The Alamo Drafthouse is a different kind of business, whether you call it a bar, a restaurant,
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History
Tim and Carrie met at Rice University in Houston, Texas, where he was majoring inmechanical engineering and art, and she was studying biology and French. After graduationand marriage, he two started their first movie theatre in Bakersfield, California. This firstventure showed art films and featured live music. Although it was not originally the main focus,the live music made a lot more money than the films. The theatre was a failure—Bakersfielddid not have a large enough art film audience, and the theatre’s location “on the wrong side ofthe tracks” contributed to its failure as well. Eventually the business was sold to an Evangelicalchurch. With this lesson under their belts, the couple moved to Austin, Texas, and decided totry again with a new approach—a theatre that serve food and alcohol. Movie theatres that servebeer are very common in Europe, but much less so in the United States, which in general hasmore restrictive drinking laws. Nevertheless, they have been cropping up in many citiesincluding Dallas, Washington, DC, and Portland, Oregon. Before opening the Alamo, Tim andCarrie visited several of these theatres. The enterprising couple noticed several problems atthese theatres. Some offered no in-theatre service, forcing patrons who wanted drinks or foodto go to the lobby. Other theatres offered too much service and wait staff constantly askedcustomers if they needed anything. These interruptions bothered many customers. Tim andCarrie recognized that movie goers wanted to see a movie first and foremost, and that goodservice meant that they would have to design a better system.
Facility Layout and Delivery System
The Alamo Drafthouse opened in 1996 in downtown Austin’s entertainment district. TheAlamo Drafthouse is a single-screen movie theatre that serves an assortment of beer and wineand offers a food menu of appetizers, hot sandwiches, individual pizzas, pasta, and dessert.Waiters take orders, serve the food, and collect the bill before and during a movie showing.Traditional movie theatre snacks are also available, and patrons can choose self-service in thelobby for all offerings. The Alamo Drafthouse, like most theatres, has rows of seats. Unlikemost theatres, however, there are fewer rows so there is enough space between rows toaccommodate long skinny tables where customers can place their food and drinks. Enoughspace also exists so that personnel can take orders and serve unobtrusively, and customers canslip out to the lobby if desired. Because of this layout, the Alamo offers about half the seatingof most auditoriums of similar size and has a capacity of 215 customers. Before each showing,wait staff visit customers and explain to them how the Alamo’s service system works. Paper,pencil, and menu are provided along the tables so customers can write their orders on the paperand place the slip of paper in a metal stand where it can be seen by waitstaff who patrol theends of the aisles. The waiter slips in, picks up the paper, and then goes out to the kitchen tofill the order for the customer. When the order is ready, the waitperson delivers it to thecustomer. All of this can be done without a single word being exchanged and minimizesdisruption to film viewers. Austin is a fast-growing high-tech town with an extremely youngand educated workforce. The film industry–focused Austin Film Festival, which coincides withthe live music festival, South-by-Southwest, takes place primarily in downtown Austin everyMarch during the University of Texas at Austin’s spring break holiday. The theatre is locatedclose to the enter of downtown nightlife activity and requires only a short walk from one of themain club and restaurant areas. The theatre does not have adjacent or free parking forcustomers, nor is there significant street parking in the vicinity. Most of the other movietheatres in town are located in huge megaplexes in suburbs or in shopping malls.
Programming
The Alamo’s programming is divided into two categories, second-run features and specialevents. Second-runs account for the majority of the Alamo’s programming, about 20 of the 25screenings per week. These movies are carefully picked to appeal to the Alamo’s customerdemographic: smart 25–40-year-olds who have a sophisticated taste in film. Examples of filmsthat fall into this category are Bowling for Columbine, The Italian Connection, and the originalThe Manchurian Candidate. Unfortunately, the Alamo is somewhat at the mercy of Hollywoodfor this programming and is occasionally forced to play movies that don’t appeal to itsdemographic as much as Tim and Carrie would like. At the end of each week Tim and Carriepick the films that will play for the following week. Special events are programmed in threemonthblocks. These fall into two categories: Austin Film Society events (generally classics orart films) and cult films. The Film Society events usually replace a second-run showing duringthe week, and cult films play Thursday, Friday, and Saturday at midnight. The cult films appealto a different (but overlapping) demographic: 18–30-year-olds, predominantly male, who areregular alcohol consumers and are customers of less mainstream, specialty-independent videorental stores such as Vulcan Video and I Luv Video. Special events account for about5 of theAlamo’s average 25 weekly screenings. Tim sees the special events as a creative outlet, forexample, Italian Westerns (commonly known as “spaghetti Westerns”), which feature all-youcan-eat spaghetti, and silent films with live accompaniment by local bands. Austin’s thrivingfilmmaking community has been a major boon for special-events programming. Tim regularlygets film makersto speak at special engagements. Some guests to the theatre include RobertRodriguez, who hosted a special double feature of El Marciachi and a Hong Kong take off ofthat film. Quentin Tarantino, director of Pulp Fiction, hosts an annual festival of cult moviesat the Alamo.
Revenues And Costs
Tim sees the Alamo’s ticket sales as a loss leader to get people into the establishment toconsume food and drink, and he keeps ticket prices low, typically $4.00. This price point isbelow the cost of seeing a first-run film at most typical Austin theatres ($6.50–$7.00), but it isabove the price of going to a bargain theatre to see a second-run film ($1.00–$1.50). Theaverage Alamo customer spends a total of $5 to $12 per showing. After the ticket is purchased,customers spend about 55 percent of this on food and 45 percent on alcohol. In order to increasespending, they have raised menu prices occasionally since opening and added more high-dollaritems to the available selections. Special events account for one-third of revenues. Althoughcustomers are spending more than they do when they go to a typical theatre, the Alamo’s profitsare limited by its smaller capacity and high labour costs. On a typical Friday night a staff of 15to 17 people is required, many more than are required to operate a standard theatre.
Advertising And Promotion
To promote the Alamo, Tim and Carrie use several low-cost methods. They takeadvertisements out in the three most read Austin papers including the Daily Texan, theUniversity of Texas student newspaper. They also create three-month calendars that list specialevents. Upcoming showings are announced before every feature. They have formed a closerelationship with the Austin Chronicle, an entertainment publication, and consequently get alot of free public relations exposure in the form of articles previewing their special events. Timalso engages in some inexpensive but effective loyalty building. He manages the Alamo’swebsite and answers every piece of e-mail personally. He also announces upcoming films andspecial events before every show and hangs around after shows to answer questions and talk tohis customers. He is very open to suggestions and has used them to plan special events and tomodify the menu. He notes that loyalty building has been a lot more effective with the AustinFilm Society and cult film crowds.
Questions
1. Marketing analysts use market position maps to display visually the customers’ perceptionsof a firm in relation to its competitors regarding two attributes. Prepare a market position mapfor Alamo Drafthouse using “food quality” and “movie selection” as axes.
2. Use the “Strategic Service Vision” framework to describe Alamo Drafthouse in terms oftarget market segments, service concept, operating strategy, and service delivery system.
3. Identify the service qualifiers, winners, and service losers for Alamo Drafthouse. Are theAlamo purchase decision criteria appropriate for the multiplex movie theatre market? What doyou conclude?
4. Use Porter’s Five Forces Model to assess the strategic position of Alamo Drafthouse in the“entertainment industry.”
5. Conduct a SWOT analysis to identify internal strengths and weaknesses as well as threats and opportunities in theexternal environment.
Related Book For
Management A Practical Introduction
ISBN: 978-0078112713
5th edition
Authors: Angelo Kinicki, Brian Williams
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