MMICC 2010 - WSH

The Acrobatics of Success

Cirque de Soleil

Connor Bogin, Linda Li, Derrick Nation & Beth Richard

Situation Short Term Long Term Recommendations

Implementation Financials

Agenda



• Extreme uniqueness• Sustainable

competitive advantage– Creative independent

cells

• Strong partnerships• Near perfect record

Background



To globally expand the Cirque du Soleil experience while maintaining a

unique brand to draw loyal guests.

Challenge



• Global recession– Decreased ticket sales– Decline in luxury

entertainment market

• Specific target market – Business travelers– Sophisticated adults

with disposable income

Barriers to Goals



Strategy

A Balancing Act

Building Up

StrategyLong-Term Short-Term



Short Term

A Balancing ActNavigating the Recession



Short-Term Situation

Situation•Revenues at 15 year low

•Hints of recovery from global recession

•Luke-warm reception of newest show: Banana Schpeel

Criteria•Return to circus nouveau roots

•Maximize current show attendance

•Minimal risk and expense

•Position for long-term growth



Short-Term OptionsChange

Ticket Prices

•Reduce ticket prices to fill seats

Increase Promotions

•New marketing channels•New target markets

Develop New Shows

•Resident show•Touring show•New show type

Offer Experience in New Places

•Channels of delivery•Expanding locations



Short-Term Analysis

Return to circus nouveau roots

Minimal risk and expense

Position for long-term growth

Maximize current offering attendance

Reduce ticket prices

Expanding locations

New show type

New channel of show delivery

New touring show

New resident

show

New target

markets

New promotion channels


New target

markets




Viral Marketing

Abridged shows at performing arts festivals

Cirque du Soleil in IMAX 3D

Short-Term Recommendations


New target

markets




Long Term

Building UpThe Road to Recovery



Long-Term Situation

?Situation•Increasing recovery of North America

•Uncertain pace of global recovery•Asian and European troubles

•Shift in global travel trends

Criteria•Pursue profitable growth with conservative risk

•Leverage core competencies

•Use lessons from short term strategy

•Concentrate in North America where recovery is more certain



Long-Term OptionsChange

Ticket Prices

•Reduce ticket prices to fill seats

Increase Promotions

•New marketing channels•New target markets

Develop New Shows

•Resident show•Touring show•New show type

Offer Experience in New Places

•Channels of delivery•Expanding locations



Long-Term Analysis

Pursue profitable growth with conservative risk

Leverage core competencies

Use lessons from short term strategy

Concentrate in North America

Reduce ticket prices

New channels

of delivery


Expanding locations

New touring show

New Show Type

New target

markets

New resident shows



Most profitable model with lowest risk

Long-Term Recommendations

Expanding locations

New Resident

Shows

New resident show in North

America

Criteria• Previous success with touring Cirque du Soleil• High tourist traffic• Probability of cannibalization• Economic stability

Possible Locations

• Chicago• New York• Austin• Honolulu



Long-Term Recommendations

City Decision Criteria

• Past Cirque du Soleil success• Tourist traffic• Economic stability• Probability of cannibalization

?Massive success of shows at Neil S. Blaisdell CenterExperiencing tourism growth• 2010: 3%• 2011: 3.1%Least hurt by economic downturnInternational and domestic destination

Honolulu



Recommendations

Short-Term, Balancing•Viral Marketing•Target market expansion•Music festivals•IMAX 3D

Long-Term, Building•New resident location in Hawaii



Create new hype through: Seemingly impromptu acrobatics in public places (subways, malls, etc)

• Generates extreme viral response– Word of mouth– Online social networks

• Involves traditional media– Pre-event press alerts– Flyer distribution

• Increases awareness and enthusiasm• Low cost and effective

ST – Viral Marketing



ST – Performing Arts Festivals

Establish relationship with future target market through:

Introduction of Cirque du Soleil experience at large arts festivals

• Leverages brand to expose new audiences to

the experience• Provides a sample of the Cirque• Potential Locations

- Coachella, Los Angeles, California- Lollapalooza, Chicago, Illinois- Jazz Festival, Montreal, Quebec

• Generates revenue and awareness



Develop a new Cirque du Soleil 3D experience through:

The creation of an IMAX 3D film of a soon-to-retire big top show

• Generates immediate revenue– Outsourced producer pays royalty

• Increases awareness in future target market

• Creates a want to attend Cirque de Soleil in the future

ST – IMAX 3D



LT – Resident Development

Build a new residentexperience in Honolulu through:

A new partnership

• Apply existing partner framework to determine ideal candidates

• Leverage brand and announce intentions to create a bidding situation

• Minimizes costs by converting retired show to resident version



2011Launch Resident Honolulu Location

Obtain Global Recession Update

2012Continue Gradual Show Rollout

Respond To Global Economy Shift





2010Launch Viral Campaign (trials)

