Hanson Production Case Analysis
Hanson Production: Pricing for Opening Day and Recommendations for Marketing Efforts
This report is consistent with our signed Academic Integrity Forms on file with the instructor. Monika Matasova
Klaudia Matasova
Candice Oye
Alex Haggstrom
Kaysen Li
ENTR 3140 S10
October 6th, 2014
Group 2
Team 2
2
CRITICAL ISSUES
1. How to create a marketing plan so that the play can maintain high attendance levels.
2. How to create a pricing plan to recoup capital investment and ensure long-term profitability. 3. How to select a venue in order to ensure audience levels consistently fill a large proportion of available seats.
ANALYSIS
HOW DID WE GET HERE?
Hansen Productions is a 50-year old Broadway production company which won a Tony Award for a previous production …show more content…
based off the Old West. The company is currently producing a largescale musical based on the 1967 Detroit riots, which boasts some of the most beloved songs in the show-tunes canon. The musical was slated to open in 4 months and a theatre has still not been selected, although 3 possibilities have been lined up. Hansen Productions also has yet to decide on a marketing plan for the musical.
WHY ARE THE ISSUES CRITICAL?
CRITICAL ISSUE 1
Research conducted on the initial marketing plan revealed that the materials were not able to sell the show as a “fun night at the theatre.” Portraying race riots as a “fun night at the theatre” would be disastrous at any rate, and potentially outright offensive. If the show is not properly marketed, ticket sales might not be able to fully recoup the capital invested in production.
CRITICAL ISSUE 2
If tickets are priced too high, Shen runs the risk of pricing potential viewers out of the audience.
In addition, if the show is not successful, tickets priced too high could offend critics, who expect the ticket price to correlate with the show’s performance. If the tickets are initially priced too high, it creates negative publicity if they have to drop prices. In contrast, if the tickets are priced too low, it would become far more difficult to recoup the capital investment, to say nothing of ensuring profitability.
CRITICAL ISSUE 3
Choosing a theatre that is too big comes with the risk of having empty seats, which critics and audiences don’t appreciate as it makes the show seem unpopular and less desirable. On the other hand, choosing a theatre that is too small results in insufficient capacity to meet demand. This lowers profits through inability to seat a potential audience and restricts Hanson’s long-term plans for a national tour and potential Broadway performances.
3
Team 2
WHAT ELSE DO WE KNOW?
Statistics collected from 2012 – 2013 show that approximately 66% of total Broadway tickets sold were purchased by tourists so we feel that advertising to tourists is very important. (The
Broadway League, 2013). Also, the average age of a theatre goer between 2012 and 2013 was 43 years and this production is aimed towards the baby boomers generation who, in 2008, were between the ages of 44 and 64. (The Broadway League, 2013). These figures can be extrapolated backwards into 2008 in order to establish an understanding of demographic breakdowns in
Hanson’s target audience.
The political landscape (Exhibit 3) surrounding the play is unavoidable due to its subject matter.
However, even if Obama doesn’t win the election, the fact that he’s on the ballot means the above-mentioned baby boomers will be experiencing nostalgia for the civil rights movement of the 60s, proving a powerful draw. Tourists will see it as a means to experience American history.
Even if Hanson avoids any direct mention of the socio-political significance of the work, the subject matter itself ensures a solid core audience to attract.
DECISION CRITERIA
1. Maintain an attendance of at least 90% for a minimum of the first nine months.
2. Recoup capital investment within the next year
3. Allocate the $1.5 million marketing budget proportionately to the target audience of the
musical.
OPTIONS
MARKETING OPTIONS
There are multiple advertising options for the musical. These have been separated into four bundles, each one option:
The first bundle consists of print ads such as posters, brochures, bus ads, and newspaper advertisements. This focuses around appealing to those who prefer traditional media and advertisements to word of mouth.
The second bundle centers around electronic media such as television commercials, radio ads, and a Tony Award show campaign. This focuses around appealing to those who don’t like discrete advertisement but don’t mind it mixed in with other media.
