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The out-of-home entertainment blood bath

There is massive over expansion of out-of-home entertainment options occurring in many markets. At the same time, in-home entertainment options are becoming more alluring.

Jim Kessler, owner and operator of two Lasertron venues, just posted a blog on what it will take for out-of-home entertainment venues to stay competitive. Check them out:

Part 1 – https://www.linkedin.com/pulse/out-of-home-entertainment-jim-kessler/

Part 2 – https://www.linkedin.com/pulse/out-of-home-entertainment-jim-kessler-1e/

 

Posted in digital, Disruption, Entertainment, FEC, Location based entertainment, Out-of-home, Trends | Comments Off on The out-of-home entertainment blood bath

Digital disruption changes industry definitions

This year two major trade organizations changed the definition of their industries. Both are telltale signs of the major digital disruption that is occurring to all types of out-of-home (OOH) B2C businesses, including OOH leisure and entertainment. 

According to the National Restaurant Association’s latest State of the Industry report, digital technology has changed what makes a restaurant a restaurant. Delivery, drive-thru, and takeout now make up 63% of all restaurant traffic. The NRA says the basic paradigm of what constitutes a restaurant in America is changing and will continue to evolve in the years ahead. They have modified how they look at the industry and now define the industry in terms of “points of access” rather than physical restaurant locations.One recent example is delivery-only operations from ghost kitchens that feature a web storefront but no dining room, drive-thru window or carry-out for customers.

Each year the Motion Picture Association of America(MPAA) reports on the state of the film industry. Previously, their annual reports were almost totally focused on results at the movie theater box office – attendance and revenues at the physical movie theater. This year they have expanded the scope of the report to include extensive in-depth analysis of the home entertainment market, both digital at-home entertainment and physical home entertainment options such as Blu-ray and DVD rental and sales. The latest MPAAreport also now even provides estimates of subscriptions to pay TV and online video services. 

The MPAAreport found that movie theaters now only capture one-third of all U.S. consumer film/video entertainment spending.

What’s happening to the restaurant and film industries as well as to all other forms out-of-home leisure and entertainment is what I call the “digitalization of place.” Slowly, leisure culture is changing as we go less and less to a physical OOH destination and is migrating more and more to digital options we can enjoy in our home. As Faith Popcorn, CEO of the BrainReserveputs it, there is a new lifestyle trend underway with Digital Cocoons (people who cocoon in their homes with digital technology).

Just as the movie and restaurant industries are looking at themselves differently – as now encompassing digital and at-home leisure experiences as well as traditional location-based ones, the location-based entertainment industry, which includes family entertainment centers (FECs), needs to do the same and no longer look at their competition as only other location-based venues, but rather as every entertainment experience consumers can have. That is the new entertainment competitive set. The same as the restaurant industry’s changed paradigm, the entertainment industry has become multiple points of access of which OOH venues are only one.   

All the at-home technology options raise the bar of what it takes to get people to leave the convenience of their homes to visit a physical location for leisure and entertainment. Today, OOH entertainment has to be high quality, high fidelity, to win. Many location-based entertainment business models that worked in the past no longer meet the higher bar that at-home digital technology has created, and that bar is continually moving even higher every day.    

Posted in Demographics, Disruption, Entertainment, feasibility, FEC, High Fidelity, Location based entertainment, Movie box office, movies, Out-of-home | Tagged , , , , , , , , , | Comments Off on Digital disruption changes industry definitions

The overexpansion of CLVs, especially FECs, is sheer folly

It’s really getting hard to understand if there is any sanity left in the out-of-home (OOH) community leisure venue (CLV) industry, especially for developers of the classic formula family entertainment centers (FECs). We’re seeing daily announcements of all types of new centers. It appears the feasibility logic for the new CLVs is that if you build it, they will come, as if demand for OOH entertainment will expand with the new offering. The fallacy with that is it is a zero-sum game for OOH leisure; consumers will only spend so much time and so much money for OOH leisure and entertainment, and it has actually been on the decline as digital screen and at-home entertainment continues to capture more of their leisure time and money. Every analysis our company has done shows a clear trend of declining, not growing, demand for OOH leisure venues. 

