EASY GROUP CASE
The Market for Cinema in the UK
• Multiplexes are so big that if a film is full there is either another session starting
in 40 minutes, or there is something else that they really want to see.
• In its early years, a multiplex was typically the monopoly supplier to its local
catchment area.
• The multiplex environment enabled cinema operators to employ the mandatory
number of employees to manage additional revenue-generating activities such as
concession stands and ticket booths.
The Movie Industry
• Film production, distribution and exhibition were the fundamental elements of the
movie business.
Film Production
• Film production is expensive and risky
• Average cost of making and marketing a Hollywood movie in 2001 was $78.7
million
• UK film companies are not large integrated organizations
• UK film companies must pre-sell film distribution rights to a separate distribution
company
• Distribution company contributes to the production budget in form of an advance
or guarantee
Distribution
• Studio-owned and independent distributors operated in the UK cinema industry
• Distributors advised on which films should be released and sold exhibition rights
to independent operators
• Factors such as film type, potential audience size and composition, and other
films released around the same time were taken into account when determining
marketing plans and release strategies
• Success in the cinema was seen as critical to success in other markets
• Films were released in successive periods, beginning with the cinema release
highly important because the success of a film in the cinema was viewed as being
critical to its success in multiple other markets.
Exhibition
• Odeon was the leading cinema operator in the UK with a strong proposition as the
film-lover's brand
• UCI pioneered the multiplex in the UK with digital projection and IMAX screens •
Warner Village had 36 cinemas with the largest multiplex in the UK
• Cine-UK with its portfolio of 28 Cine-World cinemas had featured in the Deloitte &
Touche Indy 100 list
• Nut was negotiated between exhibitor and distributor with distributors taking
lion’s share of takings
• Theatre staffing levels increased during peak periods
Target Audience
• Two broad categories of distinction in the industry: mainstream (commercial) and
art-house
• Families were a key segment for cinemas, with weekend offers designed to make
the movie-going experience more affordable and enjoyable
• Newly refurbished cinemas emphasized comfort, service and quality films
, Use of New Technology
• Research showed that young, avid cinema-goers tend to be heavy users of mobile
phones and the Internet.
• Most cinema houses had adopted the Internet as a means of reserving seats and
purchasing tickets.
Pricing Strategies
• Little difference in average prices charged by leading exhibitors.
• Prices varied by region.
• Prices varied by time of day, day of week, type of seating, or customer segment.
• Discounted rates offered to students, senior citizens, and children.
Easyjet
• Stelios founded easyJet, Europe's first low-cost, no-frills, point-to-point airline in
1995
• Bypassed travel agents and used a yield management system
• Homogenous fleet comprised only brand new Boeing 737s
• Experienced pilots paid prevailing market rates
• No advertising agencies -used own aircraft as marketing tools
• Stelios maintained 21.9% stake -sold some of shares to finance new ventures
Easy Group
• 1998: EasyJet and easyGroup brand in place
• easyInternetcafé established, same yield management and dynamic pricing
principles as in airline business applied
• Franchises of easyinternetcafe available in 15 US states and 10 other countries
• Profitability & Growth info in Exhibit 12-14
• easyCar car rental service established in April 2000
• 2 central London rental sites established by February 2003
• Profitability expected in 2003 and targeted an IPO in 2005
Other Ventures
• Launched easyValue.com and easy.com in November 2000
• Launched easyMoney in 2001
• Financed personally by Stelios in 2003, with minimal investments from other
easyGroup management team members
New Venture Development
• EasyGroup constantly sought new business opportunities, even inviting visitors to
submit ideas.
• Decisions were made based on data from the public domain.
• The easyCinema project was closest to reaching a decision point.
Criteria for New Business Selection
• Consumer-facing businesses
• Significant price elasticity
• High fixed-cost base
• Low marginal-cost to service additional customers
• Stelios cited funeral business as example of non-suitable businesses due to lack
of discretionary spending; not suitable for yield management
Process of Entering new Business
• Extract complexity from business processes to simplify operations
• Implement user-friendly software to ensure all "check-out" process steps are
executed
• Reverse engineer business operations to arrive at a cost structure that is half of
competitors
The Market for Cinema in the UK
• Multiplexes are so big that if a film is full there is either another session starting
in 40 minutes, or there is something else that they really want to see.
