MMICC 2010 - UCB
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Transcript of MMICC 2010 - UCB
CIRQUE DU SOLEIL
PARTNERSHIP ANALYSIS AND RECOMMENDATIONS FOR FUTURE EXPANSION
PRESENTED BYWYNNE CHYOU | NIKITA MAHESHWARI | GANNON SHIH |
JENNY ZHOUHAAS SCHOOL OF BUSINESS
2010
AGENDA
I. Situational AnalysisII. Current ObjectivesIII. Executive SummaryIV.RecommendationsV. Financial AnalysisVI. ImplementationVII. Q&ASituational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
SITUATIONAL ANALYSIS| CIRQUE DU SOLEIL VALUES
Creativity: Never compromise creativity; full creative control
Exclusivity: We don’t bring the show to you; each location has its own show
Expertise: Concentrate on what we are good at without stretching ourselves too thin
Mission Goal: Pursue high-growth markets and opportunities without compromising on any of our core values
Core Values
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
SITUATIONAL ANALYSIS| FAILED PROJECTS
Failed ProjectReason for
FailureCore Value Violated
London Battersea
Project
Montreal Cirque Complex
Columbia Pictures
Battleship
Lack of creative control;
Slowness of development
Limited creative involvement
Lack of expertise in new industries eroded
investor confidence
Creativity
Creativity
Expertise
Past failed projects violated core values
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
SITUATIONAL ANALYSIS| CURRENT ISSUES AND OBJECTIVES
Current Objectives
Select Compatible Partners for show expansion
Avoid Brand Cannibalization in Vegas
Enter new industries and overcome inexperience issues
Show Distribution: Resident vs. Arena vs. Big top
Build revenues in existing locations
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
Enter nightlife business in areas with established
presence
Leverage existing partnership with MGM Mirage to develop new
resident shows in attractive cities
EXECUTIVE SUMMARY| RECOMMENDATION OVERVIEW
Expand Develop Attract
Launch Reality TV Series to build
brand recognition
Recommendation 1
Recommendation 2
Recommendation 3
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 1| RESIDENT VS. TOURING
Profitability
Occupancy
Break-Even
Highest Ticket Price
Shows Per Year
Resident Shows Touring Shows
Higher Margins
90-95% 80%
60% 65%
$150 $100
480 shows 324 shows
Lower Margins
Objective: Grow shows in the Resident segment
Although resident shows require a larger capital expenditure, they deliver more value in the longer term due to higher profitability
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
Creative freedom
Sustainability
Socially Responsible
High ROI
Four Criteria for Establishing Partnerships
RECOMMENDATION 1| PARTNERSHIP CRITERIA
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 1| PARTNERSHIP CRITERIAMGM is a trustworthy, experienced partner to continue resident expansions
Creative freedom
Sustainability
Socially Responsible
High ROI
Four Criteria for Establishing Partnerships
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 1| EXPAND MGM PARTNERSHIP
City Tourism Growth
Tourist Shopping
Expenditures
Room for CdU Show
Establishment
Macau
Abu Dhabi
Atlantic City
Detroit
Cirque du Soleil should expand into Abu Dhabi, Atlantic City, and Macau
Detroit is not a viable expansion due to low tourism growth and low revenue potentials
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 1| RESIDENT EXPANSION BEYOND MGM
Several cities of high potential exist that are not currently in MGM`s plans
LEGEND LONDON NEW YORK CITY LOS ANGELES BERLIN SYDNEY SHANGHAI
$39.0 Billion
Potential Expansion
Source: www.ChinaDaily.com
Source: www.sflnc.com
Cirque du Soleil should strongly consider future establishments in Shanghai, New York City and Los Angeles due to high tourism
revenue and traffic
Tourism Revenue in 2007 ($Can)
Shanghai
Los Angeles
London
$13.3 Billion
New York City
Berlin
Sydney
$28.9 Billion
$11.3 Billion
$9.7 Billion
$12.1 Billion
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 1| ACCOMPLISHMENTS
Current Objectives
Select Compatible Partners for show expansion
Avoid Brand Cannibalization in Vegas
Enter new industries and overcome inexperience issues
Show Distribution: Resident vs. Arena vs. Big top
Build revenues in existing locations
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 2| EXPANSION INTO NIGHT LOUNGES
Create a unique night long Cirque du Soleil experience that maintains Cirque`s image as a creative, exclusive brand
Lounge Theme Marketing Strategy
"Only 20% actually stay at the casino hotel but show goers drop an average of $30 apiece [elsewhere]" -- B.Baldwin
`Soleil by Night`• Masquerade themed
lounges• Showcase colorful decor
& latest technology• High ceilings and
acrobats throughout
2 Prong Strategy• Cross-selling tickets
between show and club• Synergies in marketing
expenses• Promote club in current
shows
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 2| EXPANSION INTO NIGHT LOUNGES " SOLEIL BY NIGHT "
Create Cirque du Soleil themed night clubs to increase avg. expenditure per consumer and avoid cannibalization of existing shows.
