Competitive Rivalry in the Movie Theater Industry (Essay Sample)

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Competitive Rivalry in the Movie Theater Industry
Movie theater industry comprises of firms that do film exhibition. Outdoor theaters, drive-in movie theaters and cinemas are some of the companies that comprise the movie theater industry. Rapid changes in technology have enabled consumers to watch movies in the comfort of their homes rather than going to the theaters. Users can make the choice of viewing a movie online or buying the same from a rental business. The result has been intense competition between the players in the film industry. It is due to the changes taking place that the film industry needed to be recognized to understand the ongoing rivalry in the industry (Alex). This research paper will use Porter's model of industry competition to analyze the competitive rivalry in the movie theater industry.
Supply of movie is at its utmost high giving buyers the power to choose. Supply has increased due to the advanced innovations in technology that give film business the ability to showcase their movies in a variety of avenues. Online streaming of movies has given consumers easy access to movies making the competition tougher. On the same note, the power of suppliers has also increased as they can offer flexible prices to their products. The power of suppliers has also resulted in increasing the rivalry in the film industry which ultimately has made the film industry less attractive to investors.
There are high barriers to entry in the movie industry. High barriers have helped big theaters such as Paramount and Disney to retain their market share. Digital screen technology is an essential tool required by businesses in the industry but its cost is quite high. It is only through economies of scale that established players can purchase and use it to run their businesses (Brendan 12). Most of the equipment required to run the film industry are costly thereby enhancing competition among the major players. There are also operational barriers that exist between film theaters and distributors. New entrants find it hard to overcome the barriers and leave the industry to the already established firms. The competition is mostly between the big firms in the movie theater industry.
Due to the decline in the attractiveness of the film industry, most companies are forced to reduce operating costs and their profit margins. Competition is mainly through differentiation of products, price cuts, and market segmentation to have a sustainable market share (Alex). The industry is also characterized by seasonal fluctuations which tend to make profit margin unstable for the businesses. To remain in the competition and generate high revenues, companies such as Disney specialize in films that are consumer oriented by making consumers be participants in the production of a movie.
Another important factor affecting theater movie competition is internal competition. Production of high quality and consumer specific films at lower prices is a technique used by companies to overcome the industry competition. Discounts are provided during the recession period to attract consumers. There are offerings being provided to audiences including drinks or popcorns at the theater. Facilities have to be maintained for to improve service quality. Sessions that a movie is played during the day is also a factor that most film industries consider to remain in the industry. The sessions are set in such a way that consumers can view the movies at their convenience. Competition is also upgraded by having loyalty schemes that give special offers to the loyal consumers.
Most of the small firms do not have enough financial resources to produce a movie and end up merging with the big firms to enabl