The third bundle is Internet-centered. This bundle would include a website dedicated to the musical; internet marketing such as online banners and email blasts. This option is useful to travelers and younger people for whom other options are inaccessible.
The fourth bundle is directed towards direct contact through things such as direct mail, group sale prices, educational programs, hiring a press agent, and a press video. This option is useful for appealing to those who like a personal connection with the company rather than cold, directionless advertisements.
4
Team 2
THEATRE OPTIONS
There are three theatres available, with four options between them. Analysis performed per Exhibit 2 provides figures for both low and high attendance levels and low and high ticket prices. Low attendance, low ticket price is the “worst case” scenario. High attendance, high ticket price is the “best case” scenario.
The Longacre Theatre is the only theatre for which Hanson may experience a loss at low attendance levels. Even in the best case scenario, it would take 123 weeks to recoup
Hanson’s capital investment. This makes Longacre inadequate for Hanson’s purposes.
The St. James Theatre will recoup Hanson’s capital investment in 51 weeks in the worst case scenario, requiring 93% attendance rate to do so. At the higher ticket rate, Hanson will recoup their capital investment in 52 weeks with only 86% attendance rate, and will earn a profit of $251,884 per week thereafter.
The Hilton, without its financing offer, requires 84% attendance in the worst case scenario to recoup Hanson’s capital investment. The best-case scenario requires only
79% attendance. However, with this option, critical reception may suffer due to “empty” theatres, and the weekly profit at that minimum level being only $261,482 is not enough of a gain over the St. James option to justify taking this risk to Hanson’s long-term goals.
As well, the 90% necessary capacity at the Hilton is 1631 seats—greater than the maximum capacity at St. James, meaning reaching that level is unlikely.
The Hilton, with its financing offer, presents an interesting dilemma. The cost reduction more than makes up for the reduction in profit, and the necessary audience levels to recoup capital investment within a year drop to 75% at the higher ticket price. Weekly profits rapidly overtake all other options, with 100% attendance resulting in $513,222 a week. That said, the show’s relative lack of mainstream appeal means the excess capacity is still a liability, and given Hanson’s long-term goals of a national tour hinge on favourable reception, this is too great a hindrance to risk.
RECOMMENDATIONS
We recommend that Hanson select the St. James theatre to accommodate the musical. The St.
James theatre allows for the best chances of filling the theatre to capacity while recouping capital costs within a year. We recommend the $85 average price point as the minimum 86% attendance level is below the necessary 90% capacity.
Recommended distribution of costs is $1,000,000 and $500,000 respectively, proportional to above figures. For tourists, we recommend the Internet option. For baby boomers, we recommend print ads and electronic media, as this group is the most likely to engage in activities such as listening to the radio and reading the newspaper. Print ads also overlap with tourists, as tourists are likely to see brochures at airports or ads in buses. We recommend allocating
$400,000 to print media, $200,000 from both budgets, along with $800,000 to electronic media and $300,000 to Internet advertisement, continuing over the following year.
These suggestions enable Hanson to allocate its $1.5 million marketing budget effectively to its target audience to maintain necessary attendance, while recouping its capital investment in as few as 33 weeks, earning a profit of as much as $397,123.60 each week.
Team 2
REFERENCES
The Broadway League. (2013, December). Retrieved October 3, 2014, from http://www.broadwayleague.com/index.php?url_identifier=the-demographics-of-thebroadway-audience 5
6
Team 2
Exhibit 1: SWOT ANALYSIS
SWOT
Opportunities
Threats
o
o Musical is based off of Detroit riots Maximizing profit
o Becoming a national tour
Big popularity if democrats win
o Other productions that are popular and have big audiences
o 3 theatres that are willing to host the musical o Theatre could terminate their show if not enough sales
o
o Could alienate many different audiences because of the musicals content Strengths (ability to)
Focus here
o Shen has keen eye and ear for good scripts
Having well-known actors will help this musical grow and be a hit and maybe become a national tour.
o Knows all the theatres and their seating capacity o Well connected, knows lots of people in industry
The theatre that hosts the musical will be happy with the production because
Shen has had lots of experience putting on a good show.
o Great relationships with agents and managers
Picking the proper theatre can help the production prosper.
o Knows where people and where to get new talent
Good publicity so far.
o Actors known to the public, who have lots of good, noncontroversial coverage
Weakness ( Inability to)
Protect here
o Need to find more money for the production
If they do not market well they may not have enough people seeing their play which could mean making a loss and losing their theatre.
o
Production has no place to run
o Create a new marketing plan
The story of the musical may turn some audiences off and make selling out harder.