Target Location Criteria Short Term vs. Long Term
Location with Cirque du Soleil Show
Places where people stay overnight
Places with lively night life
Length Place Partner
Short Term Vegas
Long Term •Atlantic City•Macau•Abu Dhabi
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 2| IMPLEMENTATION CASE IN LAS VEGAS
Identify poor performing, low profit generating lounges and leverage partnerships to rent that venue
Criteria Met:
Venue located 1 block from MGM hotel
Low profitability, threat of bankruptcy with pressure to sell or close
Large venue with in place infrastructure for Cirque du Soleil design
Case Study: Prive and Living Room Nightclub in Las Vegas
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 2| ACCOMPLISHMENTS
Current Objectives
Select Compatible Partners for show expansion
Avoid Brand Cannibalization in Vegas
Enter new industries and overcome inexperience issues
Show Distribution: Resident vs. Arena vs. Big top
Build revenues in existing locations
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 3| TALENT REALITY SHOW ‘THE ARTISTE’
Strengthen presence on television media and increase brand awareness among new demographics
The Artiste: Become a part of the Next Cirque du Soleil Show...
The Basis
• Weekly challenges are assigned to candidates and weekly elimination rounds procure finalist
• Cirque du Soleil staff will coach candidates prior to challenge events
Network Logistics
ABC Network : ABC is already a subsidiary of Disney, an existing partner
Location Logistics
USA: there is a large Cirque du Soleil presence in North America and huge trend in large reality show viewership
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 3| TALENT REALITY SHOW CASE STUDIES
• The Apprentice applicant process
• Donald Trump assigns weekly challenges to candidates
• Aired 15 episodes per season for 4 seasons
• Earned #7 in number of viewers, with 20.7M viewers weekly
• Has greatly increased brand recognition of the Trump brand and logo
The Apprentice
Similar reality shows with parallel structure have enjoyed success
• Applicants are pre-selected through application process
• Elimination fights occur weekly
• Aired 129 episodes total• Boosted an esoteric
"UFC" brand into mainstream viewership and recognition
The Ultimate Fighter
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
RECOMMENDATION 3| ACCOMPLISHMENTS
Select Compatible Partners for show expansion
Avoid Brand Cannibalization in Vegas
Enter new industries and overcome inexperience issues
Show Distribution: Resident vs. Arena vs. Big top
Build revenues in existing locations
Current Objectives
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
IMPACT ANALYSIS
Single Resident Expansion
Single Nightclub Expansion
Reality Show
IRR Payback
1-Yr: 94% 5-Yr: 216% 0.52 Years
2-Yr: 24% 5-Yr: 64.9% 1.43 Years
1-Yr: 30% 2-Yr: 331% 0.77 Years
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
CONCLUSION| IMPLEMENTATION TIMELINE
Task Year 0 Year 1 Year 2 Year 3 Year 4 Year 5+Recommendation 1: Residence Expansions
Development of program Begin partnership talks with MGM Construction of theater Acrobat training Hiring of acrobats and technicians Promotion of the event
Begin showing
Recommendation 2: Club "Soleil Night" Development talks with MGM Secure rental of club venue Promotion of club Hiring of staff Evaluate success Expand nightclub reach to branches
Remodel club venue
Recommendation 3: Reality TV Show Develop program proposal and business model Establish deal with a potential network Hold auditions and hire cast and technicians Filming of program Airing of program
Promotion through advertisement of show
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
