MMICC 2010 - 3rd Place - PEN
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  • Dragone now at the Wynn with his own showEmergence of niche circuses – provides unique experiences, similar novelty value prop, avant-gardeExamples: CirkusCirkör, Circus Burlesque and Le Cirque Invsible
  • -capital investment?
  • opp= corporateCONSUMER EXPERIENCE
  • Residence in a few cities, limited footprint, growth in usual customer abroadKEY SLIDEBrand awareness rate - %Number of tickets soldHuge gapPlus international opportunities
  • Lack of diversification both globally and revenue streams
  • Amplification
  • Fix titles in slides
  • Forrester Research, “The Broad Reach of Social Technologies”
  • Need cohesive visual
  • Not only casionos – they are entertainment/complete package establishments
  • Top tier hotel that has similar customer segment as Cirque du SoleilLarge capacity similar to previous successes in Las Vegas hotels
  • Say that cirque dusoleil expressed interest in these 5 citiesNotes: Criteria 1 based on GDP/capita from CIA World Factbook Criteria 2 arrivals data from Euromonitor
  • High (5), medium (3), low (1)For construction costs, we used RSMeans construction cost calculatorClub:Too trend-driving  high risk of failure (according to Hoovers, 8 out of 10 night clubs fail within the first year)However, tourist destinations may be viable locations with 15,000 SF clubs grossing between $100-260K per yearUpfront cost: $3.1 million (high-end club in Hollywood – 90048 zip code)Hotel:Highly complex and volatile business model.High fixed costs to building hotel, and returns are driven by varying occupancy.Spa:Spa revenue driven by personal disposable incomeLow upfront costs, but high need to use spa service in tourist localesRestaurant:Can average $833K per year in revenue for full service restaurantsHigh failure rateMulti-use theater:High up front costs (e.g. The median theater according to exhibit 3 costs $70 million – median)Leverages Cirque du Soleil’s core competency (theater arts)Mall:Extremely high development costs, without complete control over revenue streamsReturns driven by personal incomeOperational complexity, and lack of existing partnerships with mall developers and operatorsAmusement parks:Can leverage amusement park’s expertise in developing attraction while licensing Cirque du Soleil brand
  • High (5), medium (3), low (1)For construction costs, we used RSMeans construction cost calculatorPotential revenue derived from entrepreneur.comCONVERT TO SQUARE METERSClub:Too trend-driving  high risk of failure (according to Hoovers, 8 out of 10 night clubs fail within the first year)However, tourist destinations may be viable locations with 15,000 SF clubs grossing between $100-260K per yearUpfront cost: $3.1 million (high-end club in Hollywood – 90048 zip code)Hotel:Highly complex and volatile business model.High fixed costs to building hotel, and returns are driven by varying occupancy.Spa:Spa revenue driven by personal disposable incomeLow upfront costs, but high need to use spa service in tourist localesRestaurant:Can average $833K per year in revenue for full service restaurantsHigh failure rateMulti-use theater:High up front costs (e.g. The median theater according to exhibit 3 costs $70 million – median)Leverages Cirque du Soleil’s core competency (theater arts)Mall:Extremely high development costs, without complete control over revenue streamsReturns driven by personal incomeOperational complexity, and lack of existing partnerships with mall developers and operatorsUsing Simon Property Group numbers, used $3.77 billion 2009 FY revenue and 152.3 million gross leasable area to derive $24.78/SF in revenue...assume mall is 2.5 million square feet.Amusement parks:Can leverage amusement park’s expertise in developing attraction while licensing Cirque du Soleil brandAssume 14 million individuals go to Disneyland each year and spend $79 per day-pass ticket...also assume that the specific section of the park would garner 5% of revenue.Virtual simulation:Assume 14 million individuals go to Disneyland a year, and spend $79 for a day pass ticket...and assume ride would gather 0.5% revenue.

MMICC 2010 - 3rd Place - PEN Presentation Transcript

  • 1. CIRQUE DU SOLEIL EXTENDING THE EXPERIENCE: PROGRAMS, PARTNERS, & PLACES THE WHARTON SCHOOL | TEAM 2 RAYMOND FLORES | CASEY KLYSZEIKO CAMERON ROUZER | MINDY ZHANG
  • 2. Problem Definition PROBLEM STATEMENT Which opportunities should Cirque du Soleil pursue in order to grow sustainably and continuously push the creative frontier? WHAT OPPORTUNITIES? PROGRAMS PARTNERS PLACES • How to balance touring and resident • Who will provide programs? the right synergies? • Which geographic • New experiences • What is the optimal markets? and revenue deal structure? streams?
