniversary promotions
• Expand point-redemption partners
Costs
• Additional free movies
• Loss of 10% concession revenue (Scene discount)
Benefits
• Increased membership: more theatre footfalls and concession spending
• Free word-of-mouth advertising
Fixing Problems Core Competencies Digital Sandbox
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5. Exhibition Theatres have scope for improvement
Social Media Penetration
A Facebook page isn’t enough
Why should this change?
Transition from offline to online social experience
How will we correct this?
Ability to post updates after ticket sales and reviews post-show
Costs
• Programming/development costs
Benefits
• Brand recognition (each auto-generated posting has Cineplex brand
embedded)
• Free social media advertising will reach broader audience & tech-savvy
users
Fixing Problems Core Competencies Digital Sandbox
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6. Leverage our Core Competency: Theatre Experience
Broad Experience
Experience beyond our best movies: complete entertainment experience
Our Proposal
Continue to invest in alternative programming, games, liquor-licensed VIP as well as
non-peak theatre usage
Actions
• Theme nights
• UFC events
• Customized events
Costs
• Licensing, capital expenditures and labour
Benefits
• Increased ticket revenue
• Additional reasons to visit a multiplex
• Increased share of wallet from customized-event clients
Fixing Problems Core Competencies Digital Sandbox
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7. Leverage our Core Competency: State of the art technology
Technology
We have the best technology. Home theatre solutions cannot simulate a real
theatre experience
Proposal
Continue to invest in:
• UltraAVX
• Complete digital screen and 3D projection upgrade by 2012 as planned
• Canadian Digital Cinema Partnership
Costs
• No change from current reporting
Benefits
• Provide enhanced customer experience
• Maintain competitive advantage over digital
Fixing Problems Core Competencies Digital Sandbox
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8. Leverage our Core Competency: Studio Relationships
Studio Relationships
We have the best new movies you can’t find online
Proposal
• Leverage leading market share position to acquire best titles
• Extend relationship to re-release patron favourites
Costs
• No change from current reporting
Benefits
• Maintain competitive advantage over digital
• Preferential treatment and flexibility
Fixing Problems Core Competencies Digital Sandbox
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9. We can PLAY in the digital sandbox
But…
• Non-core business
• High switching costs for legitimate users
• Low switching costs for illegitimate users
• Fierce competition
• In pipeline “UltraViolet”- new technology, same players
Cost
• Advertising costs for brand promotion
• Increased redemption of Scene points (affecting core margins)
Benefits
• Additional revenue stream
• Allows entry into new market
• Leveraging Scene loyalty
Fixing Problems Core Competencies Digital Sandbox
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10. Risks associated with our Recommendations
Overall Risks to the Industry
• Busier life style – not enough free time for movies
• Recessionary fears – reduced leisure budget
Convenience, Loyalty and Social Media
• Customers not receptive to reserved seating  lost revenue
• Potential breach of privacy in Loyalty program
• Maintaining higher service delivery levels
Event Experience
• Additional improvements not aligned with customer values
• Changing customer tastes
• Year without blockbuster movies
Digital Sandbox
• Ongoing piracy concerns
• Competing against new innovations by established digital competitors
• Digital players enter theatre business
Fixing Problems Core Competencies Digital Sandbox
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11. Summary
Recommendation
Cineplex should reinvest in its core competencies within the theatre
experience, while expanding the complementary entertainment services it offers
Major Insights
• Exhibition theatres have problems – we CAN fix them
• Cineplex is REALLY good at its core competencies