One thing that’s driving the crazy rate of new centers we’re seeing is the retail apocalypse. All the department and retail store closures have freed up lots of vacant space that landlords want to fill, often at very seductive lease terms. Yes, a little lower rent than in the past and maybe some landlord TI money helps to lower the breakeven point some, but not all that much. To be profitable, CLVs need healthy attendance and spending. And it is very hard to achieve that by building in markets that already meet the OOH demand. Also, much of the vacant retail space is vacant since it is in a marginal market. 

So, the strategy for all the new CLVs might be to take market share away from the competition by being better. Yes, it might be possible to capture some away from the competition, but in most markets, very little competition is really that bad, and they will still get a slice of the pie.

There is a basic problem with the classic FEC model that continues to be developed – the formula of having attractions that appeal to everyone, to children, families and adults. Over the almost three decades since that formula first surfaced, there’s been an expansion and segmentation of CLV types targeting specific demographic groups and types of activities. So, while in the early days of FECs, that formula generated adequate attendance revenues by also appealing to adults since adults had so few other options, today there are all types of entertainment venues specially targeting adults rather than families. Why go to an FEC when adults can go to a venue that is tailored for them such as Top Golf, or Punch Bowl Socialor a Dave & Buster’sas just a few examples of the many options they now have. FECs have basically lost the adult market, a part of the attendance they once had that made them a viable concept. And they are also losing some of the family market to venues targeting adults. Places like Dave & Buster’s, although they have no children’s games, attract families, especially during weekend and holiday daytimes. 

Another hurdle for FECs is the continuing decline of the birth rate, and with it the number of children and families with children who can be customers. The family market is shrinking. 

The classic FEC formula that worked in the early days is no longer viable in today’s world.

In most of the major markets in the U.S., we are also seeing oversaturation of OOH entertainment options and it just doesn’t seem to stop. Building more CLVs of all types, including FECs, in all but the few unserved markets does not expand the demand. Instead, consumers just spread their OOH attendance, time and money among the increased competition. 

It’s just plain foolishness out there with the classic FECs continuing to pop up everywhere. First the Australians showed up thinking they had found the magic formula with Main Events. Then the Japanese with Round1. Now we even have an airline company, Allegiant Airopening a chain of 100,000-square-foot G4CEFECs (pronounced “G-force”). And that’s just the tip of the iceberg of all the classic FECs that have recently opened or announced development.

Paul Carr, VP of Business Development for Allegiant Travel, the parent company of the airline,said, “G4CEis designed to appeal to all ages. We have something for everyone.” And the company said that includes pre-teens and teens who have few OOH entertainment options. That’s exactly the outdated formula that developers thought was the key to success decades ago.

Allegiantalso believes they will have a marketing advantage, as they will be able to market G4CEsto their existing airline customers. What they may have missed is that they are a discount airline appealing to predominately middle- and lower-class customers, who account for the minority of the OOH entertainment spending.

A lot of the growth of these new FEC chains is driven by when the first ones opened, they seemed to be successful. That’s because just about any new OOH venue works the first six months to a year as everyone shows up to check it out. That’s doesn’t translate into repeat appeal and long-term viability. The problem is that in today’s social-capital-driven experience economy, people are collecting experiences, especially with so many available to collect. Repeat visits don’t create the social capital visiting a new experience can when shared on social media.  

This wide growth of CLVs is great for the equipment suppliers, lots of sales. What they don’t realize is that when the bubble breaks, which it will as the market can’t support them all, there will be lots of used equipment on the market, so their sales will go south with all the closures. I guess for industry consultants, when the apocalypse comes, especially for the outdated FECs, there will still be plenty of work, as they will be hired by the failing ones to develop strategies to save them. Unfortunately, not that many will be saved in what is an over saturated and ever shrinking customer base, especially for classic FECs. 

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