  • 3. Since its founding, Cirque du Soleil has successfully differentiated itself in the entertainment industry Redefined Experience Unique Positioning Win-Win Partnerships Customer Loyalty Context Programs Partners Places Implementation & Results Conclusion
  • 4. Cirque du Soleil has redefined the traditional circus experience TRADITIONAL CIRCUS CIRQUE DU SOLEIL Redefined Experience Circus performers and Street performers, no animals animals Low-brow amusement Provocative, sophisticated Unique Positioning performances Incorporates elements of Emphasis on innovation “typical” circus experience and creativity Win-Win Partnerships Targets kids and families Targets sophisticated adult population Customer Loyalty Context Programs Partners Places Implementation & Results Conclusion
  • 5. Cirque du Soleil has redefined the traditional circus experience TRADITIONAL CIRCUS CIRQUE DU SOLEIL Redefined Experience Circus performers and Street performers, no animals animals Low-brow amusement Provocative, sophisticated Unique Positioning performances Incorporates elements of Emphasis on innovation “typical” circus experience and creativity Win-Win Partnerships Targets kids and families Targets sophisticated adult population Customer Loyalty Cirque du Soleil Mission Statement “To invoke, provoke, and evoke the imagination, the senses, and the emotions of people around the world” Context Programs Partners Places Implementation & Results Conclusion
  • 6. It’s uniquely positioned away from competing forms of performing arts entertainment PERFORMING ARTS MARKET Intense Redefined Experience Unique Positioning Low price High price Win-Win Partnerships Customer Loyalty Mild Context Programs Partners Places Implementation & Results Conclusion
  • 7. It has been able to realize success through its “win-win” partnerships Cirque du Soleil’s brand brings consumers to Redefined Experience partner venue 1. Contributed to doubled earnings growth Unique Positioning of three largest casino partners 2. NY-NY experienced 23% increase in net revenues given the addition of Zumanity Win-Win Partnerships 3. MGM increased 13% increase in slot revenue attributed to Kà Customer Loyalty Context Programs Partners Places Implementation & Results Conclusion
  • 8. The typical Cirque du Soleil customer is affluent and loyal to the brand • 70% repeat customer base Redefined Experience • Targets sophisticated and educated adults • $75,000+ in average annual income Unique Positioning Win-Win Partnerships Customer Loyalty Context Programs Partners Places Implementation & Results Conclusion
  • 9. Due to its differentiated strategy, Cirque du Soleil has realized tremendous financial success Revenue (CAD$ millions) 800 700 Redefined Experience 600 500 400 300 70 million tickets sold by 2007 200 Unique Positioning 100 0 Win-Win Partnerships 12 Annual Tickets Sold (millions) 10 8 6 Customer Loyalty 4 2 0 Context Programs Partners Places Implementation & Results Conclusion
  • 10. However, the industry is becoming increasingly competitive Fragmented Industry Past directors are Emergence of niche • 60 circuses in U.S. creating their own circuses alone shows How will Cirque du Soleil maintain its distinctive advantage? Context Programs Partners Places Implementation & Results Conclusion
  • 11. And Cirque du Soleil’s business model is changing to a mixture of touring and resident shows Touring Resident Number of Cities 100 1 Price $40-$90 $100-$150 Seating Capacity 2,500 1,750 Occupancy to Break-Even 65% 60% Average Occupancy Variable 95% Performances/Year 350 480 Partners Limited Sponsors Casinos in Las Vegas; Disney Cirque’s Capital Investment $50 Million $15 Million Touring model allows for greater Resident model drives more exposure, more touch points with profits, better efficiency, and lower consumers, and better capital risk diversification Note: Figures are approximate and from case Context Programs Partners Places Implementation & Results Conclusion
  • 12. Cirque du Soleil is presented with many new opportunities • On a weekly basis, Cirque du Soleil is offered opportunities with new show partners across the globe • Corporations have a growing interest in associating with Cirque du Soleil Cirque du Soleil is a growing global brand that people want to be a part of and associate with Context Programs Partners Places Implementation & Results Conclusion