7
Team 2
Exhibit 2: Revenue/ Breakeven calculations
Low Ticket Price
Longacre
St. James
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
80%
100%
1096
593437
$631,315.96
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
93%
100%
1623
640298
$681,168.09
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
$693,548.80
$554,839.04
-$71,888.30
$58,498.87
-181.00
224.00
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
$1,027,034.40
$955,141.99
$257,535.47
$325,114.34
51.00
41
High Ticket Price
Longacre
St. James
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
80%
100%
1096
593437
$631,315.96
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
$745,280.00
$596,224.00
-$32,986.44
$107,126.20
-396.00
123.00
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
86%
100%
1623
640298
$681,168.09
$1,103,640.00
$949,130.40
$251,884.58
$397,123.60
52.00
33
8
Team 2
Exhibit 2: Revenue/ Breakeven calculations (continued)
Low Ticket Price
Hilton
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
Hilton (with offer)
84%
100%
1813
654025
$695,771.28
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
$1,147,266.40
$963,703.78
$251,856.55
$424,405.42
52.00
30.82
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
81%
100%
1813
588622.5
$695,771.28
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
$1,147,266.40
$929,285.78
$256,415.52
$440,827.12
52.00
29.68
High Ticket Price
Hilton
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
Hilton (with offer)
79%
100%
1813
654025
$695,771.28
$1,232,840.00
$973,943.60
$261,481.98
$504,844.60
51.00
25.91
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
Operating costs = weekly operating costs per case + $17000 royalties + 6% of gross
Break-even = operating costs + 0.06*gross = gross, or (operating costs / 0.94)
Low ticket price: $79.10 (used as per the case for illustrative purposes)
High ticket price: $85 taken as approximately $10 less than popular shows as per the case
Ticket prices are used as average of all patrons across seating types and days.
75%
100%
1813
588622.5
$695,771.28
$1,232,840.00
$924,630.00
$252,476.73
$513,222.39
52.00
25.49
9
Team 2
Exhibit 3: PEST Analysis
Political
- Upcoming election
- First ever black president running for office
- War against Taliban continues in Pakistan
Economic
Housing crisis
- Stock market crash
- Increase in unemployment rates - Decreased consumer spending -
Social
-
Growth of social media as a means of communication
- Increasing use of smartphones - Facebook becomes most popular social network, surpassing Myspace
Technological
-
Increased use of internet to gather information
Creation of Direct-to-Web musical Sources: http://www.statista.com/statistics/218529/us-martphone-penetration-since-2008/ http://content.time.com/time/specials/packages/completelist/0,29569,1852747,00.html http://www.switched.com/2008/06/14/facebook-surpasses-myspace-as-worlds-mostpopular-social-networ/
10
Team 2
Exhibit 4: Porter’s 5 Forces
New Competition
Other plays/musicals may be announced to be opening in the same time frame that may have a story that appeals to a wider audience. Suppliers
Current Competition
Distributors/Consumers
The suppliers (theatre owners willing to host the production) have a big say in the production because if they are unhappy with its progress or revenues they have the option to cancel the contract. Also before any contract is signed a theatre owner can still change their mind about hosting.
The biggest current competition is the big, constant and popular plays/musicals such as Wicked, The Lion
King, Jersey Boys, and the
Phantom of the Opera, among others. Consumers have a big pull when it comes to this musical because if it incurs a loss for 2 or more consecutive weeks the owner of the theatre hosting the musical can cancel the contract. The audience determines the success of the production. Substitutes
The story of the musical is a very specific story based off of true events and may resonate personally with some audiences, there are no primary
substitutes.
