Product Talk #14: Hoyts Cinemas and Product Differentiation, Part 2

Product Talk #14 was a robust discussion about Differentiation lead by Matthew Liebmann, Chief Commercial and Development Officer from Hoyts. In part two of the review of this event Matthew talks about differentiation by price in regional markets, segmentation, the Hoyts loyalty program and survival of the film industry as a whole in a download world.

“Cinema is universal: 69% of Australians went to the cinema in the past year. Bluntly, movie content helps with a level of segmentation organically -for example, Action Movie Goers tend to buy popcorn. Ticket type is another proxy: adult, child, senior, student, etc. We get a lot of specific rich data from our loyalty program, Hoyts Rewards. It is a paid program; it costs $10 a year and you get a free movie ticket on joining. Once you are a member you scan your card when you buy a ticket and shop at the candy bar. Members are incentivised to scan to earn and burn points and other benefits. For us, it creates a very full picture of the way our customers consume our cinema experience: demographics, stated intention, transactional history and opinions. We have over 80 filters that we can utilise to segment our base. We can find out what you wanted to watch but didn’t and get a message out to you with an offer before the movie run ends by email SMS. It’s the Holy Grail knowing what the customers want and communicating with them in a targeted way. . It is true one-to-one marketing.”

Differentiation discussions invariably lead to price. When asked if Hoyts was concerned about an Aldi type entrant to the cinema landscape, offering a basic experience and low cost tickets. Matthew said “We have looked at this in some of our regional markets, such as Wollongong and Newcastle. It creates positive elasticity which is a good thing and there is business enough for both. Most multiplexes in Australia are in shopping centres and they are there for a reason, there is ample parking, food and things to do after but it is a high cost fixed asset. When you look at the providers who have gone with a discounted model, most have not been able to sustain it. It works well in isolated areas but, for instance, if we discount Eastgardens, then we could lose customers from our surrounding full-priced cinemas. It is also hard to communicate that message in metro areas whereas in regional or isolated areas there an opportunity to use local media to get great reach without confusing messaging strategy.”

When talking about the future innovations for cinema, Matthew says that there isn’t anything radically new on the horizon. The cinemas are digital, 3D, they have the premium seating and experiences so differentiating the product will be more focused on experience touch points and quality of service.

Discussing the collapsing of release ‘windows’ so that films are simultaneously released in cinema, on DVD, pay TV and via the internet, Matthew said “While there is call in some quarters for simultaneous release, there is a very real danger to the industry and for movie-lovers if this occurs. Cinema is the only form of entertainment where people will consume the same product at standard times, different places in different ways. They might go and see it in the cinema, then buy it from JB Hi-fi, download it from iTunes or indirectly pay for by getting it through Foxtel packages. By comparison, you don’t buy a book in hardcover, paperback and digital format. For movies, this multiplicity of revenue funds the next round of blockbusters. If it was compressed, people would be less likely to consume a film in multiple times and the returns needed to fund the next $300 million blockbuster substantially erodes. I understand why consumers ask for simultaneous release and I generally believe that we should give customer what they want. But I honestly believe that in this instance, it would undermine the economics of the whole industry and you won’t continue to get the kind of films we currently enjoy, I think that it is a very complex argument and one that will be hard to convince the public of but I genuinely believe that collapsing release windows would ultimately be to the detriment of the whole industry and to our customers.”

Hoyts is committed to keeping in touch with the customer and innovating in order to match experience and expectation of the audience. “There may come a day very soon, where we create a virtuous cycle within our loyalty program where we offer members a movie via our kiosk and stream channels which they have seen in cinema at a discounted rate to encourage that multiplicity of consumption. We could also encourage them to see movies via kiosk and stream that they had on their watch-list but missed in cinema. We will continue to find ways to create a great experience and great value to our customers, creating a well-rounded entertainment offering for movie-watching preferences.

Read the first part of Matthew’s insights on Product Differentiation: Click Here