Competitive Rivalry in the Movie Theatre Industry (Essay Sample)

Competitive Rivalry in the Movie Theatre Industry
Samuel Ng’ang’a
WritersCash
September 12, 2014
The movie theater industry entails companies, which specialize in film exhibition. These include outdoor and indoor movie theatres and cinemas. Ever since the first movie theatre experience in 1894 in the US, demand for theatre services continually grew from the beginning of the 20th century onwards. This led to emergence of theatrical industries worldwide. Under current estimation, there are more than 130,000 movie theatres worldwide, with over 38,000 being in the United Sates alone (Tribune Business). This is an implication that there is intense competition rivalry within the industry and thus, creates an interest for research consideration. In order to understand this, it is imperative that a multidimensional analysis of competition factors such as market growth, differentiation, capacity, economic impact, technology and culture and barriers be undertaken to prove or disapprove this thesis.
The industry experiences changing demand trends as evident from Industry statistics. Although, attendance reports indicate that demand for these services in 2013 has tremendously declined from 1946, from 28 to 6 per person per year, global financial statistics indicate that it experienced growth in 2013, by passing the 35 billion dollar mark, and thus one of the largest in history. This growth was larger than the previous year by 4% (Glover, 2014). In the US and Canada region, the industry is worth over 10 billion dollars. These growth trends were attributed to continual expansive growth of large exhibitors such as Cineplex and Nickelodeon. Reports on small exhibitors indicate insignificant growth.
Film obtaining costs also limit industrial competition. Liberatore (2012) argues that the costs of obtaining films for theatre are very high. Only large exhibitors have the financial abilities to meet them. This locks out small exhibitors and thus reduces the levels of market rivalry (PR Newswire). Additionally, the former are given advertising rights by movie production companies and consequently, get a superior competition platform to the latter. This in turn diminishes marketplace rivalry.
Differentiation in the industry is service and price oriented. There is little price difference between them and therefore consumers prefer main exhibitors. The average ticket for a movie is approximately $8 across the platform (Glover, 2014). The costs of operation and maintenance remain high, hindering small exhibitors from further price reductions. Competition thus, becomes limited.
Capacity in the industry is imbalanced. Large exhibitors have large audience capacities and space as compared to small ones. Availability of enough space is a key consumer preference in the industry. Given that only the former meet space assurance requirements, most consumers prefer their movie experiences and are most likely to purchase tickets from these service providers (Kanny, 2010). This creates a disadvantage to small exhibitors.
Technological changes have affected consumer theatrical experiences. The digital age has risen to 65%. With availability of television sets, iPads, and computers, most consumers achieve theatrical experiences within their homes. Most movies are downloadable online, presenting ease with this experience. However, according to Liberatore (2012), emergences of IMAX and 3D technologies have retained the industry’s market relevance as consumers prefer them. The costs of purchase and implementation of these technologies are beyond small exhibitors’ abilities. This gives an advantage of market dominance to large exhibitors.
Brand popularity and thus loyalty within the industry is also a notable factor. Most consumers easily identify and relate to leading industrial brands such as Regas, Cinemark, Cineplex and Nickelodeon (Liberatore, 2012). They, in turn, continue to dominate the market as small exhibitors find it difficult in marching such brand competition. This limitation reduces market rivalry.
From the discussion, it is evident that there is little market competition in the movie theatre industry. Technological inventions and factors, brand loyalty, capacity satisfaction, costs of operation and consistencies in prices have reduced competition, enabling large exhibitors to thrive at the expense of small exhibitors.
References
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