CONCLUSION| RECOMMENDATION SUMMARY
Expand Into New Markets
``Soleil by Night`` The Artiste
Access
Spending ⁄Location
Occupancy Rate
Expand Develop Attract
Creativity . Sustainability . Profitability
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
Q&A
ContentSituational Analysis - ValuesSituational Analysis – FailuresSituational Analysis – Current IssuesExecutive SummaryRecommendation 1Recommendation 2Recommendation 3Impact AnalysisConclusion – SummaryImplementation Timeline
Appendix Slides (cont.)Why Not Expand Touring ShowsArena Over Big TopCirque du Soleil`s Value-add for CasinosTop 10 Gambling GetawaysWhy Cirque Complex Did Not Work
FinancialsHistorical Revenue & Ticket Sales DataShow Profit ModelShow Break-Even AnalysisResident Show Expansion ModelNightclub ROI (1)Nightclub ROI (2)Nightclub Revenue ProjectionNightclub Operating Profit ProjectionReality Show Revenue ProjectionReality Show Operating Profit ProjectionAlternative StrategiesCompetitor Analysis
Appendix SlidesRisks & Mitigations (Rec 1)Risks & Mitigations (Rec 2)Risks & Mitigations (Rec 3)Partnership ImplementationManaging CreativityMitigating Creativity Risks
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|RISKS & MITIGATIONS
Risks for Recommendation 1: Expansion
Mitigation
Large investment expenditure for venue construction does not receive due ROI
Historical growth has shown that even worst-case is still sufficient
Competing with established competitor shows in target geographic location
Differentiate the show as exclusive with premium ticket pricing
Cultural differences per geographic location may hinder acceptance of a show
Tailor new show to the specific regions culture
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|RISKS & MITIGATIONS
Risks for Recommendation 2: Night Club
Mitigation
Inability to find a new locale for venue on the Vegas strip
Expand into an existing venue that by leasing
Cannibalism of existing MGM-owned clubs and equivalents in its hotels
Look into revamping poor performing clubs outside of MGM
Low attendance rate or insufficient brand awareness of new club development
Extensively use promotions, advertisements and discounts
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|RISKS & MITIGATIONS
Risks for Recommendation 3: Reality TV
Mitigation
Low amount of viewers due either to unawareness or disinterest
Promote heavily with existing membership base
Lack of advertisement sponsors to generate sufficient revenue returns
Leverage existing partnerships and introduce new show to them
Reality TV and related industry is not our expertise
Hire outside directors as well as utilize past case studies
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX| PARTNERSHIP IMPLEMENTATION
City
Los Angeles
Example of Partner
Example Shows
Kodak Theater “Hollywood“
Los Angeles Pantages Theater “Hollywood“
Capacity
3,401
2,703
Shanghai Grand Theater “Asia“1,800
New York City Broadway Theater “Broadway“
New York City WaMu Theater “In the City“
500
5,600
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX| MANAGING CREATIVITY
``Always put creativity first``
``Maintain full creative control``
``Show comes before business``
Creativity is the Cornerstone of Cirque du Soleil
Guiding Quotes by Management
How to Maintain Creative Edge
Rotate Stage Directors
Set strict partnership selection criteria
No outsourcing talent
Spend 2-3 years planning shows
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX| MITIGATING CREATIVITY RISKS
Don`t OverextendExample: Cirque Complex
Familiar Territory
Leverage Existing Partnerships
(MGM for masquerade)
Start in Existing Markets
(Las Vegas)
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
Demand High Prices and Margins