  • 13. There are many regions for continued global growth Touring Coverage Resident Locations Note: Planned 2010 Opening In Dubai • High brand awareness – Shows regularly sell-out • Only 3 countries with resident programs – 7/10 U.S. shows in Las Vegas Context Programs Partners Places Implementation & Results Conclusion
  • 14. Cirque du Soleil is at a crossroads with new opportunities and threats Strengths Weaknesses • Scalable creativity • Increasingly complex business • The Cirque du Soleil experience model • Loyal customers • Dependence on specific people • Profitability • Lack of diversification • Investment capability Opportunities Threats • Many partnership opportunities • Uncontrolled expansion leading • Untapped market potential to brand dilution • More global audience • Competitive entrants • Leverage brand in new platforms • Partners’ demands on creative control Context Programs Partners Places Implementation & Results Conclusion
  • 15. Problem Statement Which opportunities should Cirque du Soleil pursue in order to grow sustainably and continuously push the creative frontier? Context Programs Partners Places Implementation & Results Conclusion
  • 16. Cirque du Soleil has leveraged its current model for engaging consumers extremely well CURRENT MODEL Customer interacts with Cirque du Soleil mainly through its tour and resident shows. Context Programs Partners Places Implementation & Results Conclusion
  • 17. However, Cirque du Soleil can extend its distinctive experience through new platforms CURRENT MODEL NEW MODEL Customer interacts with Cirque du Customer interacts with Cirque du Soleil mainly through its tour and Soleil through new resident shows. programs, partners and places. PROGRAMS PARTNERS PLACES Context Programs Partners Places Implementation & Results Conclusion
  • 18. Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit PROGRAMS PARTNERS PLACES 1. Continue touring and 1. Expand successful Global expansion: resident shows partnership models to 1. Dubai simultaneously hotels 2. Sydney 2. Launch new nightclub 2. Introduce corporate 3. Berlin experience sponsors for touring 4. London 3. Develop flagship shows theatre Drive profitability Extend Cirque du Soleil experience Push frontiers of creative expression Context Programs Partners Places Implementation & Results Conclusion
  • 19. Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit PROGRAMS PARTNERS PLACES 1. Continue touring and 1. Expand successful Global expansion: resident shows partnership models to 1. Dubai simultaneously hotels 2. Sydney 2. Launch new nightclub 2. Introduce corporate 3. Berlin experience sponsors for touring 4. London 3. Develop flagship shows theatre 4. Invest in social media Drive profitability Extend Cirque du Soleil experience Push frontiers of creative expression Context Programs Partners Places Implementation & Results Conclusion
  • 20. Existing and new programs will extend and improve the Cirque du Soleil experience OBJECTIVE To create brand extensions that increase opportunities to engage with the Cirque du Soleil experience Recommendations 1. Continue pursuing both touring and resident shows simultaneously 2. Launch a nightclub and flagship theatre 3. Leverage social media to further engage consumer Context Programs Partners Places Implementation & Results Conclusion
  • 21. Existing tours and resident shows serve as complements and should be pursued together • BROAD ACCESS • EXCLUSIVE EXPERIENCE • Lower-priced tickets • Higher-priced tickets • Serve non-resident show cities • Serve selective cities with large tourism industries TOURING RESIDENT Touring shows encourage SHOWS SHOWS customers to seek out resident shows in the future IMPLICATION Cirque du Soleil should pursue both programs simultaneously to extend customer lifetime value and increase financial and brand impact Context Programs Partners Places Implementation & Results Conclusion
  • 22. A nightclub and flagship theatre will further extend the Cirque du Soleil experience NIGHTCLUB OBJECTIVES AND Creative Potential FLAGSHIP Compatibility with Brand Experience THEATRE Feasibility of Implementation Financial Opportunity Evaluate opportunities 1. LAUNCH NIGHTCLUB WITH 2. BUILD FLAGSHIP THEATRE EXISTING PARTNER Context Programs Partners Places Implementation & Results Conclusion
