marketing article analysis

LIME LIGHT CINEMA

In January 2019, after nine months of operation under a new name, Lime Light Cinema of

Victoria, British Columbia, was still not generating satisfactory revenues. To attract larger

audiences, Head Office in Montreal had made two major changes to the marketing strategy in the

last year: it changed the programming format and the pricing strategy. Olga Siroonian, the new

Manager, was faced with the responsibility for successfully implementing these changes and

increasing local profitability by at least 25%.

Company History

The theatre had operated as a pornographic film house under the name “The Cosmopolitan

Cinema” for twenty-five years. In January, 2018, Phoenix Theatres of Montreal purchased the

business as part of an expansion plan. To reposition the theatre as a first run art film cinema

featuring two films per evening, major renovations were undertaken in late February. In March,

Phoenix reopened the theatre as “The New Cosmopolitan Cinema.”

From the beginning, the new cinema encountered problems with image. Even though the

concept had changed, association with the previous name still branded the cinema as a place to see

pornographic films. In October, the name was changed to “Lime Light Cinema” (an homage to

Charlie Chaplin’s silent film “The Lime Light”) and a new marquee was erected. In November, the

owners fired the Manager and promoted the Assistant Manager (of four months), Olga Siroonian, to

the position. Prior to becoming Assistant Manager, Olga had worked for five months as one of the

theatre’s ushers.

Company Problems

After the name change and under Olga’s new management, business improved slightly. In

March and April the average audience size had been about 60 people per show, well below the 375

seat capacity. Attendance in December was 60 to 70 people per show. Olga remarked that “As we

will be receiving an average admittance fee of $5.00 per head under the new membership system,

we will pretty well have to pack the place every night to break even.”

In Olga’s opinion, the theatre had two problems: 1) people did not know much about the

theatre; and 2) people did not know much about the films being shown. “People don’t know what

they are getting when they go to a repertory cinema,” stated Olga.

After eight months of operations, Phoenix finally realized that Victoria did not have the

population size or audience interest to support a “first run art film cinema.” (Available cost data is

outlined in Exhibit 1).

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This case was written by Marvin Ryder. Case material is prepared as a basis for classroom

discussion only. Copyright 2021 by Marvin Ryder, DeGroote School of Business, McMaster

University, Hamilton, Ontario. This case is not to be reproduced in whole or in part by any

means without the express written consent of the author.

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Recent Changes

Responding to low attendance figures, the theatre’s concept was changed again. Beginning

in mid-December, Lime Light Cinema became a repertory theatre featuring two different movies

every night (one shown at 7:00 p.m. and the other at 9:15 p.m.). Features would include second-run

commercial films (movies shown two to three months after their premiere), occasional premiere

films, classic movies, foreign films, and first-run art films. Olga explained, “Most of the films

shown will have been in Victoria already. People will know the films and that will make our

promotion job a lot easier.” The variety of films and reduced prices were key elements in the new

strategy.

As well, in mid-October, Lime Light moved from a straight admission fee of $6.00 for

students and $8.00 for adults to a membership basis. Company management felt the old prices

were not low enough to attract enough people to come to see a film with which they were

unfamiliar. Members would pay $10.00 a year to join the cinema and $4.00 per show admission

fee. For non-members, the fee would be $6.00. At these prices Lime Light Cinema would be

offering lower prices than the other repertory theatre in town which charged a $15.00 membership

fee, and $5.00 and $7.00 for admission. Initially, Lime Light Cinema had ordered 2,500

membership cards.

There was one bright spot – in the last two weeks of December, Olga had increased theatre

revenues and profits by making changes in the candy bar operation. She added/deleted products and

adjusted prices on soft drinks and popcorn. The average receipt per patron had increased from

about $2.50 to $3.00. The theatre generated a high contribution margin, and thus profit, from the

candy bar operation, so these changes were important.

The Theatre Industry

There were eight commercial theatres and one repertory theatre in Victoria. (See Exhibit 5

for Population data) Originally, Lime Light Cinema was not directly competing with either type of

theatre. However, with the changes, it would be competing directly with the other, very well

established, repertory theatre in town. Olga expected to have some initial difficulty competing for

business but believed that there was room for two repertory theatres in Victoria.