• In its early years, a multiplex was typically the monopoly supplier to its local
catchment area.
• The multiplex environment enabled cinema operators to employ the mandatory
number of employees to manage additional revenue-generating activities such as
concession stands and ticket booths.
The Movie Industry
• Film production, distribution and exhibition were the fundamental elements of the
movie business.
Film Production
• Film production is expensive and risky
• Average cost of making and marketing a Hollywood movie in 2001 was $78.7
million
• UK film companies are not large integrated organizations
• UK film companies must pre-sell film distribution rights to a separate distribution
company
• Distribution company contributes to the production budget in form of an advance
or guarantee
Distribution
• Studio-owned and independent distributors operated in the UK cinema industry
• Distributors advised on which films should be released and sold exhibition rights
to independent operators
• Factors such as film type, potential audience size and composition, and other
films released around the same time were taken into account when determining
marketing plans and release strategies
• Success in the cinema was seen as critical to success in other markets
• Films were released in successive periods, beginning with the cinema release
highly important because the success of a film in the cinema was viewed as being
critical to its success in multiple other markets.
Exhibition
• Odeon was the leading cinema operator in the UK with a strong proposition as the
film-lover's brand
• UCI pioneered the multiplex in the UK with digital projection and IMAX screens •
Warner Village had 36 cinemas with the largest multiplex in the UK
• Cine-UK with its portfolio of 28 Cine-World cinemas had featured in the Deloitte &
Touche Indy 100 list
• Nut was negotiated between exhibitor and distributor with distributors taking
lion’s share of takings
• Theatre staffing levels increased during peak periods
Target Audience
• Two broad categories of distinction in the industry: mainstream (commercial) and
art-house
• Families were a key segment for cinemas, with weekend offers designed to make
the movie-going experience more affordable and enjoyable
• Newly refurbished cinemas emphasized comfort, service and quality films
, Use of New Technology
• Research showed that young, avid cinema-goers tend to be heavy users of mobile
phones and the Internet.
• Most cinema houses had adopted the Internet as a means of reserving seats and
purchasing tickets.
Pricing Strategies
• Little difference in average prices charged by leading exhibitors.
• Prices varied by region.
• Prices varied by time of day, day of week, type of seating, or customer segment.
• Discounted rates offered to students, senior citizens, and children.
Easyjet
• Stelios founded easyJet, Europe's first low-cost, no-frills, point-to-point airline in
1995
• Bypassed travel agents and used a yield management system
• Homogenous fleet comprised only brand new Boeing 737s
• Experienced pilots paid prevailing market rates
• No advertising agencies -used own aircraft as marketing tools
• Stelios maintained 21.9% stake -sold some of shares to finance new ventures
Easy Group
• 1998: EasyJet and easyGroup brand in place
• easyInternetcafé established, same yield management and dynamic pricing
principles as in airline business applied
• Franchises of easyinternetcafe available in 15 US states and 10 other countries
• Profitability & Growth info in Exhibit 12-14
• easyCar car rental service established in April 2000
• 2 central London rental sites established by February 2003
• Profitability expected in 2003 and targeted an IPO in 2005
Other Ventures
• Launched easyValue.com and easy.com in November 2000
• Launched easyMoney in 2001
• Financed personally by Stelios in 2003, with minimal investments from other
easyGroup management team members
New Venture Development
• EasyGroup constantly sought new business opportunities, even inviting visitors to
submit ideas.
• Decisions were made based on data from the public domain.
• The easyCinema project was closest to reaching a decision point.
Criteria for New Business Selection
• Consumer-facing businesses
• Significant price elasticity
• High fixed-cost base
• Low marginal-cost to service additional customers
• Stelios cited funeral business as example of non-suitable businesses due to lack
of discretionary spending; not suitable for yield management
Process of Entering new Business
• Extract complexity from business processes to simplify operations
• Implement user-friendly software to ensure all "check-out" process steps are
executed
• Reverse engineer business operations to arrive at a cost structure that is half of
competitors