Maintain prestigious image value
We want to be a ``diamond``
APPENDIX| WHY NOT EXPAND TOURING SHOWS
ExclusivityCore Value
``We deliberately chose a strategy of exclusivity``
Maintain current number of tour shows (7)
Maintain current tour locations and length
Arena over Big-Top
How
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX| WHY ARENA STYLE OVER BIG TOP STYLE
Arenas are more efficient to set-up, less expensive to operate, and more modern
Show Length
Set-up Employees
Set-up Time
Take-down Time
Capacity
Arena Big Top
96 people 200 people
9 hours 9 days
2 hours 2.5 days
2,500 seats 8,000-12,000 seats
Less Than WeekFull Week
Source: Gateway
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX| CIRQUE DU SOLEIL`S VALUE-ADD FOR CASINOS
Introduction of a Cirque du Soleil Show has benefited MGM Mirage`s other segments
Casino Show Seats Benefit
New York New York Zumanity 1,250 23% increase in Net Revenue
The Mirage Love 2,000 $25 mn growth in EBITDA impact in following year
MGM Grand Ka 2,000 13% increase in slot revenues
Note: Show goers drop an average of $30 apiece on dinner or drinks
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX| TOP 10 GAMBLING GETAWAYS
1. Aruba2. Atlantic City3. Goa4. Las Vegas5. Macau6. Mississippi Gulf Coast7. Monte Carlo
Source: msnbc
1. Las Vegas2. Macau3. Atlantic City4. Australia5. Mississippi6. France7. Los Angeles
Source: Casino City Times
MSNBC Casino City Times
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX| WHY THE CIRQUE COMPLEX DID NOT WORK
`Interactive museums, night clubs where customers dance in water and hotels that add a surreality to five-star service`
Location Features Cost Reasons Failed Takeaway
London`s Battersea Power Station
High-end retailRestaurantEntertainment Center2,000-seat Theater2 HotelsConvention Center
1 Bn Pounds +
Slowness of Developments
Lack of creative Control over
Project
Choose partnerships carefully with
focus on vision and creative control
Montreal 100-room Hotel, Spa, RestaurantMulti-use Theater
C$100Mn
Lack of investors
Lack of expertise in hotels and restaurants
business
Concentrate on what we are good at
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
Year Revenues ($C) % GrowthAnnual Tickets
Sold (Mil) % Growth Revenue/# TicketsCumulative Tickets
Sold (Mil)1992 35 -- 0.5 -- 70.0 3.01993 50 42.86% 1.0 100.00% 50.0 4.01994 80 60.00% 2.0 100.00% 40.0 6.01995 100 25.00% 2.0 0.00% 50.0 8.01996 140 40.00% 2.5 25.00% 56.0 10.01997 150 7.14% 2.5 0.00% 60.0 13.01998 180 20.00% 2.5 0.00% 72.0 15.01999 300 66.67% 4.0 60.00% 75.0 19.02000 380 26.67% 4.0 0.00% 95.0 23.02001 420 10.53% 5.0 25.00% 84.0 28.02002 450 7.14% 6.0 20.00% 75.0 34.02003 475 5.56% 7.0 16.67% 67.9 41.02004 500 5.26% 7.0 0.00% 71.4 48.02005 590 18.00% 7.0 0.00% 84.3 54.02006 630 6.78% 8.0 14.29% 78.8 61.02007 700 11.11% 10.0 25.00% 70.0 71.0
APPENDIX|HISTORICAL REVENUE & TICKET SALE DATA
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|SHOW PROFIT MODEL
Resident Show Touring Show Fixed Cost
Big top $0 $13,000,000Equipment $0 $7,000,000Production $15,000,000 $30,000,000
Total $15,000,000 $50,000,000
Average ticket price $120 $150
Average Profit Margin 80% 80%Total Operating Expenses/ Show $164,160 $240,000
Shows per week 10 9Weeks per year 48 36Shows per year 480 324Available seats per show 1900 2500Occupancy rate 90% 80%Occupied seats per show 1710 2000Occupied seats per year 820800 648000
Total Revenue (M) $98,496,000 $97,200,000Revenue per show $205,200 $300,000Profit per show $41,040 $60,000
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|SHOW BREAK-EVEN ANALYSIS
Resident Show Touring Show Average ticket price $120 $150Shows per year 480 324Available seats per show 1900 2500Profit per show $41,040.00 60,000.00$
