jueves, 14 de junio de 2007

My Independent Movie Theater

I want to start my own independent movie theater and I think it’s a good idea. At the Jackson Hole Film Festival, June 7-11 2007, more than 750 movies were submitted and only 93 were accepted for the festival. What happens to the other 657 movies? Thousands of movies are sent into film festivals that only allow less than one hundred to be shown. With the increase in technology that makes independent film making easier and more widely available, more and more independent films are going to be made. Just look at how many independently made videos are on youtube.com where in July 2006, they announced that they hit 100 million videos served per day. There is an increase of independent movies being made but there is no increase of venues to show them.
My independent movie theater will also take advantage of strategies that conventional movie theaters can’t. My theater can maximize profits using the economic theories of supply and demand, which states that when demand is high and supply is low companies should raise prices, and when demand is low and supply is high, they should lower prices. Traditionally in a movie theater, a hugely popular movie will cost just as much as a less popular movie that’s on its 5th week of release. This strategy doesn’t make much sense. Just as retail stores mark down inventory to move it, the independent theater can mark down movies to lure more customers. We all know that millions of Americans who won’t shell out 8 dollars to see a not-so-great-movie in the theater will happily spend 3 or 4 dollars to watch the same movie on their home TV when it comes out to rent. To further this argument that lowering prices of less popular movies in the theater will increase box office sales, Americans spent 1 billion more on movie rentals than on movie theaters in 2002, which suggests that there is a lot of cash being spent at Blockbuster that theater owners could be claiming instead. If less people are going to a certain movie that costs 8 dollars, then the price will be lowered to 5 dollars to get more people into the seats. This strategy will maximize profits.
In a traditional movie theater, they only get to keep 25 percent or so of ticket sales in the first few weeks of a movies run. The percentage of ticket sales that the studio takes decreases each week that a movie is in the theater. During the film's opening week, the studio might take 70 to 80 percent of gross box office sales. By the fifth or sixth week, the percentage the studio takes will likely shrink to about 35 percent. This is why movies rely so much on concessions to make a profit.
On the other hand, in the independent movie theater, the price that the theater makes per ticket could be increased. This is possible because instead of having to show a big production studio’s movie in your theater on the big production company’s terms, you can show it on the terms between you and the independent filmmaker himself. Independent filmmakers are used to having to pay submission fees in order to get their movies shown in film festivals let alone make any money back. And more than anything, they just want their work to be seen. So more often than not, the independent theater could collect as much as 75 percent or more of ticket sales beginning opening night.
My independent theater could also make money off charging independent filmmakers to show trailers. Traditionally again, studios pay theaters for showing their trailers after the fact, based on the number of people who saw them. Studios send a couple of new trailers every week to the theater and then the theaters have to call in their numbers every night to the studios, and then the studio gives them 'x-amount' per person. This process could also be side stepped in an independent theater where a flat fee could be charged for an independent filmmakers trailer.
In addition, tidbits like local advertising and concessions can generate revenue for my independent theater as well. The theater could have slide projectors that show ads for local businesses that play before the movie begins. Having 15 advertisements that cost 100 dollars a week each can easily add up to as much as 6,000 dollars a month.
Then it comes down to just getting independent filmmakers to give you quality movies to show, and then getting people to come to the theater to watch them. Since independent films are inherently lesser known, this poses a slight problem. For it to really work, the theater would need to be in a big city where there are film schools and where film festivals take place. You could advertise just like any theater does but emphasize cheaper prices and that the films are independent. Like with any company, the best kind of marketing is through word of mouth. Recommendations that come from your peers are 100 percent more effective than a recommendation that comes from the company itself because your peer is speaking honestly and is unlikely to have an ulterior motive (i.e. they are not receiving an incentive for their referrals.) So, the independent theater would need to translate its idea to the public in a way that it is intriguing enough to get them to interact with it and then share it with others.
To get the news out there that this theater exists you can use pre-existing social networks, chain Emails, electronic mailing lists, a website, and blogs to spread the word, and you can put the theater’s website on every ticket stub and box of popcorn sold to motivate more participation. On the website, the trailers for any independent filmmaker’s movie could be uploaded and then people could vote with their Email addresses on which movie they would want to see most. They could also comment on the movie’s blog and forward the trailer to friends so they can vote as well. Then once the movie has enough votes to sell out a few showings, you email all those people who voted to tell them when the showings would start. Instead of pushing films into theaters with lots of marketing money, audience pull will be the way that more films get into theaters. In addition, to pass advertising onto others, by spreading the message across the Web like a virus, is at no cost to the Independent Movie Theater.
So there’s my idea.

