Over the years we've been reporting on the Fidelity Trade-off. In our increasingly experiential economy, consumers make leisure choices in terms of two key dimensions - Experience and Convenience. It's a trade-off between Fidelity, the quality of the experience, and Convenience - the ease of access in time, effort and money. The more Convenient digital entertainment and socialization becomes, the higher the Fidelity of an out-of-home experience has to become to compete and attract people. The last thing you want do is end up in the fidelity belly where you are neither high fidelity nor convenient. That was the fate of the music CD that landed in the fidelity belly when mp3 music players came on the scene.
A good example of advances in technology increasing Convenience and forcing out-of-home entertainment to increase in Fidelity is the movies. As movie viewing in the home and on mobile screens got more Convenient (easy access, quality and cost), cinemas had to increase the Fidelity of the moviegoing experience to pull people away from streaming Netflix movies on their HDTVs and video on their smartphone screens to see movies on the big theater screen. A good example is AMC Theaters that is tearing standard cinema seats out of their auditoriums, replacing them with electric-controlled reclining leather lounge chairs. With only 1/3 the former seating capacity, they're seeing increases in both attendance and revenues. Many theaters have added high-end food and bars to the moviegoing experience to increase the destination appeal of their theaters. Half of the iPic chain's revenues, which also offers reclining leather seats, are now food and beverage.
The lower graphic illustrates what happens over time as technology advances. If a community-based leisure venue doesn't continually increase its Fidelity, the quality of its overall experience, it will eventually end up in the fidelity belly as digital technology and its Convenience gets better.
At-home and mobile technology is getting better and cheaper every day. Projects that were once in the High Fidelity sweet spot can quickly fall into the fidelity belly if they don't continually improve the Fidelity of their visit experience.
If you bought a TV or computer recently you probably noticed their prices have decreased over the years, while their quality continues to improve. The U.S. Department of Labor's Consumer Price Index (CPI) adjusts prices to account for the quality of items over time. From December 1997 to August 2015, the CPI for personal computers and peripheral equipment of the same quality declined 96%. The price index for TVs of the same quality decreased 94% from December 1997 to August 2015.
For every $100 you spent on these items in 1997, an item of similar quality today would cost:
The technology items we value most highly are a whole lot cheaper and much better in quality than they used to be. Today, you can buy a much more advanced computer or TV for less then you paid for a lower quality one not that many years ago. That's what's called increasing Convenience.
This is the challenge location-based venues continually face with rapid advancements in the quality and price declines of at-home and mobile entertainment and social media options. Out-of-home leisure venues have to continually raise their Fidelity to stay relevant and competitive, no different than the movie theaters.
Our company's extensive industry research indicates that due to all these Convenience advances with consumer technology, today's future proof business model that offers a High Fidelity out-of-home experience is no longer about being an entertainment center or using technology in the front of the house. It's about being a High Fidelity social gathering place targeting adults with destination food and beverage as the anchor attraction and mostly old school, physical interactive social games as the secondary anchors. It is all about creating a socially inclusive real world experience, not just an entertainment experience.
This is the reason our company is now placing so much emphasis on the food and beverage component of the projects we are designing and producing for our clients. It takes great contemporary food and beverage and a great social environment to have a High Fidelity location-based leisure venue today that will succeed for many years to come.