This report is consistent with our signed Academic Integrity Forms on file with the instructor. Monika Matasova
Klaudia Matasova
Candice Oye
Alex Haggstrom
Kaysen Li
ENTR 3140 S10
October 6th, 2014
Group 2
Team 2
2
CRITICAL ISSUES
1. How to create a marketing plan so that the play can maintain high attendance levels.
2. How to create a pricing plan to recoup capital investment and ensure long-term profitability. 3. How to select a venue in order to ensure audience levels consistently fill a large proportion of available seats.
ANALYSIS
HOW DID WE GET HERE?
Hansen Productions is a 50-year old Broadway production company which won a Tony Award for a previous production …show more content…
based off the Old West. The company is currently producing a largescale musical based on the 1967 Detroit riots, which boasts some of the most beloved songs in the show-tunes canon. The musical was slated to open in 4 months and a theatre has still not been selected, although 3 possibilities have been lined up. Hansen Productions also has yet to decide on a marketing plan for the musical.
WHY ARE THE ISSUES CRITICAL?
CRITICAL ISSUE 1
Research conducted on the initial marketing plan revealed that the materials were not able to sell the show as a “fun night at the theatre.” Portraying race riots as a “fun night at the theatre” would be disastrous at any rate, and potentially outright offensive. If the show is not properly marketed, ticket sales might not be able to fully recoup the capital invested in production.
CRITICAL ISSUE 2
If tickets are priced too high, Shen runs the risk of pricing potential viewers out of the audience.
In addition, if the show is not successful, tickets priced too high could offend critics, who expect the ticket price to correlate with the show’s performance. If the tickets are initially priced too high, it creates negative publicity if they have to drop prices. In contrast, if the tickets are priced too low, it would become far more difficult to recoup the capital investment, to say nothing of ensuring profitability.
CRITICAL ISSUE 3
Choosing a theatre that is too big comes with the risk of having empty seats, which critics and audiences don’t appreciate as it makes the show seem unpopular and less desirable. On the other hand, choosing a theatre that is too small results in insufficient capacity to meet demand. This lowers profits through inability to seat a potential audience and restricts Hanson’s long-term plans for a national tour and potential Broadway performances.
3
Team 2
WHAT ELSE DO WE KNOW?
Statistics collected from 2012 – 2013 show that approximately 66% of total Broadway tickets sold were purchased by tourists so we feel that advertising to tourists is very important. (The
Broadway League, 2013). Also, the average age of a theatre goer between 2012 and 2013 was 43 years and this production is aimed towards the baby boomers generation who, in 2008, were between the ages of 44 and 64. (The Broadway League, 2013). These figures can be extrapolated backwards into 2008 in order to establish an understanding of demographic breakdowns in
Hanson’s target audience.
The political landscape (Exhibit 3) surrounding the play is unavoidable due to its subject matter.
However, even if Obama doesn’t win the election, the fact that he’s on the ballot means the above-mentioned baby boomers will be experiencing nostalgia for the civil rights movement of the 60s, proving a powerful draw. Tourists will see it as a means to experience American history.
Even if Hanson avoids any direct mention of the socio-political significance of the work, the subject matter itself ensures a solid core audience to attract.
DECISION CRITERIA
1. Maintain an attendance of at least 90% for a minimum of the first nine months.
2. Recoup capital investment within the next year
3. Allocate the $1.5 million marketing budget proportionately to the target audience of the
musical.
OPTIONS
MARKETING OPTIONS
There are multiple advertising options for the musical. These have been separated into four bundles, each one option:
The first bundle consists of print ads such as posters, brochures, bus ads, and newspaper advertisements. This focuses around appealing to those who prefer traditional media and advertisements to word of mouth.
The second bundle centers around electronic media such as television commercials, radio ads, and a Tony Award show campaign. This focuses around appealing to those who don’t like discrete advertisement but don’t mind it mixed in with other media.
The third bundle is Internet-centered. This bundle would include a website dedicated to the musical; internet marketing such as online banners and email blasts. This option is useful to travelers and younger people for whom other options are inaccessible.
