Read the Case Study and answer the following questions:
• What changes in the external environment put companies in the difficult position in this industry? Support your answer by conducting PESTEL and Five-Forces
Analyses.
• How could a company operating in this industry react to the identified challenges?
• How does the structure of the industry affects profits?

The Movie Exhibition Industry 2013
IT IS APT that 2012’s top-grossing film was The Avengers, because movie studios and exhibitors sought to avenge a dismal prior year at the box office. Domestic box office receipts climbed 6 percent from 2011 to a record—setting $10.8 billion in 2012.‘ Three films—The Avengers, The Dark Knight Rises, and Skyfall—grossed more than $1 billion each in global ticket sales (see Exhibit 1). Behind the scenes, the success, even the fundamental health of the exhibition industry, is far less clear, however.
Consider these contradictions:
- Domestic ticket revenues grew 6 percent in 2012, but that volume ranks just 13th since
1980. The 1.364 billion tickets sold is down 13 percent from the most recent high in 2002 of 1.575 billion (see Exhibit 2). 2012‘s record revenues resulted from ticket price increases, not more attendees. At $7.94, the average ticket price has risen 24 percent since
2005. But over the long term, prices keep pace with inflation, raising questions about the creation of differentiated value (see Exhibit 3).
- The long-term per-capita trend is negative. In 2012, the average number of films seen per capita was 3.9.2 In 1946, the peak of moviegoing in America, the industry sold four billion tickets, and the typical American went to 28 films per year at the theater.
- Movies are more widely available than ever, creating new substitutes for where, when, and how to view movies. Exhibitors are especially anxious for moviegoers to return to the