NOTES+FOR+IMAX+CASE+Part+2


 * Niche Market- Limited Growth
 * Ineffective marketing techniques
 * High cost of conversion of material
 * Alliance with AMC, Cinemark and Regal
 * Wrong customer demographic decisions
 * Competitor threats- Sony high definition DVD prayers, recorders & home theaters
 * New technologies- continuous treat of “new independent firms”
 * Technological advances made Piracy easier
 * Controversial movie releases


 * Issues faced by IMAX:
 * Being a niche it was concern for IMAX to achieve sustainable growth when it was comparability smaller than its competitors Disney, Regal and Pixar.
 * IMAX was not aggressively marketing its films where movie theaters were able to draw customers as famous movie stars acted in the films they offered. Also, its competitor Disney partnered with McDonald and Burger King making them even more popular within the target population that were children and young adults.
 * High cost of converting a standard 35mm movie to IMAX.
 * Alliance with AMC, Cinemark and Regal generated receivable problems in the 1990’s which took time to recover.
 * IMAX concentrated on their key customer demographic to be between the ages of 19-65 years whereas 41% of the movie goers in the market were between the ages of 12-24 years.
 * Improvements in technology with companies like Sony releasing high definition DVD prayers, recorders, home theaters and big screen televisions was a big treat to sales.
 * New technologies enabled “new independent firms” to enter their industry.
 * These new advances also made it easier for people to download and/or distribute illegal copies of movies.
 * Controversial movie release in IMAX for example ‘Volcanoes of the deep Sea’ cost the company loss of sales and distorted the image of IMAX as being edutainment.

Controversial movie release in IMAX for example ‘Volcanoes of the deep Sea’ cost the company loss of sales and distorted the image of IMAX as being edutainment
 * 1) 2 – Assumptions about problem (validate why they are key issues, including qualitative and financial reasoning.)

· It’s niche in creating breathtaking, educational movies made it difficult to achieve sustainable growth. A strategic move that helped ensure its consistent growth was to “continue making educational films that could be screened in theaters during daytime for families, students and tourists, while its reformatted Hollywood movies could be screened in the evening.” In December 2004, “The Polar Express” marked the first time a Hollywood film was released in both standard and IMAX format. Their Annual Income Statement reflects the consumer response to this successful strategy—net income grew steadily, increasing from $10,244,000 in 2004 to $14,382,000 in 2005. However, the novelty seems to be wearing off for most consumers—net income has decreased drastically from ($16,849,000) in 2006 to ($26,940,000) in 2007. This net loss reflects the high cost of converting a standard 35mm movie to IMAX format. Although IMAX has achieved lower conversion costs, the cost to convert a standard 2D film to IMAX is still expensively priced at $22,500, while a 3D film is upwards of $45,000. This net loss validates that IMAX is having difficulties achieving sustainable growth without substantial investments in Research & Design. · With the introduction of products, such as a 65” HDTV, surround sound systems, or DVD players, today’s electronic market carries something for everyone. The ability to purchase such a large TV and customize your stereo system, greatly appeals to consumers. Why pay money to go see a movie, when you have the option to wait until it comes out on DVD and watch it in the comfort of your own home? Although Hollywood films collect a majority of profits this way, (charging an average price of $22.11 per DVD in 2007), IMAX is unable to garnish any of these profits. And with moviegoers dwindling due do a poor economy (falling from 1.60 billion a year in 2002 to 1.40 billion in 2007) it is evident that consumers are taking advantage of these substitutes. · New technologies, such as inexpensive high definition video recorders, have made it easier for small “new independent firms” to enter the entertainment industry. For example, Summit Entertainment was recently formed in 1999, becoming an independent studio in 2006. With the declining cost in producing movies, Summit has been able to generate successful films, such as Twilight, New Moon, and Eclipse, for reasonable, inexpensive prices relative to the industry. · Piracy is a very real threat to all companies in the entertainment industry. Not only does it threaten movies at the box office by enabling consumers to download free copies of the film online, but DVD sales also reflect the threat of this new technology and its impact on the industry. For example, DVD sales in 2007 fell to 1,084.6 million units from 1,129 million in 2006.