Case Cinemex
Firms and Markets Mini-Case
Wednesdays at Cinemex
Revised: August 28, 2002 In April 2001, Matt Heyman, co-founder of Cinemex, the largest chain of movie theaters in Mexico City, looked out the window of his office and pondered the future of his company. In just seven years, Heyman and his partners had nurtured Cinemex from a student idea into the largest theater chain in Mexico City, but they faced new challenges every day. Many of these challenges came from competitors. For years competitors ran old, poorly-maintained theaters, but in recent months they had begun to imitate Cinemex’s top-of-the-line exhibition venues. Their latest tactic: offering two tickets for the price of one on Wednesdays. Heyman wondered whether Cinemex should offer a similar deal, or instead rely on the Cinemex brand and hold the line on price. Movie Exhibition Movie theaters – known as exhibitors in the film business – are the last link in the chain of events for a theatrical release: Story Rights Acquisition Pre-production Principal Photography Post-production Exhibition Exhibitors worldwide compete through their locations, their choice of films, and the quality of experience they give their customers. Heyman calls it a straight EBITDA business. Revenue consists primarily of ticket sales (box office) and concessions (food and drink sales). Expenses include film rental (the cost of renting the movie from the distributor, generally a percentage of ticket sales), the cost of facilities, payroll, and the cost of goods sold at concessions. See Exhibits 1 and 2. History of Cinemex Cinemex started with a student business plan. Heyman and two of his business school classmates, Adolfo Fastlich and Miguel Angel Davila, speculated that Mexico was ready for world-class movie theaters. Decades of regulation, including fixed (low) ticket prices, had produced an installed base of old and dilapidated theaters. When the regulations were lifted, Heyman and his colleagues decided that Mexico City
Wednesdays at Cinemex
Revised: August 28, 2002 In April 2001, Matt Heyman, co-founder of Cinemex, the largest chain of movie theaters in Mexico City, looked out the window of his office and pondered the future of his company. In just seven years, Heyman and his partners had nurtured Cinemex from a student idea into the largest theater chain in Mexico City, but they faced new challenges every day. Many of these challenges came from competitors. For years competitors ran old, poorly-maintained theaters, but in recent months they had begun to imitate Cinemex’s top-of-the-line exhibition venues. Their latest tactic: offering two tickets for the price of one on Wednesdays. Heyman wondered whether Cinemex should offer a similar deal, or instead rely on the Cinemex brand and hold the line on price. Movie Exhibition Movie theaters – known as exhibitors in the film business – are the last link in the chain of events for a theatrical release: Story Rights Acquisition Pre-production Principal Photography Post-production Exhibition Exhibitors worldwide compete through their locations, their choice of films, and the quality of experience they give their customers. Heyman calls it a straight EBITDA business. Revenue consists primarily of ticket sales (box office) and concessions (food and drink sales). Expenses include film rental (the cost of renting the movie from the distributor, generally a percentage of ticket sales), the cost of facilities, payroll, and the cost of goods sold at concessions. See Exhibits 1 and 2. History of Cinemex Cinemex started with a student business plan. Heyman and two of his business school classmates, Adolfo Fastlich and Miguel Angel Davila, speculated that Mexico was ready for world-class movie theaters. Decades of regulation, including fixed (low) ticket prices, had produced an installed base of old and dilapidated theaters. When the regulations were lifted, Heyman and his colleagues decided that Mexico City