  • 23. The nightclub will extend the experience in a new realm with limited financial and operational risks 1. LAUNCH NIGHTCLUB WITH EXISTING PARTNER NIGHTCLUB • Unique brand extension Why? • Can leverage existing partners’ expertise • Work with MGM Mirage – best relationship Implementation • Upfront cost: $1.6mil (50% of total capital) • Reduce financial and operational risk through Risk Mitigation partnership / short term contract Outcomes • Annual revenue: $2.8 million Context Programs Partners Places Implementation & Results Conclusion
  • 24. The flagship theatre will be the premier creative vehicle for Cirque du Soleil 2. BUILD FLAGSHIP THEATRE FLAGSHIP • Base for creative freedom THEATRE Why? • Significant financial potential Implementation • Upfront cost: $180million • Limit financial risk through gradual development Risk Mitigation timeline • Launch in new location to limit cannibalization Outcomes • Annual revenue: $100 million Context Programs Partners Places Implementation & Results Conclusion
  • 25. Finally, interactive and social media will engage the consumer and build loyalty BUILDING BUZZ OBJECTIVE Increase exposure to Cirque du Soleil to attract new THROUGH SOCIAL customers and continue loyalty among existing customers MEDIA • Of the 80% of online American adults who use social media monthly, 48% use it to review product and service ratings* RECOMMENDATIONS Increase usage of social & interactive media • Social networking sites (blogs, websites) EXPECTED OUTCOMES • Increase connection with potential customers • More ticket purchases from existing customers * 2009 Forrester Research Context Programs Partners Places Implementation & Results Conclusion
  • 26. New programs will enable the consumer to extend the Cirque du Soleil experience TOURING RESIDENT SHOWS SHOWS NIGHTCLUB AND FLAGSHIP THEATER BUILDING BUZZ THROUGH SOCIAL MEDIA Context Programs Partners Places Implementation & Results Conclusion
  • 27. Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit PROGRAMS PARTNERS PLACES 1. Continue touring and 1. Expand successful Global expansion: resident shows partnership models to 1. Dubai simultaneously hotels 2. Sydney 2. Launch new nightclub 2. Introduce corporate 3. Berlin experience sponsors for touring 4. London 3. Develop flagship shows theatre 4. Invest in social media Drive profitability Extend Cirque du Soleil experience Push frontiers of creative expression Context Programs Partners Places Implementation & Results Conclusion
  • 28. Finding the right partners will be integral to enhancing and growing the Cirque du Soleil experience Criteria for 1. Respect Creative Freedom Successful Cirque du Soleil must have complete control over all artistic Partnerships decisions 2. Brand Compatibility Resident The mission, values, and market perception of a partner must Partnerships align with that of Cirque du Soleil 3. Mutual Financial Advantage Cirque du Soleil presence provides additional revenue Touring opportunities for partner Partnerships Amplifies Cirque’s financial returns and awareness Context Programs Partners Places Implementation & Results Conclusion
  • 29. Cirque should build upon the success of past resident program partnerships Respect Mutual Criteria for Brand Creative Financial Successful Compatibility Freedom Advantage Partnerships Casinos Hotels Resident Cities Partnerships Restaurants Venues Touring Partnerships Context Programs Partners Places Implementation & Results Conclusion
  • 30. Resident partnerships should be pursued with casinos and hotels Respect Mutual Criteria for Brand Creative Financial Successful Compatibility Freedom Advantage Partnerships Casinos Hotels Resident Cities Partnerships Restaurants Venues Touring Partnerships • Continue resident programs with casinos • Pilot new programs with compatible hotel resorts Context Programs Partners Places Implementation & Results Conclusion