The fourth bundle is directed towards direct contact through things such as direct mail, group sale prices, educational programs, hiring a press agent, and a press video. This option is useful for appealing to those who like a personal connection with the company rather than cold, directionless advertisements.
4
Team 2
THEATRE OPTIONS
There are three theatres available, with four options between them. Analysis performed per Exhibit 2 provides figures for both low and high attendance levels and low and high ticket prices. Low attendance, low ticket price is the “worst case” scenario. High attendance, high ticket price is the “best case” scenario.
The Longacre Theatre is the only theatre for which Hanson may experience a loss at low attendance levels. Even in the best case scenario, it would take 123 weeks to recoup
Hanson’s capital investment. This makes Longacre inadequate for Hanson’s purposes.
The St. James Theatre will recoup Hanson’s capital investment in 51 weeks in the worst case scenario, requiring 93% attendance rate to do so. At the higher ticket rate, Hanson will recoup their capital investment in 52 weeks with only 86% attendance rate, and will earn a profit of $251,884 per week thereafter.
The Hilton, without its financing offer, requires 84% attendance in the worst case scenario to recoup Hanson’s capital investment. The best-case scenario requires only
79% attendance. However, with this option, critical reception may suffer due to “empty” theatres, and the weekly profit at that minimum level being only $261,482 is not enough of a gain over the St. James option to justify taking this risk to Hanson’s long-term goals.
As well, the 90% necessary capacity at the Hilton is 1631 seats—greater than the maximum capacity at St. James, meaning reaching that level is unlikely.
The Hilton, with its financing offer, presents an interesting dilemma. The cost reduction more than makes up for the reduction in profit, and the necessary audience levels to recoup capital investment within a year drop to 75% at the higher ticket price. Weekly profits rapidly overtake all other options, with 100% attendance resulting in $513,222 a week. That said, the show’s relative lack of mainstream appeal means the excess capacity is still a liability, and given Hanson’s long-term goals of a national tour hinge on favourable reception, this is too great a hindrance to risk.
RECOMMENDATIONS
We recommend that Hanson select the St. James theatre to accommodate the musical. The St.
James theatre allows for the best chances of filling the theatre to capacity while recouping capital costs within a year. We recommend the $85 average price point as the minimum 86% attendance level is below the necessary 90% capacity.
Recommended distribution of costs is $1,000,000 and $500,000 respectively, proportional to above figures. For tourists, we recommend the Internet option. For baby boomers, we recommend print ads and electronic media, as this group is the most likely to engage in activities such as listening to the radio and reading the newspaper. Print ads also overlap with tourists, as tourists are likely to see brochures at airports or ads in buses. We recommend allocating
$400,000 to print media, $200,000 from both budgets, along with $800,000 to electronic media and $300,000 to Internet advertisement, continuing over the following year.
These suggestions enable Hanson to allocate its $1.5 million marketing budget effectively to its target audience to maintain necessary attendance, while recouping its capital investment in as few as 33 weeks, earning a profit of as much as $397,123.60 each week.
Team 2
REFERENCES
The Broadway League. (2013, December). Retrieved October 3, 2014, from http://www.broadwayleague.com/index.php?url_identifier=the-demographics-of-thebroadway-audience 5
6
Team 2
Exhibit 1: SWOT ANALYSIS
SWOT
Opportunities
Threats
o
o Musical is based off of Detroit riots Maximizing profit
o Becoming a national tour
Big popularity if democrats win
o Other productions that are popular and have big audiences
o 3 theatres that are willing to host the musical o Theatre could terminate their show if not enough sales
o
o Could alienate many different audiences because of the musicals content Strengths (ability to)
Focus here
o Shen has keen eye and ear for good scripts
Having well-known actors will help this musical grow and be a hit and maybe become a national tour.
o Knows all the theatres and their seating capacity o Well connected, knows lots of people in industry
The theatre that hosts the musical will be happy with the production because
Shen has had lots of experience putting on a good show.
o Great relationships with agents and managers
Picking the proper theatre can help the production prosper.
o Knows where people and where to get new talent
Good publicity so far.
o Actors known to the public, who have lots of good, noncontroversial coverage
Weakness ( Inability to)
Protect here
o Need to find more money for the production
If they do not market well they may not have enough people seeing their play which could mean making a loss and losing their theatre.
o
Production has no place to run
o Create a new marketing plan
The story of the musical may turn some audiences off and make selling out harder.