Besides the other theatres, another source of competition was home DVD or DVR machines

along with Netflix. The latter allowed an unlimited number of movies or television shows from an

immense library to be streamed to a computer or internet-enabled television in exchange for a

monthly membership fee. By the time second-run commercial films were shown at Lime Light

Cinema, they were available on DVD’s or online. People could purchase or rent these media for

home viewing. Premiere films would not be affected by DVD sales or online services. Art films

were generally not available to the public on DVD or online. Only with concerted effort could

some of the exotic art or foreign film titles be located. Olga had read predictions for new

technologies. Consumers had a choice between computers and tablets, iPod’s and iPad’s, and even

smartphones as sources of entertainment. Netflix, Crave, Disney+, and Amazon Prime could be

considered competitors. The future would likely see other new devices and technologies to

compete with watching a movie in a theatre.

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A variety of customers patronized the cinema. Olga estimated that 35% of her customers

were students from the University of Victoria. Customers could be categorized as follows:

1) regular movie-goers who could afford to go to commercial theatres;

2) avid movie buffs, including film students from the University of Victoria;

3) people who wanted something off-beat and different; and

4) people who were just looking for an inexpensive night out.

She believed the theatre was targeting and promoting to everybody.

Promoting the New Concept

Approximately $30,000 had been allocated to promotion for the year. In the past, most

advertising had been allocated to newspapers. Lime Light Cinema placed a seven-line ad daily in

the Victoria Times-Colonist and an occasional sixty-line ad in The Martlet, the university student

newspaper. (See Exhibits 2 and 3) Olga felt that radio advertising was generally too expensive but

would use it occasionally to promote premiere films. In addition, bi-monthly tabloid-type printed

program schedules were distributed to potential customers through all record stores and donut

shops in the city. These schedules were provided by Head Office (Information on media costs is

provided in Exhibit 4). Lime Light had a Facebook page. It was mostly used by patrons to discuss

movies. She had wondered if she should launch a website, an Instagram page, a TikTok account, or

maybe get a Twitter account to also promote the theatre. Olga did not really know if any of the

advertising was effective. She did know that the future promotional strategy for the repertory

concept had to be successful or she was out of a job.

The objective of the new promotional program was to make people aware of the repertory

format, the new prices, and to sell memberships. So far, Olga had purchased a sixty-line ad in the

Victoria Times-Colonist to announce the opening and had arranged an interview on a CHEK-TV

entertainment program to talk about the new concept. She was thinking of trying to arrange a

couple of radio interviews as well, but she knew more had to be done.

Exhibit 1 Theatre Cost Information

Film Rental Per Showing $200.00

Estimated Management Salaries $45,000 per year

Estimated Theatre Lease (building & utilities) $5,000 per month

Estimated Gross Margin on ‘Candy Bar’ operation - 65%

(i.e., 65 cents of each dollar spent at the ‘Candy Bar’ was profit; 35% covered variable costs)

Average Staffing Per Night (average of 3.5 hours per person at minimum wage)

One Cashier

One Candy Bar Person (Two on Friday and Saturday nights)

Two Ushers

One Doorman

One Projectionist – 4.5 hours per night at $20.00 per hour

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Exhibit 2 Daily Ad in the Victoria Times-Colonist

Exhibit 3 Weekly Ad in The Martlet (University of Victoria Newspaper)

5

Exhibit 4 Advertising Rates

NEWSPAPER Circulation Line Rate (per column)

Victoria Times-Colonist 89,356 (total paid $5.16

daily) $4.61 (over 10,000 lines per year)

TV Plus (Victoria edition) 45,613 (weekly) 1/4 page - $310.00/week

(free distribution) (26 week schedule)

The Martlet 12,000 (weekly) $2.62

(University of Victoria) $2.48 (rate for weekly contract)

RADIO AAA AA A B

CFAX (#1 station in Victoria $55 $43 $35 $28 60 Seconds

area - reach 28% of homes) 45 34 29 23 30 Seconds

AAA - 6:00 am to 10:00 am weekdays AA - 4:00 pm to 11:00 pm weekdays

A - 10:00 am to 4:00 pm weekdays and Saturdays B - all other times

Reach plan $35 per spot for 21 sixty-second spots

Made up of four AAA, six AA, six A and five B spots

CFUV University of Victoria - 60 Seconds - $10.00

Exhibit 5 Population Statistics

Metropolitan Victoria

Population 367,700*

Pop’n Rank in Twenty Largest Canadian

Census Metropolitan Areas 15th

Age Groups

14 and under 48,260

15 to 24 42,690

25 to 34 48,190

35 to 44 44,705

Over 44 183,925

Average Household Income per week $1,831.736

Income Rank in Twenty Largest Canadian

Census Metropolitan Areas 8th

* Student population

University of Victoria 21,696

Source: Statistics Canada, Canadian Census, 2016