  • 31. The Atlantis Palm is the ideal candidate for a pilot hotel partnership Criteria for Recommended Target: Atlantis Palm, Dubai Successful Partnerships At a Glance • Rooms: 1,539 • Restaurants: 17 Resident • Average Rate: Partnerships $490 - $5,450 Deal Structure • Atlantis pays $100M The Cirque Effect Touring construction cost • Hotel-owned restaurants and shopping Partnerships • $30M production cost will benefit from additional spending by evenly split Cirque customers • Profits shared 50/50 • 80% of customers are not staying at the hotel • Cirque maintains complete • Average attendee spends approx. $30 creative control on food and drinks Context Programs Partners Places Implementation & Results Conclusion
  • 32. There is an opportunity to benefit from partnerships with touring shows Criteria for Respect Creative Brand Mutual Financial Successful Freedom Compatibility Advantage Partnerships Corporate Sponsorships Resident Partnerships Touring Partnerships Context Programs Partners Places Implementation & Results Conclusion
  • 33. Infiniti provides an example of a lucrative corporate sponsor Criteria for Respect Creative Brand Mutual Financial Successful Freedom Compatibility Advantage Partnerships Corporate Sponsorships Resident Partnerships Case Example: Infiniti Automotive Partnership Natural alignment of market perception of performance and innovation Touring Partnerships Infiniti financially supports Cirque du Soleil shows while Infiniti benefits from brand association Cirque du Soleil brand moves from one night experience to everyday exposure Context Programs Partners Places Implementation & Results Conclusion
  • 34. New hotel partners and corporate sponsors will support, enhance and grow the Cirque experience Resident Partnerships Touring Partnerships ex. Atlantis Palm Dubai ex. Infiniti Sponsorship • Drive additional revenue streams • Facilitate new growth and expansion • Extend the brand experience to new venues Context Programs Partners Places Implementation & Results Conclusion
  • 35. Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit PROGRAMS PARTNERS PLACES 1. Continue touring and 1. Expand successful Global expansion: resident shows partnership models to 1. Dubai simultaneously hotels 2. Sydney 2. Launch new nightclub 2. Introduce corporate 3. Berlin experience sponsors for touring 4. London 3. Develop flagship shows theatre 4. Invest in social media Drive profitability Extend Cirque du Soleil experience Push frontiers of creative expression Context Programs Partners Places Implementation & Results Conclusion
  • 36. Cirque du Soleil should expand in geographies that share characteristics with current successes • Cirque du Soleil has worldwide presence • Resident shows extremely concentrated in the U.S., particularly Las Vegas • Cirque du Soleil should look to expand in geographies that share similar location and population characteristics with current resident shows Location Criteria 1. High and/or growing population income 2. Tourism & travel-based destination 3. Past experience from touring shows 4. Diversify locations and offerings Context Programs Partners Places Implementation & Results Conclusion
  • 37. Cirque du Soleil should expand in geographies that share characteristics with current successes 1. High and/or 2. Tourism & 3. Past experience 4. Diversify growing travel-based from touring locations and population income destination shows offerings 6,535,000 Dubai $41,800 Yes Yes arrivals per year 15,340,000 London $35,400 Yes Yes arrivals per year 1,869,000 Sydney $38,500 Yes Yes arrivals per year 2,552,000 Berlin $34,200 Yes Yes arrivals per year 7,646,000 New York $46,400 Yes No arrivals per year Context Programs Partners Places Implementation & Results Conclusion
  • 38. Dubai, London, Sydney and Berlin present the best opportunities for future Cirque expansion 1. High and/or 2. Tourism & 3. Past experience 4. Diversify growing travel-based from touring locations and population income destination shows offerings 6,535,000 Dubai $41,800 Yes Yes arrivals per year 15,340,000 London $35,400 Yes Yes arrivals per year 1,869,000 Sydney $38,500 Yes Yes arrivals per year 2,552,000 Berlin $34,200 Yes Yes arrivals per year 7,646,000 New York $46,400 Yes No arrivals per year Context Programs Partners Places Implementation & Results Conclusion