7
Team 2
Exhibit 2: Revenue/ Breakeven calculations
Low Ticket Price
Longacre
St. James
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
80%
100%
1096
593437
$631,315.96
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
93%
100%
1623
640298
$681,168.09
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
$693,548.80
$554,839.04
-$71,888.30
$58,498.87
-181.00
224.00
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
$1,027,034.40
$955,141.99
$257,535.47
$325,114.34
51.00
41
High Ticket Price
Longacre
St. James
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
80%
100%
1096
593437
$631,315.96
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
$745,280.00
$596,224.00
-$32,986.44
$107,126.20
-396.00
123.00
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
86%
100%
1623
640298
$681,168.09
$1,103,640.00
$949,130.40
$251,884.58
$397,123.60
52.00
33
8
Team 2
Exhibit 2: Revenue/ Breakeven calculations (continued)
Low Ticket Price
Hilton
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
Hilton (with offer)
84%
100%
1813
654025
$695,771.28
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
$1,147,266.40
$963,703.78
$251,856.55
$424,405.42
52.00
30.82
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
81%
100%
1813
588622.5
$695,771.28
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
$1,147,266.40
$929,285.78
$256,415.52
$440,827.12
52.00
29.68
High Ticket Price
Hilton
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
Hilton (with offer)
79%
100%
1813
654025
$695,771.28
$1,232,840.00
$973,943.60
$261,481.98
$504,844.60
51.00
25.91
Low attendance:
High attendance:
Seats:
Fixed costs:
Break-even:
Revenue at high attendance:
Revenue at low attendance:
Profit at low attendance:
Profit at high attendance:
Weeks to recoup at low attendance:
Weeks to recoup at high attendance:
Operating costs = weekly operating costs per case + $17000 royalties + 6% of gross
Break-even = operating costs + 0.06*gross = gross, or (operating costs / 0.94)
Low ticket price: $79.10 (used as per the case for illustrative purposes)
High ticket price: $85 taken as approximately $10 less than popular shows as per the case
Ticket prices are used as average of all patrons across seating types and days.
75%
100%
1813
588622.5
$695,771.28
$1,232,840.00
$924,630.00
$252,476.73
$513,222.39
52.00
25.49
9
Team 2
Exhibit 3: PEST Analysis
Political
- Upcoming election
- First ever black president running for office
- War against Taliban continues in Pakistan
Economic
Housing crisis
- Stock market crash
- Increase in unemployment rates - Decreased consumer spending -
Social
-
Growth of social media as a means of communication
- Increasing use of smartphones - Facebook becomes most popular social network, surpassing Myspace
Technological
-
Increased use of internet to gather information
Creation of Direct-to-Web musical Sources: http://www.statista.com/statistics/218529/us-martphone-penetration-since-2008/ http://content.time.com/time/specials/packages/completelist/0,29569,1852747,00.html http://www.switched.com/2008/06/14/facebook-surpasses-myspace-as-worlds-mostpopular-social-networ/
10
Team 2
Exhibit 4: Porter’s 5 Forces
New Competition
Other plays/musicals may be announced to be opening in the same time frame that may have a story that appeals to a wider audience. Suppliers
Current Competition
Distributors/Consumers
The suppliers (theatre owners willing to host the production) have a big say in the production because if they are unhappy with its progress or revenues they have the option to cancel the contract. Also before any contract is signed a theatre owner can still change their mind about hosting.
The biggest current competition is the big, constant and popular plays/musicals such as Wicked, The Lion
King, Jersey Boys, and the
Phantom of the Opera, among others. Consumers have a big pull when it comes to this musical because if it incurs a loss for 2 or more consecutive weeks the owner of the theatre hosting the musical can cancel the contract. The audience determines the success of the production. Substitutes
The story of the musical is a very specific story based off of true events and may resonate personally with some audiences, there are no primary
substitutes.