A Different Business Model
you charge less than $3 for movies in a major urban market,
sell no concessions, and still operate a viable cinema
company? That’s what Greek entrepreneur Stelios
Haji-Ioannou is attempting on an experimental basis in
England. Though it sounds crazy, Haji-Ioannou has used
similar models with success in other businesses.
“EasyJet,” his venture in the airline industry,
has somewhat revolutionized travel in Europe. Cheap tickets
are purchased in advance online. Planes are full. No
food is served. There are no reserved seats. Maria and
I recently flew from Amsterdam to London for $39 a head
on tickets Maria booked online weeks before. It wasn’t
very comfortable, but it was very inexpensive. The cab
ride downtown was more expensive. “EasyJet” now
plans a new fleet of planes for the trans-Atlantic
market to the United States.
In addition to his airline, Haji-Ioannou’s ventures
include rental cars and Internet cafés, also based
on heavy discounting and no frills. But how successfully
can he extend this model to the cinema?
“EasyCinema” has acquired
its first site in Milton Keynes and began selling tickets
for shows in late May
2003. Haji-Ioannou signed a 5-year lease for what
was a loss-making UCI 10-plex in the area. The site was
in 1985. Milton Keynes is a very competitive cinema
territory, with traditional cinemas close by.
To date, easyCinema has only booked films from smaller
companies, or films that have already had their first
run. None of the distributors have agreed to supply
first-run product yet.
The easyCinema has no box office.
Patrons must purchase their tickets online, or at kiosks
the site. No
concessions will be sold. Indeed, Mr. Haji-Ioannou
his patrons to bring their own popcorn. Obviously,
the business plan contemplates significantly
costs than the typical cinema’s.
The key to “easyCinema,” and the other businesses
operated by Haji-Ioannou, is yield management pricing.
Under this structure, tickets booked in advance are much
cheaper than those nearer the show date and time. “EasyCinema” sells
tickets up to one month in advance for as little as 20p
(32 cents). For patrons who wait until the last minute,
the ticket prices rise substantially. But the average ticket
price contemplated is only about one and a half pounds
Under this system, Haji-Ioannou believes
he will obtain a much higher rate of seat use, and that
patrons will come
to easyCinema during non-peak times. I assume he also counts
on some breakage from patrons who buy tickets online and
then never come to the show.
Film companies will each make their own
decision about the proposed business model. To date, easyCinema
booked films from smaller companies, or films that have
already had their first run. None of the distributors have
greed to supply first-run product yet. Haji-Ioannou wants
to pay distributors a flat rate in return for being able
to show first-run films for an agreed period. He plans
legal action against the film companies to demand that
they supply him with product.
No doubt the movie exhibition business in
the United Kingdom is hot. Gross box office has doubled
in less than 10 years,
from roughly half a billion dollars in 1994 to roughly
a billion dollars a year today. Average ticket price has
floated in the past few years between six and seven dollars.
But I have my doubts about the “easyCinema” plan.
Discount theatres traditionally survive on high traffic
and concessions sales. Haji-Ioannou only plans on the former,
and excludes the latter. Without concessions, he really
needs first run product.
Maybe I’m missing something. This businessman has
changed other markets and surprised people before. So let’s
watch and see how he does.