  • 39. Expanding in Dubai, London, Sydney and Berlin will give Cirque du Soleil a truly global footprint Touring Coverage Resident Locations New Resident Locations New Flagship Locations A global footprint will extend the Cirque du Soleil experience to more consumers and diversify its programs and partnerships Context Programs Partners Places Implementation & Results Conclusion
  • 40. Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit PROGRAMS PARTNERS PLACES 1. Continue touring and 1. Expand successful Global expansion: resident shows partnership models to 1. Dubai simultaneously hotels 2. Sydney 2. Launch new nightclub 2. Introduce corporate 3. Berlin experience sponsors for touring 4. London 3. Develop flagship shows theatre 4. Invest in social media Drive profitability Extend Cirque du Soleil experience Push frontiers of creative expression Context Programs Partners Places Implementation & Results Conclusion
  • 41. Given the increased complexity of pursuing additional expansion, a gradual implementation strategy is most appropriate Current Programs 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Touring Shows Continue current shows and pursue corporate sponsorships Continue current shows New show in Dubai Resident Shows New show in Sydney New show in Berlin New Programs Build Launch and operate Nightclub (Las Vegas) Explore potential expansion Flagship Theatre Build Launch Operate (London) Context Programs Partners Places Implementation & Results Conclusion
  • 42. This strategy will increase revenues by 25.6% and profits by 33% annually over the next 10 years Total Revenue Total Profits $1,797,176 $452,665 $701,500 $137,300 2010 2020 2010 2020 Note: Graphs in 000s (millions) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total Revenue $ 702 $ 738 $ 778 $ 818 $ 858 $ 1,030 $ 1,215 $ 1,552 $ 1,629 $ 1,712 $ 1,797 Total Profits $ 137 $ 144 $ 148 $ 151 $ 87 $ 136 $ 189 $ 391 $ 410 $ 432 $ 453 Context Programs Partners Places Implementation & Results Conclusion
  • 43. New ventures will generate annual profits by 2017 and contribute nearly $800M over the next 10 years New Venture Profits $250,000 $200,000 $150,000 $100,000 • New Ventures included are: $50,000 1.Dubai Resident Show $- 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2.Sydney Resident Show -$50,000 3.Berlin Resident Show -$100,000 4.London Flagship Theatre Cumulative New Venture Profits 5.Las Vegas Nightclub $800,000 6.Touring Corporate Sponsorships $700,000 $600,000 $500,000 • Cirque will sustain losses from 2013- $400,000 2015 during initial investment phase $300,000 $200,000 $100,000 $- -$100,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 -$200,000 Context Programs Partners Places Implementation & Results Conclusion
  • 44. Cirque du Soleil should create an extended experience through new programs, partners and places in order to push the frontiers of creativity and drive profit PROGRAMS PARTNERS PLACES 1. Continue touring and 1. Expand successful Global expansion: resident shows partnership models to 1. Dubai simultaneously hotels 2. Sydney 2. Launch new nightclub 2. Introduce corporate 3. Berlin experience sponsors for touring 4. London 3. Develop flagship shows theatre 4. Invest in social media Drive profitability Extend Cirque du Soleil experience Push frontiers of creative expression Context Programs Partners Places Implementation & Results Conclusion
  • 45. QUESTIONS EXTENDING THE EXPERIENCE: PROGRAMS, PARTNERS, & PLACES Touring Shows: Problem Touring v. Additional Risk Mitigation Places Analysis Definition Resident Considerations Resident Shows: New Venture Strategy Nightclub Additional Profits Sensitivity Coverage Map Statement Considerations Analysis Evaluating New Venture Changing Business Flagship Theatre Program Shows: Financial Timeline Model Opportunities Projections Nightclub Venture: Corporate Social Resident Social media Profits & Financial Responsibility Partnerships campaigns Revenues Breakdown Extending the Touring Infiniti Deal Organizational New Venture Experience Sponsorships Structure Structure Analysis