• We can PLAY in the Digital sandbox, but…
Fixing Problems Core Competencies Digital Sandbox
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12. Thank you
Q&A
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13. Reserved Seating Cost/Benefit Structure
Reserved Seating Reserved Seating
Brand new chairs $ 300.00 Chair covers $ 35.00
Total Seats to Change 60 Total Seats to Change 60
TOTAL NEW SEAT COST $ 18,000.00 TOTAL NEW SEAT COST $ 2,100.00
Replacement Labour Cost $ 100.00 Replacement Labour Cost $ 100.00
Hours to replace 60 seats 15 Hours to replace 60 seats 15
TOTAL LABOUR COSTS $ 1,500.00 TOTAL LABOUR COSTS $ 1,500.00
GRAND TOTAL COST $ 19,500.00 GRAND TOTAL COST $ 3,600.00
Increased Revenue Increased Revenue
Premium for Reserved Seating $ 2.00 Premium for Reserved Seating $ 2.00
Average Show Rate 4 Average Show Rate 4
50% occupancy 30 50% occupancy 30
75% occupancy 45 75% occupancy 45
80% occupancy 48 80% occupancy 48
85% occupancy 51 85% occupancy 51
TOTAL REVENUE at 50% sales $ 240.00 TOTAL REVENUE at 50% sales $ 240.00
TOTAL REVENUE at 75% sales $ 360.00 TOTAL REVENUE at 75% sales $ 360.00
TOTAL REVENUE at 80% sales $ 384.00 TOTAL REVENUE at 80% sales $ 384.00
TOTAL REVENUE at 85% sales $ 408.00 TOTAL REVENUE at 85% sales $ 408.00
Payback Period Payback Period
Cost/Revenue @ 50% 81 days Cost/Revenue @ 50% 15 days
Cost/Revenue @ 75% 54 days Cost/Revenue @ 75% 10 days
Cost/Revenue @ 80% 51 days Cost/Revenue @ 80% 9 days
Cost/Revenue @ 85% 48 days Cost/Revenue @ 85% 9 days
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14. Scene Membership Growth
Scene Membership
(in millions)
3.5
No. of Members 3.2
3.0
2.6
2.5
2.0
2.0
1.5
1.2
1.0
0.5 0.4
0.0
Q3 '07 Q3 '08 Q3 '09 Q3 '10 Q3 '11
Y/Y Growth 23%
(2010-2011)
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15. Internal Activities and Capabilities
Plane Beakers Boat
Valuable Rare In-imitable
Movies (Exhibition) - showtimes, convenience 3 2 2
Movies (Digital) 1 1 1
Loyalty (Scene) 3 2 3
Merchandise (zoning) 30% 3 1 1
Alternative 3 1 1
Media (ads) 3 2 1
Media (magazine) 2 1 1
Social media 3 1 1
Premium (seats, sounds, VIP) 3 1 2
Interactive (App) 3 1 1
Vendor relationship (food/aeroplan) 3 1 1
Technology (3D/IMAX) 3 3 3
Popcorn 3 1 1
Previews 2 1 1
Partnership (Scotia) 3 3 3
CDCP (Empre) 3 3 3
Night-out package 2 1 1
In-house brand (OutTakes) 2 2 1
Locations 3 3 3
Studio Relationship (having the best movies) 3 2 3
Source:
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16. Blue Ocean Analysis of Cineplex (Current), Cineplex
(Proposed), Cineplex Anywhere and Digital Download
8
7
6
5
NEW-CPX
4
CineAW
3 CPX
Digital
2
1
0
Watch a Price Convenience Great food Great Fun Great social Watch the
recently experience emotional experience movie I want
released experience
movie
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17. 5 forces: Exhibition Entertainment
Substitute – high, and getting worse
• More activities
Buyer – moderate
• Switching costs low, consumer influence mod
Supplier – moderate
• Avatar high, others low
Barriers – High
• Huge Capex
Rivalry – Low
• Cineplex 66%
Source:
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18. 5 forces: Anyway to Watch a Movie at Home
Substitute – High
• Tons of other options
Buyer – Moderate, and getting worse
• Can influence the price (Netflix)
• But there are potential switching costs (Rogers On Demand, buying an Xbox)
• Getting worse because of increasing piracy
Supplier – Moderate
• For legal activities, high
• For illegal, low
Barriers – Moderate
• For legal activities, high
• For illegal, low
Rivalry – High
• Tons of ways to get a movie at home
Source:
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19. Industry Analysis
Exhibition Out of home - Coffee
Entertainment in - Movie - Community
Canada - Plays/operas - Arcades
- Sports events - Nightlife
- Recreational activities - Culture
- Dining - Shopping
- F&F
At home (Electronic) At home (Non-electronic)
- TV - Board games
Anyway to get
- Movies - Card games
movies at home
- Computer - Reading
- Video games - Quiet time
- Music - Exercise
- Internet - F&F
- Social media - Cooking
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