Negotiate IMAX ProjectDevelop Arts Festival Performance

Timeline

2010 2011 2012 2013 2014•Viral Campaign •IMAX Project•Arts Festival s

•Resident Honolulu•Global Update

•New Shows•Global Update





Sales Projection



Revenue Contributions



NPV

(in CAD$ million) 2010 2011 2012 2013 2014Revenue

tickets 530 580 630 690 710IMAX 3-D creative royalty 5 5 5 0 0merchandising 4 4.4 5 7 8

Total 539 589.4 640 697 718

Costsales/operation cost 431.2 471.52 512 557.6 574.4new shows upfront cost 20 21 22 0 0

Total 451.2 492.52 534 557.6 574.4

EBITDA 88 97 106 139 144

(investment) production 35.12 50 42.4 55.76 57.44

Cash Flow after Tax 42 38 51 67 69

NPV 20% $150.58NPV 10% $196.04NPV 8% $207.66



Conclusion

Short-Term, Balancing• Viral Marketing• Target market

expansion• Music festivals• IMAX 3D

Long-Term, Building• New resident location in

Hawaii

Questions?

Connor Bogin, Linda Li, Derrick Nation & Beth Richard



AppendixBackgroundChallengeBarriers to GoalsStrategyShort-Term SituationShort-Term OptionsShort-Term AnalysisShort-Term RecommendationsLong-Term SituationLong-Term OptionsLong-Term AnalysisLong-Term RecommendationsFinal RecommendationsST – Viral MarketingST – Performing Arts FestivalsST – IMAX 3DST – Resident DevelopmentTimeline

Viral Campaign RisksFestival RisksIMAX 3D RisksHonolulu RisksMirage MGM PartnershipDefining SuccessGlobal Expansion ContingWhy Not ChinaGeneration YSelecting PartnersSuccessful MarketingCurrent Target MarketViral Marketing DiagramTarget Market Expansion DiagramPorter`s 5 ForcesSocial Networking



Internal resistance to new conceptRelative ease of implementation

and option to outsource to an advertising agency

Viewed as “cookie cutter” approach

Implement the campaign in a differentiated way

Viral Campaign Risks



Festival Risks

Gen Y focus alienates Boomer

generation

Unique offering to market is a “sample”

Option in future to create

a separately targeted show



IMAX 3D Risks

Brand Dilution

Offer to experience CdS in a new way.

NOT a substitute.

Prestige



Honolulu Risks

Show is not financially successful

Partner shares in return and downside risk

Option to pursue a phased approach with show beginning

in a Big Top in Honolulu

Unable to find suitable partner

Awareness of CdS will attract many qualified partners

Leverage partnership with MGM



• At this time, no issue exists with Las Vegas partnership

• Key consideration will be to refrain expanding to point at which CdS becomes a commodity

• Caution in further Vegas expansion to avoid market and creative saturation

Mirage MGM Partnership



• Observation of immediate climb in revenues as result of seat fill rate improvement

• Return to pre-2007 revenue levels• Positive returns from Honolulu partnership

without negative effects on existing shows• Financial success that empowers continued

creative progress

Defining Success



• What if other international markets recover at an unexpected rate?– Cross reference gambling destinations, family

resorts, and high GDP cities to determine key locations of resident shows

Global Expansion Contingencies



• Existing Competition– Popular Chinese cultural performances– Acrobatics/circus style– Low cost

• Economic Uncertainty– Popular expectation of double trough of recessions

impacting entire Asian region

• Price of CdS ticket exceeds average yearly income of Chinese citizen.

• Danger of cannibalization. Currently, wealthy Chinese citizens travel to Macau for entertainment and gambling

Why Not China?



• The “connected” generation• Aged 18-30• Poised to become most powerful generation

since Baby Boomers• Extremely high purchasing power due to

exit of Boomers from work force• Early interest in luxury entertainment

Generation Y



• Insufficient data to recommend or select partner pool

• Criteria– Creative challenge– Sustainability of partnership– Profitability– Partner’s adherence to social responsibility

parameters

Selecting Partners



• Product– Quality service

• Price– Broad price range with IMAX

• Place– New strategic locations

• Promotion– Viral marketing, music festivals & IMAX 3D

Successful Marketing



• Businessmen & women who like to travel• Stray from the traditional family circus

scene by being more risque, having no animals & with music scheme

Current Target Market



ST – Viral Marketing

Brand Image Target Market

Cirque De Soleil Attendance

Reputation Growth

StimuliIntensity, Movement

& Surprise

Hedonic & Utilitarian Value

Return

Word of Mouth



ST- Target Market Expansion

Perceptual Map- Luxury Entertainment

Adventure

Low Quality & Price

Relaxation

Orchestra

Yachting

Opera

Skiing

Theme Park

Zoo

AquariumAmusement Park

Cirque De Soleil

IMAX

Musical Festival

Beach Resort

High Quality & Price



Porter`s 5 Forces



Social Networking

Documents

MMICC 2010 - WSH