  • 46. PROGRAM APPENDIX – Touring Shows: Additional Considerations (A) Should Cirque du Soleil pursue arena touring shows in addition to big-top shows? TOURING Yes, but limit arena touring shows to older, repeat shows rather SHOWS than new pilots. PROS OF ARENA SHOWS CONS OF ARENA SHOWS Broader reach Danger of brand dilution Scale and profitability Less intimate experience for consumers Should Cirque du Soleil continue to invest in touring shows despite lower profitability? • Yes, touring shows are core to CDS’s tradition and brand • Doing otherwise would compromise broad brand exposure • Fewer customers exposed -> fewer loyal customers and repeat purchasers
  • 47. PROGRAM APPENDIX – Resident Shows: Additional Considerations (B) Does an excess of resident shows cannibalize financial impact? RESIDENT SHOWS • Must maintain novelty of each show • Diversity of partners and show offerings reduce cannibalization within geographic markets • Example: Las Vegas
  • 48. PROGRAM APPENDIX – Evaluating Program Opportunities (C) The nightclub and flagship theater are the most viable opportunities to extend the Cirque du Soleil experience Compatibility Creative Feasibility - Financial with brand Total Potential implementation Opportunity experience Nightclub 5 5 5 2 17 Hotel 5 3 2 3 13 Spa 3 2 5 1 11 Restaurant 3 2 5 2 12 Multi-use 2 5 2 5 14 theater Mall 2 1 1 4 8 Amusement Park 4 4 1 4 13 attraction Virtual 4 3 3 3 13 simulation
  • 49. PROGRAM APPENDIX – Evaluating Program Opportunities (D) Metrics used to determine the development feasibility and financial potential of program opportunities Size (SF) Zip Code Upfront Costs Potential Avg. /description (feasibility) Annual Revenue (opportunity) Club 15,000 90048 (LA) $3.1 million $1.6 million Hotel 300,000 90048 (LA) $74.8 million $1.9 million Spa 23,000 90048 (LA) $2.8 million $60,000 Restaurant 9,000 90048 (LA) $2.2 million $980,000 Theater 500,000 90048 (LA) $180 million $100 million Mall 2,500,000 90048 (LA) $262 million $62 million Amusement park Benchmarked to new N/A $200+ million $55.3 million Harry Potter attraction attraction Virtual simulation Benchmarked to Star N/A $50 million $5.5 million Tours simulation
  • 50. PROGRAM APPENDIX – Social media campaigns (E) How will Cirque du Soleil utilize social media to create buzz about its programs? Existing Interactive Media Platforms New Platform: Exclusive Cirque du Soleil • Conversations “Supporters” Website  Twitter • Exclusive to show-goers  Performing arts blogs • Incentives for referring friends  Nightlife blogs • Sneak peaks into new shows  Video-sharing (YouTube) • Discussion forum for sharing photos • Communities • Exclusive interactive features online  Facebook (e.g. games, behind-the-scenes  Other social networking sites videos, interviews with • Referrals performers, etc.)  Local city websites  Referral / review sites  City tourism websites
  • 51. PARTNERS APPENDIX – Infiniti Deal Structure Case Example: Infiniti Automotive Partnership Criteria for Successful Partnerships • No infringement on Cirque creative freedom • Infiniti will receive recognition as sponsor on show promotional materials and during marketing Resident • No use of Cirque images or brand in Infiniti advertising Partnerships Potential Deal Structure Touring • Fixed Initial Sponsorship Fee: $1.5M Partnerships • Occupancy Bonus: $10,000 for every 1% over 80% occupancy Other Partnerships Note: Estimates based on benchmark of comparable sponsorship deals
  • 52. IMPLEMENTATION & OUTCOMES APPENDIX – Risk Mitigation Risk Mitigation 1. Brand dilution • Maintain high-end exclusivity through resident shows and flagship theatre 2. Potential competition between new Cirque du • Cross-promotions and bundling with existing partners to Soleil programs and existing partner shows drive customers to all shows 3. Upfront cost of expansion • Collaborate with existing partner for night club -> spread financial and operational risk • Build flagship theatre gradually to avoid high upfront cost 4. Unprofitable operations • Collaborate with existing partner for night club -> spread financial and operational risk • Start with one night club as a “testing ground” for future initiatives 5. Oversaturation of circus market • Cirque du Soleil’s market is broader than just circus-goers – the potential extends to all high-end entertainment-seekers 6. Potential for delayed project start • Current operations provide continued revenue streams 7. Potential for partners to infringe upon Cirque du • Prioritize existing partners with proven reputation for Soleil’s creative freedom respecting Cirque du Soleil’s creative freedom • Encourage future creative developments through flagship theatre – Cirque du Soleil has 100% control