jueves, 7 de junio de 2007

The Wal-Mart effect

I finished reading The Wal-Mart Effect by Charles Fishman and here is my conclusion.
Wal-Mart, the largest company in history, is constantly being questioned about its practices. The way it treats its employees, the way it treats its suppliers, the way it treats its communities, and its motivation are under constant scrutiny from the public. Yet millions of people vote with their debit cards everyday to keep Wal-Mart around. Whether you shop at Wal-Mart or not, it has an effect on you as a consumer. There are always two sides to every criticism which I will show through this report. The objections to criticisms of Wal-Mart, and their positive sides, make me personally a fan of Wal-Mart.
The statistics of Wal-Mart, the world’s most powerful company, are staggering. Ninety percent of Americans live with in 15 miles of a Wal-Mart and 93 percent of American households shop at least once at Wal-Mart in a year. Wal-mart’s sales in the U.S. are equal to 2,060 dollars spent there by every household in the last year. This year 7.2 billion people will shop at a Wal-mart store. Wal-mart is also the largest retailer in both Mexico and Canada. Wal-Mart has 1.6 million employees. Wal-Mart is not only the largest company in the world it is also is unchallenged by its so-called rivals being as big as Home Depot, Kroger, Target, Costco, Sears, and Kmart combined.
The core of Wal-Mart’s success and everyday low prices stems from founder Sam Walton himself. Hard work, accountability, frugality, and constant improvement are some of Walton’s values that still last to this day. The typical worker at Wal-Mart headquarters in Bentonville Arkansas puts in 58 hours a week. They work 15 percent more hours than their competitors.
The level of frugality of Wal-Mart is unprecedented as they pass every last penny of savings on to the customer. Suppliers are required to give Wal-Mart toll free numbers to call them, offices at Wal-Mart headquarters are furnished with mismatched office furniture given to them from suppliers, and staffers who travel only have their tipping reimbursed up to 10 percent for a meal. Accountability is emphasized to the point of the dollar performance of Wal-Mart’s sales in every category. For example, Wal-Mart keeps track of the number of items per hour each of its checkout clerks scans at every cash register, at every store, for every shift as a means of measuring their productivity. These obsessive data gathering habits drive home the importance of accountability to the point where there is no hiding.
This culture, instilled by founder Sam Walton, to this day remains unchanged but the scale of Wal-Mart has. Walton died when there were 370,000 employees and sales of 44 billion. Now there are 1.2 million more employees and 240 billion more dollars in sales. These practices of get to work early, check your numbers constantly, and don’t spend money you don’t have to spend, got Wal-Mart to where it is today, but now these practices have transformed Wal-Mart into what seems to be borderline exploitive if not illegal because of its change in size.
Much of criticism towards Wal-Mart has to do with low wages, unrelenting pressure on suppliers, products cheap in quality as well as price, and offshoring of jobs.
First, on the topic of low wages; Wal-Mart declares proudly that the hourly wage of store employees is almost twice the federal minimum wage. However, for a single mom that means that she is taking home only 290 a week, hardly enough to support a family. Wal-Mart says that their retail jobs are meant as supplemental income; not to support a family. The problem with that is for two thirds of Americans Wal-Mart is the single largest employer where they live.
Wal-Mart wields its dominating power to transmit its relentless dissatisfaction with price towards its suppliers to keep those everyday low prices. Wal-Mart has the ability to reach deep inside the day-to-day operations of its suppliers and shape their operations, choices, and product mix to their liking. They form “partnerships” with their suppliers to take down the barrier between vendor and retailer to take costs out of the system. But too often this translates to businesses being chewed up and spit out by Wal-Mart’s bullying system. Wal-Mart takes control away from suppliers of everything from redesigning packages to computer systems if the supplier wants to sell at Wal-Mart. Wal- Mart tells its suppliers straightforwardly what it will pay for their goods. Wal-Mart’s suppliers cant consider themselves serious players unless they are doing business with Wal-Mart, then once they are doing business with them they are doing it on Wal-Marts terms and they no longer run their own business.
