The Southeastern Theater Company

COMPANY HISTORY AND OPERATIONSBecause of the growth in cinema attendance and revenues Wendell Carrington and Bill Meyers, formerly involved in restaurant and hotel management, established The Southeastern Theater Company (SETC) in 1995 in Atlanta, Georgia. Their dream was now to design, build, and operate movie theaters throughout the Southeast; they currently own and manage 15 such theaters with revenues exceeding $50 million. Typically their theaters have 15 or 18 screening rooms and have been located in larger, southern cities (e.g., Atlanta, Georgia; Orlando, Florida; and Memphis, Tennessee). Their newest design, which seems to fit well in medium-sized cities, their new target market; adjusts for the recent, national economic decline; and requires less land at lower costs. It incorporates a 12-screen theater having digital, surround sound and stadium seating in all showing rooms. The problem facing the SETC owners and senior management is how many employees are needed to operate such a theater in their newly constructed, Charlottesville, Virginia location. The employee staffing decisions for this theater will be the template used for other theaters of the same design. Management acknowledges that a general manager is needed, but is uncertain as to how many assistant managers, ticket sales employees, projectionists, ticket collectors, and concession workers are needed. Management also recognizes that the staffing needs are not simply proportional to the number of screening rooms or total number of theater seats, since the new theater design has fewer screening rooms, each with less seating capacity than those of SETC's other theaters, yet the total weekly operating hours will be the same.THE MOVIE INDUSTRYThe U.S. cinema industry has experienced steady revenue growth, expanding from $4.9 billion in 1992 to $9.5 billion in 2002 (Motion Picture Association, 2002). Admissions have grown from 1.2 billion to 1.6 billion annually (Motion Picture Association, 2002). During July 2002,107 million Americans (45%) reported going to the movies (at least once) that month. Perhaps due to the lagging economic recovery, enhanced television channel selections, Red Box discount movie DVDs, digital gaming, and the internet, ticket sales have decreased from 1.55 billion in 2002 to 1.37 billion in 2012. However, due to inelastic demand revenue has continued to increase hitting $10.71 billion in 2012. Ticket sales and revenues are both projected to increase in 2013 to 1.43 billion and $11.35 billion respectively (Nash Information Services, 2013). Thus, while ticket prices increase, the cinema is appealing to younger and more affluent moviegoers. A study revealed that in January 2003, 95 million Americans - 40% of U.S. persons as young as 12 went to the movies in the past month (ZenithOptimedia, 2002). Movies are particularly important to teens and young adults, who go in larger numbers and attend more often.Theaters are also becoming more than a place to sit a watch a movie; they are becoming entertainment centers including audio programming, video programming and games, and information kiosks. Also, small to medium size rooms can be reserved for special events such as children's birthday parties.Food and beverage offerings have also expanded to include, not only popcorn, candy, and beverages, but meals (pizza, hot dogs, nachos and cheese, etc.). This "fast theater meal" trend is likely to continue.Thus, cinema revenues have increased for they have multiple revenue sources. Ticket sales and concession revenues have long been the dominant source of income. However, wall posted and on-screen advertising is increasing as a revenue source (ZenithOptimedia, 2002). ZenithOptimedia estimates that in 2002 over $800 million was spent worldwide on cinema advertising. The U.S. cinema industry, in particular, is poised for growth in this marketing arena as advertisers begin to realize the reach and unique value of cinema advertising (Arbitron, 2002). …