  • 53. FINANCIAL APPENDIX - New Venture Profits Sensitivity Analysis (A) Good Scenario: Cumulative New Venture Profits • Breakeven in 2017 $1,200,000.00 $1,000,000.00 • $1 Billion in Profits by 2020 $800,000.00 from New Ventures $600,000.00 $400,000.00 $200,000.00 • 25% profit margin increase over $- normal scenario -$200,000.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Bad Scenario: Cumulative New Venture Profits $150,000 $100,000 • Breakeven in 2020 $50,000 $- -$50,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 • Loses of $250M+ through 2016 -$100,000 -$150,000 -$200,000 -$250,000 -$300,000
  • 54. FINANCIAL APPENDIX - New Venture Shows: Financial Projections (B) (millions) Location Profit Margin 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Dubai $- $- $ - $ - $ 100.00 $ 105.00 $ 110.25 $ 115.76 $ 121.55 $ 127.63 $ 134.01 Revenues Resident Berlin $- $- $ - $ - $ - $ 100.00 $ 105.00 $ 110.25 $ 115.76 $ 121.55 $ 127.63 Sydney $- $- $ - $ - $ - $ - $ 100.00 $ 105.00 $ 110.25 $ 115.76 $ 121.55 Flagship London $- $- $ - $ - $ - $ - $ 100.00 $ 105.00 $ 110.25 $ 115.76 $ 121.55 Dubai $- $- $ 5,202.00 $ 5,306.04 $ 5,412.16 $ - $ - $ - $ - $ - $ - CapEx Resident Berlin $- $- $ - $ 5,306.04 $ 5,412.16 $ 5,520.40 $ - $ - $ - $ - $ - Sydney $- $- $ - $ - $ 5,412.16 $ 5,520.40 $ 5,630.81 $ - $ - $ - $ - Flagship London $- $- $ - $ - $ 64,945.93 $ 66,244.85 $ 67,569.75 $ - $ - $ - $ - Dubai 28% $- $- -$ 5,202.00 -$ 5,306.04 -$ 5,384.16 $ 29.40 $ 30.87 $ 32.41 $ 34.03 $ 35.74 $ 37.52 Profits Resident Berlin 28% $- $- $ - -$ 5,306.04 -$ 5,412.16 -$ 5,492.40 $ 29.40 $ 30.87 $ 32.41 $ 34.03 $ 35.74 Sydney 28% $- $- $ - $ - -$ 5,412.16 -$ 5,520.40 -$ 5,602.81 $ 29.40 $ 30.87 $ 32.41 $ 34.03 Flagship London 55% $- $- $ - $ - -$ 64,945.93 -$ 66,244.85 -$ 67,514.75 $ 57.75 $ 60.64 $ 63.67 $ 66.85 Total Profits $- $- $ - $ - $ 128.00 $ 262.40 $ 558.52 $ 586.45 $ 615.77 $ 646.56 $ 678.88
  • 55. FINANCIAL APPENDIX - Nightclub Venture: Financial Breakdown (C) Customers Per Night 200 Nights Open Per Year 312 • Breakeven in 2018 People Served (Customers/Night * Nights/Yr) 62,400 • Cirque Profit Margin: 7.5% Cover Charge/Customer $ 10 Drink Spending/Customer $ 15 Revenue $ 1,560,000 • Based on 50/50 profit Profit Margin 15% sharing with partner Profit Margin after Sharing with Partner 7.5% • 5% annual revenue growth 2012 Profit $ 117,000 Cumulative Nightclub Profits $1,000,000.00 $500,000.00 $- -$500,000.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 -$1,000,000.00 -$1,500,000.00 -$2,000,000.00
  • 56. OTHER APPENDIX – Organizational Structure (A) Current Structure CEO Show 1 Show 2 Show 3 Show 4 Show directors have complete creative freedom to develop innovative programs
  • 57. OTHER APPENDIX – Organizational Structure (B) Proposed Structure • Increased business staff to manage CEO expansion and development of brand extensions • Modify structure while maintaining Touring Resident Development “show over business” philosophy Director Director Director Show 1 Show 1 New Initiatives Show 2 Show 2 Maintain “show over business” philosophy
  • 58. Extending the Cirque du Soleil experience TRADITIONAL CUSTOMER LIFE CYCLE: Consumer reaches Engagement maximum engagement with brand through singular with brand interaction point, with engagement decreasing over time. Time Show
  • 59. Extending the Cirque du Soleil experience NEW CUSTOMER LIFE CYCLE: Consumer experiences Engagement increasing and sustained engagement with the brand with brand through multiple interaction points. Show 1 Club Show 2 Time
  • 60. Parameters for corporate responsibility Community Environment • Promote the potential of youth • Reduce impact on climate change by • Cirque’s creative complex ensuring responsible energy • Cultural action in Montreal consumption • Citizenship action in St. Michel • Waste management and hazardous • TOHU – City of Circus Arts waste disposal • Citizenship action on tour shows • Air and water quality management • Resident shows • Social action • Cultural action • Social Circus – artistic intervention • Cirque du Monde • Training in Social Circus