Because of Wal-Mart’s constant pressure for everyday low prices, some manufacturers have to make their products cheaper by changing the quality of the products themselves to be able to sell them at Wal-Mart’s low price. The core value of Levis blue jeans for example, is quality and durability. But to sell at Wal-Mart, a cheaper kind of denim is used and simpler designs. This creates a serviceable but utterly undistinguished pair of jeans that are both inexpensive and cheap, which turns inside out what Levis jeans have stood for for 150 years.
Eventually there are no more efficiencies to be wrung out of the supply chain; eventually the only way to lower costs is to manufacture outside of the U.S. There is no question that Wal-Mart is accelerating the loss of American jobs to low wage countries like China. Some people say that we are buying ourselves out of jobs by supporting Wal-Mart but Wal-Mart says that they created 100,000 new jobs in the U.S. in the year of 2004. But the truth is that actually when a new Wal-Mart opens up people don’t buy more products, they just shift where they buy those products. Much of Wal-Marts business comes at the expense of other retailers. So when Wal-Mart “increases” jobs, all it is really doing is taking the jobs away from other retailers that already existed in the community that have gone out of business because Wal-Mart came into town.
Even with all these negative viewpoints of Wal-Mart, I feel that Wal-Mart is the up most example of what is possible within the realm of a democratic free market. Wal-Mart is a testament to what American capitalism is all about. Wal-Mart does affect everyone, even if you don’t shop at Wal-Mart, but I don’t think it is capable of ever taking over completely.
When it comes to low wages; it’s true that Wal-Mart makes 10.3 billion in sales, but if you distribute that across the 1.6 million employees that’s only 6,400 dollars per employee. Wal-Mart makes 3 dollars an hour in total profit spread out over the year, so they wouldn’t be able to afford to pay 12 dollars an hour, even if they wanted to. There isn’t enough money-at least not without raising prices.
Most companies will beg for the opportunity to have Wal-Mart sell their product because Wal-Mart has such a large market share, but that doesn’t mean that a company needs to go through Wal-Mart to be successful. Some companies make it a conscious business strategy to not sell in Wal-Mart because the perception is that things sold in Wal-Mart are not quality products. No one really likes shopping at Wal-Mart; most people just go to buy things. Trekking through a Wal-Mart to find what you need feels more often like a chore than shopping. There will always be opportunity for other businesses to survive if they make their emphasis customer service and quality instead of price. Just yesterday (6/6/07) in the Wall Street Journal, there was an article entitled, “Not copying Wal-Mart Pays Off for Grocers”. It said, “The supermarkets are winning back shoppers by sharpening their differences with Wal-Mart's price-obsessed supercenters, stressing less-hectic stores with exotic or difficult-to-match products and greater convenience. Last year, sales at supermarkets open at least a year rose 4%, the biggest increase in five years, according to retail consultants.”
We have all seen U.S. factories being shut down to go overseas but at the same time, finding cheaper stuff is still too addictive for American consumers to give up and no one connects the two. Consumers will never be able to say no to a lower price even if it means we are buying ourselves out of jobs. What Americans need to realize is that continuing education is the only solution to offshoring. If we are constantly adding value to our work by increasing our ability to compete with the work of the world, and educating ourselves, then less jobs will be lost weather Wal-Mart encourages offshoring or not. Offshoring is not Wal-Mart’s fault.
Wal-Mart’s relentless goal of always low prices may persuade some suppliers to produce under sweat shop conditions or side step environmental rules, but where does Wal-Marts responsibility start and stop? Shouldn’t it be the government’s responsibility to enforce laws? According to Wal-Mart, their responsibility is to obey the law and deliver low prices. Even though they could potentially use their power to solve some of the environmental and labor problems that the industries that it relies on create, where is the line? And once you open the door to considerations other than what’s required by law, to considerations other than what’s required to improve efficiency and decrease cost; where will the demands end? What won’t people ask of Wal-Mart?
I salute Wal-Mart and its efforts to be the best retailer in history. If I start a business I want to be able to know that there is no limit to my company’s potential. I enjoy everyday low prices and I also know that Wal-Mart just ads to innovation, better quality, and better customer service everywhere else.