Regal Movie Theaters (geographical distribution analysis) - Essay Example

Geographical distribution analysis Regal movie theatres is in the business of distributing a commodity or service to masses. It a B2C type of business and which is not virtual. Hence geographical reach and distribution becomes a key factor in determining the profitability of the company. When talking about geographical distribution and its analysis, you can divide the decision making process for a geography at three levels. Level 1 – Selecting a particular state and city Level 2 – Selecting a particular area, district in the city Level 3 – Selecting a property to house the theatre in that city Each level has its own importance, affected by different factors and its own parameters for selection process.

These are discussed in detail below Selection of Particular state and city This is a bit like studying macro economics. The data required here shall be very broad in nature and a birds view will be taken of the state as a market on its own and whether it is advisable to enter it or not. Population, education index, earning index, human development index, per capital income, political stability and susceptibility to natural calamities are some of the factor which will need to be considered. The profitability will depend finally on number of people coming to Regal theatre, but that number of customer visits is determined by the above factors.

Selection of particular district in selected city In each city there are various different segments which are not a formal division of city but still people identify them as different. A business district, a red light district, an eating area and an area popular with kids are few examples how a city can be broken down into for ease of decision making process. Movie theatre business is a business of entertainment. Regal would specifically want to avoid schools, brothels or hospitals next door to avoid any conflict of interest.

Especially when there are large gatherings, or premiers of movies Regal would want them to be in a place where it is easy to operate from. City in the evening generally get crowded and the theatre has to have accessibility in terms of driving down or public transport. Selection of a particular property in selected area of the selected city Once the area is finalized either the company can go for a ready property, make necessary changes and use it. Or it can develop the structure from scratch by buying a plot or demolishing an existing property.

All depends on how much money the theatre co. wants to invest in the property and how luxurious the theatre is ought to be. Analysis Regal theatres and its main competitors, cinemark and AMC entertainment have their own strategies to decide on which geographical area to expand into. Before going for our own strategy it is important to know the facts and thought process of the competitors and analyze their positioning in the market when it comes to geographical distribution. AMC entertainment AMC has 299 theatres with 4528 screens in 30 different states and the district of Columbia.

It is also present in four countries outside USA as on end of 2009. AMC has an average of 15 screens per theatre which is highest and well above the industry average of 7.1. Busiest AMC theatre is in New York City playing host to roughly 2 millions viewers every year. California is the most concentrated state with 42 theaters and 451 screens in them. Cinemark Cinemas Cinemark has 428 theatres with 4938 screens in USA and Latin America. It’s the third largest chain with presence in 39 states.

They are the most geographically diverse in Latin America with 133 theatres and 1084 screens in 13 countries. Regal Cinemas Regal has 6683 screens in 537 theatres spread across 37 states and District of Columbia. It has a total of 244 million of annual attendance. It has its presence in 43 of the top 50 U.S. designated areas. Its has an average of 12.4 screens per location which is well above average and only a little less than AMC. Macro economic data to aid decision process is shown in figure 1.

This shows how markets of US and Canada have grown and will aid Regal in decision making of venturing into international markets or not. It also shows 3D and 2D box office revenues to aid decision of whether to built normal theatres or make more investments into 3D theatres and in which locations. Similar analysis is also available for state by state decision making process. Fig 2 shows the age group who see the movies and their percentages. If this is matched with the demographics of each state one can see which state to enter with 3D facility as there are more no.

of young people in it, and which state to stick to traditional theatres. Fig. 3 shows the proportion of cinema goes and this if matched with the population of the district or concentration of people in a city can be useful to see the expected turn up for the theatre. Fig 4. Average annual cinema ticket price analysis shows the trend how the ticket prices are changing in last one decade. Fig 5. US theatres by type distribution. Fig 6. Worldwide 3D screen distribution Hence all this data shall provide helpful for Regal to decide on the correct geographical strategy.

Alternatives Go for more number of 3D cinemas as this is the one which is the most attractive technology and bound to improve and become more popular with time. Dedicated 3D only cinemas will be able to demand a captive market of 3D watchers. Or don’t go for 3D cinemas as they are capital intensive, better to stick to old 2D way so that the debt problem is better handled by lesser capital expenditure. Select a state with most no. of young people. They have better disposable income and better able to spend it on theatres.

There are 37 states where Regal is present; hence the rest where AMC and Cinemark are present, Regal should target those. Or instead of head on competition try to diversify its risk by going to different countries in Latin America or even in other continents nearby To built either a multiplex or cinebarre or go for traditional theatres for family and teens. Each has its own pros and cons, with teens and families being cost conscious and spend less in theatres (not on theatres), whereas the cinebarre group are upwardly mobile young couples without children who are better able to spend on theatre and in theatre as well.

Recommendation Regal is in huge debts right now. Its is better for regal to take a conservative approach of cost cutting rather than aggressive take over and mergers and acquisitions. Geographically it’s well spread and needs to streamline those markets rather than venturing into international markets. Hence international markets should not be considered as of now. Existing 37 states can be increased to almost all where Cinemark and AMC are present to give them a competition there. But huge expenses in 3D and IMAX should be avoided to take higher risks.

It is best to stick to traditional theatre approach as even today it represents the major chunk of the industry. If regal decreases the no. of screens in each city and starts making themselves available at more no. of sites, this will lead to a diverse audience keeping their less no. of screens full, rather than more no. of screen all half empty. It should not go to huge multiplexes as they are much cost intensive, they should try to create smaller theater for a happy retreat for family and teens. Fig.1. Fig 2. Fig. 3 Fig. 4. Fig 5. Fig.

6 References AMC Fact sheet, 2009 www.amctheatres.com. Web. 20th Jan 2010 Motion picture association of America. www.mpaa.org . Web. 20th Jan 2010 Theatrical market statistics, 2009. Motion picture association of America Images Fig.1 to Fig. 6, Theatrical market statistics, 2009. MPAA Greif R. ‘Measuring the 3D Film Revolution: Understanding the Impact of New Technology on Movie Theater Visitation’. Opinion Dynamics corporation white paper 2005 Mastracci F, ‘To 3D or not to 3D, that is the question’.

1 Feb 2011. Web. www.examiner.com www.rcc.regalcinemas.com www.amctheatres.com www.cinemark.com