Break-Even StatisticsBreakeven occupancy rate 60% 65%Revenue at Break-even Occupancy $65,664,000 $78,975,000Revenue per show to Break-even $136,800 $243,750Shows to Break-even 365.5 833.3Years to Break-even 0.76 years 2.57 years
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|RESIDENT SHOW EXPANSION MODEL
Year0 1 2 3 4 5
Number of shows opened 0 1 0 0 0 0Total Shows 0 1 1 1 1 1Average ticket price $120 $120 $130 $130 $130 $130Shows per year 480 480 480 480 480 480
Avg. Available seats per show 2000 2000 2000 2000 2000 2000Occupancy rate 90% 90% 90% 93% 93% 95%Occupied seats per show 1,800 1,800 1,800 1,860 1,860 1,900Occupied seats per year 864,000 864,000 864,000 892,800 892,800 912,000Revenue per new show $0 $103,680,000 $0 $0 $0 $0Total Revenue $0 $103,680,000 $112,320,000 $116,064,000 $116,064,000 $118,560,000
Production costs per show 180,000,000$ 180,000,000$ 180,000,000$ 180,000,000$ 180,000,000$ 180,000,000$ Production Costs to MGM 91.7% 91.7% 91.7% 91.7% 91.7% 91.7%
Fixed Cost : Production Costs $15,000,012 $0 $0 $0 $0 $0Variable Cost: Theater and Show Ops $0 $88,128,000 $88,128,000 $88,128,000 $88,128,000 $88,128,000Total Cost $15,000,012 $88,128,000 $88,128,000 $88,128,000 $88,128,000 $88,128,000
Operating profit -$15,000,012 $15,552,000 $24,192,000 $27,936,000 $27,936,000 $30,432,000Creative Royalty $13,478,400 $14,601,600 $15,088,320 $15,088,320 $15,412,800Net Cash Flow -$15,000,012 $29,030,400 $38,793,600 $43,024,320 $43,024,320 $45,844,800
1-Year IRR 94%5-Year IRR 216%Break-even 0.52 Years
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|SHOW PROFIT MODEL
Resident Show Touring Show Fixed Cost
Big top $0 $13,000,000Equipment $0 $7,000,000Production $15,000,000 $30,000,000
Total $15,000,000 $50,000,000
Average ticket price $120 $150
Average Profit Margin 80% 80%Total Operating Expenses/ Show $164,160 $240,000
Shows per week 10 9Weeks per year 48 36Shows per year 480 324Available seats per show 1900 2500Occupancy rate 90% 80%Occupied seats per show 1710 2000Occupied seats per year 820800 648000
Total Revenue (M) $98,496,000 $97,200,000Revenue per show $205,200 $300,000Profit per show $41,040 $60,000
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|NIGHTCLUB ROI (PART 1)
2008 2009 2010 2011 2012 2013Total clubs 1 1 1 1 1Club capacity 2,000 2,000 2,000 2,000 2,000Club occupancy rate 60% 60% 60% 60% 60%Average club occupancy 1,200 1,200 1,200 1,200 1,200
Cirque attendees 1,800 1,800 1,860 1,860 1,900% of Cirque attendees 35% 45% 55% 60% 60%Cirque and club attendees 630 810 1,023 1,116 1,140Outside attendees 570 390 177 84 60
Entrance price - Cirque attendees $40 $40 $45 $45 $50Entrance price - Outside attendees $50 $50 $55 $55 $60Consumption expenditure per person $40 $45 $50 $55 $60
Cirque attendee revenue $25,200 $32,400 $46,035 $50,220 $57,000Outside attendee revenue $28,500 $19,500 $9,735 $4,620 $3,600Consumption revenue $48,000 $54,000 $60,000 $66,000 $72,000
Number of Tables 50 50 50 50 50Table Occupancy rate 50% 50% 50% 50% 50%Table Reservations 25 25 25 25 25Price per Table $3,000 $3,000 $3,000 $3,000 $3,000Table Revenue $75,000 $75,000 $75,000 $75,000 $75,000
Total Ticket Revenue $53,700 $51,900 $55,770 $54,840 $60,600Total Consumption Revenue $48,000 $54,000 $60,000 $66,000 $72,000Nights open a year 234 234 234 234 234Annual revenue per club $12,565,800 $12,144,600 $13,050,180 $12,832,560 $14,180,400
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|NIGHTCLUB ROI (PART 2)
2008 2009 2010 2011 2012 2013Total nightclub revenue $12,565,800 $12,144,600 $13,050,180 $12,832,560 $14,180,400Consumption Margin 70% 70% 70% 70% 70%Total COGS 14,400.00$ 16,200.00$ 18,000.00$ 19,800.00$ 21,600.00$ Gross Profit $12,551,400.00 $12,128,400.00 $13,032,180.00 $12,812,760.00 $14,158,800.00
Expenses (per club)SG&A 2,513,160.00$ 2,428,920.00$ 2,610,036.00$ 2,566,512.00$ 2,836,080.00$ Rent Expense 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ Utilities Expense 628,290.00$ 607,230.00$ 652,509.00$ 641,628.00$ 709,020.00$
Total Expenses (per club) 5,541,450.00$ 5,436,150.00$ 5,662,545.00$ 5,608,140.00$ 5,945,100.00$ Total Operating Expenses 5,541,450.00$ 5,436,150.00$ 5,662,545.00$ 5,608,140.00$ 5,945,100.00$
Operating Profit $7,009,950.00 $6,692,250.00 $7,369,635.00 $7,204,620.00 $8,213,700.00Net Cash Flow 10,000,000-$ $7,009,950.00 $6,692,250.00 $7,369,635.00 $7,204,620.00 $8,213,700.00
2-Yr IRR 24.0%5-Yr IRR 64.9%Payback Period 1.43
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|NIGHTCLUB REVENUE PROJECTION
2009 2010 2011 2012 2013Number of new clubs 1 3 0 0 0Total clubs 1 4 4 4 4Club capacity 2,000 2,000 2,000 2,000 2,000Club occupancy rate 60% 60% 60% 60% 60%Average club occupancy 1,200 1,200 1,200 1,200 1,200
Cirque attendees 1,800 1,800 1,860 1,860 1,900% of Cirque attendees 35% 45% 55% 60% 60%Cirque and club attendees 630 810 1,023 1,116 1,140Outside attendees 570 390 177 84 60
Entrance price - Cirque attendees $40 $40 $45 $45 $50Entrance price - Outside attendees $50 $50 $55 $55 $60Consumption expenditure per person $40 $45 $50 $55 $60
Number of Tables 50 50 50 50 50Table Occupancy rate 50% 50% 50% 50% 50%Table Reservations 25 25 25 25 25Price per Table $3,000 $3,000 $3,000 $3,000 $3,000Table Revenue $75,000 $75,000 $75,000 $75,000 $75,000
Total Ticket Revenue $53,700 $51,900 $55,770 $54,840 $60,600Total Consumption Revenue $48,000 $54,000 $60,000 $66,000 $72,000Nights open a year 234 234 234 234 234Annual revenue per club $12,565,800 $12,144,600 $13,050,180 $12,832,560 $14,180,400
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|NIGHTCLUB OPERATING PROFIT PROJECTION
2008 2009 2010 2011 2012 2013Total nightclub revenue $12,565,800 $48,578,400 $52,200,720 $51,330,240 $56,721,600Consumption Margin 70% 70% 70% 70% 70%Total COGS 14,400.00$ 16,200.00$ 18,000.00$ 19,800.00$ 21,600.00$ Gross Profit $12,551,400.00 $48,562,200.00 $52,182,720.00 $51,310,440.00 $56,700,000.00
Expenses (per club)SG&A 2,513,160.00$ 2,428,920.00$ 2,610,036.00$ 2,566,512.00$ 2,836,080.00$ Rent Expense 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ Utilities Expense 628,290.00$ 607,230.00$ 652,509.00$ 641,628.00$ 709,020.00$
Total Expenses (per club) 5,541,450.00$ 5,436,150.00$ 5,662,545.00$ 5,608,140.00$ 5,945,100.00$ Total Operating Expenses 5,541,450.00$ 21,744,600.00$ 22,650,180.00$ 22,432,560.00$ 23,780,400.00$
Operating Profit $7,009,950.00 $26,817,600.00 $29,532,540.00 $28,877,880.00 $32,919,600.00
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|REALITY SHOW REVENUE PROJECTION
2008 2009 2010 2011 2012 2013Revenue
Touring Shows Average number of seats 2,000 2,000 2,000 2,000 2,000 Number of shows 6 7 6 6 6Total number of seats 12,000 14,000 12,000 12,000 12,000Total shows per year 324 324 324 324 324Annual seats 3,888,000 4,536,000 3,888,000 3,888,000 3,888,000
Resident Shows Average number of seats 1,710 1,710 1,710 1,710 1,710 Number of shows 7 8 8 8 8Total number of seats 11,970 13,680 13,680 13,680 13,680Total shows per year 480 480 480 480 480Annual seats 5,745,600 6,566,400 6,566,400 6,566,400 6,566,400
Total number of seats 9,633,600 11,237,270 10,611,722 10,602,964 10,772,489% increase in attendees 1.4% 1.4% 1.4% 3.0% 3.0%Total increase in attendees 134870.4 157,322 148,564 318,089 323,175
Average price per ticket $100 $100 $100 $100 $100Increase in attendee revenue $13,487,040 $15,732,179 $14,856,410 $31,808,892 $32,317,467
% of attendees who purchase DVDs 0% 20% 20% 20% 20%Price per DVD 25 25 25 25 25DVD Revenue $0 $56,186,352 $53,058,609 $53,014,821 $53,862,445
Total Revenue $13,487,040 $71,918,531 $67,915,019 $84,823,713 $86,179,911
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX|REALITY SHOW OPERATING PROFIT PROJECTION
2008 2009 2010 2011 2012 2013Total Revenue $13,487,040 $71,918,531 $67,915,019 $84,823,713 $86,179,911
Operating costs:Average cost per episode $700,000 $700,000 $700,000 $700,000 $700,000Number of episodes 10 10 10 10 10Production costs $7,000,000 $7,000,000 $7,000,000 $7,000,000 $7,000,000Winner's new contract 0 75,000 75,000 75,000 75,000Total costs $7,000,000 $7,075,000 $7,075,000 $7,075,000 $7,075,000
Operating profit $6,487,040 $64,843,531 $60,840,019 $77,748,713 $79,104,911Development Cost -$5,000,000Net Cash Flow -$5,000,000 $6,487,040 $64,843,531 $60,840,019 $77,748,713 $79,104,911
1-Yr IRR 30%2-Yr IRR 331%Payback 0.77
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX| ALTERNATIVE STRATEGIES
Alternative Strategy
Pros Cons
Cruises -Targets high-end sophisticated customers-Global audience-Infrastructure available for general shows
-Lower viewership per performance-Limited number of shows per week-Low ROI
Hotel Operation -Huge revenue potential-Potential venue for future shows
-Lack of experience in this business segment-High fixed cost to operate
Interactive Museum - Engages cutting-edge technologies
-Low Revenue potential-Many competing museums, lack of differentiation
High-End Dining - New market segment -Not our expertise-Chain could overextend brand
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX| COMPETITIVE POSITIONING
Competitor Line of Business The Cirque Advantage
Dragone • Director from Cirque du Soleil•Similar Productions•Upcoming Project in Macau
•Larger scale•Partnerships with global businesses
Feld Entertainment • Ringling Bros.•Disney on Ice•Disney Live
• Different Target Demographic of Adults vs. Families•No repeats of shows
Dodger Properties •Major Broadway Productions
•Huge creative team that handles all aspects of creative process•Production of more creative, interpretive shows
Source: Businessweek
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
APPENDIX| WHY ABU DHABI & ATLANTIC CITY
• The survey demonstrates that Atlantic City remains an attractive destination for tourists
• 96% of visitors view Atlantic City as becoming more attractive.• 99% would recommend Atlantic City to friends or family
members.• Eleven casinos where you also get to enjoy the pleasures of
celebrity chef restaurants, nightclubs in New York style and sprawling spas. historic concert hall where musical bands like The Police, The Rolling Stones and Madonna
• Casinos are great attractions with sparkling new retail, dining and entertainment complexes like The Pier Shops at Caesars (where Tiffany & Gucci boutiques hold court) and the Havana-inspired The Quarter at Tropicana.
Tourism Reviews
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion
2010
Annual Visit-Trips to Atlantic City (in thousands)
Year Automobile Casino Bus Franchise Bus Air Rail Total
2008 25,903 4,910 505 250 245 31,8132007 26,929 5,408 501 260 202 33,3002006 27,545 6,041 526 260 162 34,5342005 27,889 6,104 519 261 151 34,9242004 25,815 6,600 495 261 152 33,3232003 24,553 6,764 504 261 142 32,223 2002 24,676 7,586 514 268 143 33,1882001 23,501 7,985 519 276 139 32,4202000 23,177 9,015 536 323 133 33,1841999 23,247 9,342 539 396 128 33,6521998 23,293 9,903 530 447 127 34,300
Source: South Jersey Transportation Authority
APPENDIX| WHY ABU DHABI & ATLANTIC CITY
Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion