Category Archives: Entertainment

Musings From a Bored Feasibility Consultant  

My practice lives and dies with innovation and optimism.  With most clients and friends scared to death about what this crisis will bring when it is over, or whether it will ever be over, my normally optimistic client base is taking a nap.  They are shut down and not practicing good old American ingenuity.

I have lived through many downturns and booms, a litany of business cycles.  My space in the entertainment development world falls between the idea and execution. Is this idea crazy?  Does it have legs?  Can I afford to develop it?  Where will I get development funds?  Am I nuts to be thinking this right now?  These are some of the questions my practice is hired to consider.

In all cases, I provide one of the following answers:

  1. Brilliant idea. Let’s do some preliminary testing.
  2. Hmmmm, I think that’s been done before, but maybe we can improve on the existing model.
  3. I like it, but I really think the idea needs more development on your part, or if you like, we can help you move it along.
  4. That is the dumbest idea I have ever heard. Save your money, don’t hire me, or if you’ve already hired me, you should fire me!

A couple examples of the ill-though-out ideas:

  • A large INDOOR entertainment center on the beachfront of a major East coast resort.  The branding strategy: It’s a beautiful beach day, let’s all head inside!
  • A 100,000 square foot museum at a major Indian casino in the U.S. with the theme “The slaughter of the tribe by the White man.”  (Footnote: The gamblers at the resort are 95% White.)
  • A major entertainment company’s decision to disallow wine at a park in France.
  • The decision to build two competing 20,000-seat amphitheaters across the highway from each other in a major Orange Co. California city.

But happily, more of my practice involves ideas that have you smacking your forehead and saying, “Why didn’t I think of that?”!  Some examples:

American Girl Place (built and wildly successful),

Academy of Motion Pictures Museum (to open year’s end 2020),

Hollywood and Highland (the initial plan didn’t follow our advice);

Sony Metreon (also, didn’t follow our advice);

A new hospitality/retail/dining/entertainment/ development in Mecca, the Hajj (they didn’t hire us:  I wouldn’t have either!);

A mixed-use sports and entertainment-infused $1.0 billion development in downtown Edmonton (The Oilers got 60% of their Phase One development funds from our numbers, the first time ever a sports venue received public funding in the province):

Maybe soon we will have a few new brilliant ideas to report to you.  Until that time, stay safe, well, healthy and hopefully, not too bored!

 

 

 

 

 

What Will the World Look like in 2025? Five Things to Know for the Future

 

It’s a question on everyone’s mind.  In times of uncertainty, we look to the past, we look to the future, because we just can’t understand what’s going on right now!

In my world (and probably yours), I am working digitally.  That’s nothing new for me.  But right now, I have a profound sense of loneliness.  I miss the sights and sounds of movies, shopping, visiting with my grandkids, even going to doctor’s appointments!  I miss the gym (well maybe not too much) and I miss going out to dinner!!

In these quiet moments, I’ve been thinking about how our world will change in the next five years.  Here are five of my predictions about what we will be doing and how we will be doing it in 2025.

  1. People have short memories. That’s a good thing.  If it were not so, no one would ever have a second child!  One of my major prognostications is that the gathering spots all over the nation will be teeming with people and activity.  But it will be different.  Visitors will “keep their distance”, be more polite, and leave space for their fellows both in front and back.  This new behavior will change necessary planning factors for public assembly.  Our current “order-of-magnitude” space requirements for various entertainment and attraction venues – theme parks, movies, museums, convention/conference centers and retail spaces – are all planned this way.  We will need new numbers, and that will put pressure on the size of many of our social institutions and facilities.  This will make them bigger, and thus likely more expensive to build.

 

  1. Consumers will pivot spending from big ticket items to more affordable choices.  Theme parks and cinemas are considered recession-proof.  That’s not true, but they are much more sustainable than expensive cars, hotels, high-priced vacations and restaurants during and after a recession.

As a corollary, Millennials who are the darlings of advertisers and the future of our country’s spending, will keep on the same consumption track, preferring experiences to things. But the experiences will be closer to home and without as much adventure as before.

These Millennial consumers are:

    •  Born between 1980 – 1994
    • Number 72 Million
    • Ages: 25-39
    • Forming Families Now
    • 29% of Adults in the U.S.
    • Ethnically Diverse
    • Tech Savvy
    • Multi-Taskers
    • Prefer Experiences to Things (So important to keep in mind for retailers!)
    • Prefer Health to Wealth
    • Prefer Mobile/Digital Communication
    • Responsible for $14 billion in consumption expenditure

More fascinating though is the amount spent by Generation X, those consumers born from 1965 to 1980, and aged 40 to 55.  These are the most prolific spenders, accounting for $24 billion in annual expenditure.  Why we aren’t planning for and paying more attention to these mid-life consumers is beyond my understanding!  (In fact, a comparison of the average annual expenditure on Entertainment by cohort shows GenXers spending $3,231 per household, followed by Boomers at $3,286 per household and finally the younger Millennial Generation at $2,186 per household.  Average for the nation is about $2,800.)

These expenditures will likely be at the same in 2025 as they are today.  But smart owners and developers will target the groups that spend the most.

  1. New entertainment-infused projects that continue planning and development during this relatively short period of confinement will come out on top. These projects will be first to market.  If planners/owners develop well thought out, well designed, well executed projects with rational business plans, they will reap the benefits of a surge in demand immediately following the downturn and thereafter.

 

  1. Cultural entities such as museums and live theaters will present content that is relevant, easily understood and fundable. They will likely lag behind the uptick in commercial entertainment activity.  This is because spending for nonprofit activities are seen as more discretionary than other forms of entertainment.  In fact, for the past 20 years, expenditures on cultural attractions have been slipping. Why?  Baby Boomer parents did not do a good job of educating their children on the value of theater and art.  That’s the number one factor in propensity to spend on the arts:  exposure as a child.  Our institutions will reflect the society and cultural needs of a diverse population.  Many of our older institutions were born in a homogeneous America that no longer exists.

 

  1. We will return to a simpler time, albeit with sophisticated tech all around us. Everything old will become new. Consumption of just plain fun with some silliness will be the norm!

While living abroad for a year, I experienced this uncomplicated world that offered          simpler and enduring fun.

I went to the mountains with my friends:

I attended Oktoberfest in Munich:

I attended  opera at La Scala and the Teatro dell’Opera di Firenze. I went to formal            dances:

And I lightened up, became a kid again, upped my joie de vivre:

What are your thoughts about the world after Covid-19?  Write us and let us know.  We want to keep connecting with our friends during this time.

ROGERS PLACE – EDMONTON, ALBERTA CA

The Edmonton Oilers are in the process of creating a two billion dollar (C) arena-led mixed-use entertainment project in downtown Edmonton, on a 20-acre site where an old casino once stood. We were fortunate enough to conduct all the market and financial feasibility studies for the project, which include a practice arena, retail/dining/entertainment, several hotels, office, casino, convention center, meeting spaces, housing, university, and cultural uses. In September 2016, the first phase of the project opened, presenting the arena and a glass-enclosed winter garden plaza.

One of the most contentious issues was who would pay for which part of the project since Alberta (and most of Canada) had no precedent for municipal participation in funding an expensive, state-of-the-art, mixed-use, sports-entertainment district.  Negotiation on these points went on from 2009 to 2013, when the City and the Katz organization came to a mutually agreed upon solution.

Besides testing the market and financial feasibility, we also completed a warranted investment analysis that quantified the shortfall in revenue to attain an industry-standard rate of return on the investment. The exercise was extremely complicated with the many uses being tested, the multiple ownership formats suggested, the non-profit elements blended together with the commercial elements, and the fact that there were no Tax Increment Financing instruments in place in the province.

rogers-placeFast forward seven years to 2016, and the new “Rogers Place” opened in September 2016 to great fanfare carrying a total construction cost of C$604,500,000. The specifics of the deal are precedent-setting in terms of public support for a private sports enterprise. Sources of funds are as follows:

  • City-Issued Debt:                              C$541,810,000 (90%)
  • Government Funds (Non-City): C$39,000,000 ( 6%)
  • Oilers Contribution:                         C$23,690,000 (4%)

Phase One terms are summarized as follows:

  • Owner: City of Edmonton
  • Lessee: Edmonton Oilers
  • Operator: Edmonton Oilers
  • Lease Term: 35 years (with three 10-year lease options)
  • Oilers –  Manage arena operations, receive all arena revenues & pay for arena operations/maintenance
  • Oilers operating revenues include naming rights and parking revenues

The Oilers received the right to levy a Ticket Surcharge (with a portion going towards debt service and capital reserve).  Other Key Terms are as follows:

  • Team will pay annual lease payment of approximately C$6.7 Million
  • Approximately C$6.1 Million per year in Ticket Surcharge fees will go towards debt service
  • City will pay the Oilers C$2 Million annually for 10 years to help market/promote the City
  • Total project also includes City amenities (winter garden, community ice rink, etc.)
  • City will have up to 28 days a year of free arena access for community events

The Annual Debt Service Payment of almost $32 million will be generated from the following sources:

  • City – Downtown Tax Increment: C$13,122,554
  • City – Other Public Sources:          C$5,275,399
  • Oilers Lease Payments:                   C$6,697,157
  • Ticket Surcharge Revenue:            C$6,074,629

With the attendance and revenue generated since opening, these targets are very likely to be reached.

Voila, a new model for building and financing a $600 million arena is born!

It’s the Most Wonderful Time of the Year!

Rockefeller_Center_christmas_tree

If you are like most Americans, you feel better this year, but there is still a nagging doubt in the back of your mind, “is this as good as it gets?”  True, the economy has picked up, spending is up, the recession is no more, but we are still feeling the pinch.  How shall we shop for Christmas this year?

duluthsnow-w_AQBL

We did some digging to find out how much has changed and how much has stayed the same.

The following figures provide some context for the economic growth since before the recession until after, with per capita GDP not yet recovered to pre-2008 levels:

united-states-gdp-per-capita

The gross domestic product increased from $13.3 trillion in 2007 to $15.1 trillion in 2012.

united-states-gdp 06-12

GAFO retail sales seem to be slowly recovering from the recession, and consumers are spending again.  Consumer confidence is back up to about 73 percent of what it was in 2006, but spending at shopping centers is ACTUALLY DOWN in real constant dollars (adjusted for inflation):

united-states-consumer-confidence 08-12

GAFO retail sales in the nation increased from $968 billion in 2002 to $1,032 billion in 2010,  for a compound average growth rate of 1.1 percent.  However, from 2007 to 2010, compound average growth was  -.03 percent nationally.

As everyone knows, brick-and-mortar stores are in competition with internet retailers for market share.   With the ease of shopping online in the comfort of your home or office, and the ability to compare sale prices amongst retailers, the brick-and-mortar stores have to come up with creative ways to appeal to the consumer as the better way to shop drawing them to their retail store locations.  Some retailers are offering free shipping, extended hours along with other special promotional items available only in stores.

Electronic shopping and mail order retailers suffered only a mild set back during the recession and bounded back with sales for the twelve months through February 2012 accounting for $308 billion.  The overall sales market rose 30 percent since the peak in 2008 as reported in an article, “Retail Sales Recover, Mostly, From Recession”, written in The New York Times, by Floyd Norris.

One of the biggest impacts of the recession on the retail market is the change in the behavior of shoppers.  People are bargain shopping and looking for the biggest bang for their buck.  They are more interested in products or items that are reliable and have lasting value rather than purchasing the latest gadgets.

Consumers are looking to save money where possible, which has increased on-line shopping as well as sales at discount and dollar stores such as Wal-Mart, 99 Cent stores and Target.  Not only are shoppers finding better bargains, they are saving time and money especially when factoring savings of not having to drive with high gas prices.

Target shoppers

The recession has also caused a spike in sales at thrift shops/resale stores,  as  the number of resale shops opened within the last year increased approximately seven percent.

According to comScore.Inc,  holiday retail spending over the four-day Thanksgiving weekend was estimated at $59.1 billion dollars nationally, up nearly 13 percent over last year.   Black Friday online sales exceeded $1 billion, rising 26 percent to $1.04 billion.

How do you feel this year?  Let us know if your pocketbook feels lighter or if you are back to normal.  Have we stabilized at the new normal? We are anxious to hear from you!

The New Face of Retail

Can you smell it?  Fall is in the air!  It may still be 85 degrees in sunny California, but the kids have returned to school, a crispness is the order of the day, and last weekend, I did my annual fall shopping.  The trip this year was much more measured than other years, as I suppose it is for most in the developed world.  The recession is alive, growth from the last few quarters has slowed, and there is still rampant uncertainty in all of our daily lives.

But that is not what I want to blog about today.  On my trip, I did my usual “people watching”  noting a subtle but noticeable shift in the gestalt of the crowd.  We visited our local mall which is owned by Macerich.  The shopping center was renovated in 2007 and a huge Target took over a vacated Robinson’s-May as one of the anchors.  Still, the mall floundered and felt like an unhappy place to me.  And then voila!  In the midst of the downturn, with unemployment still above 9 percent nationally and American companies holding on to more than $1.8 trillion in cash ( not investing, not hiring), a new sense of hope and purpose is in the air.  Unscientific you say?  Yes, but after so many years in the business I am a reader of attitudes, unspoken  intentions, a focus group unto myself.

What has caused this shift in outlook, turned the gray glasses to rose-colored?  I believe it is the retailers, some of whom are doing an excellent job of reading their markets.  With my husband in tow, we were given free treats at Cinnabun, Wetzels Pretzels, and See’s Candy while waiting in line to buy a low-cal coffee at Coffee Bean and Tea Leaf.  I smelled popcorn and saw several happy families with brightly colored red-and-white boxes.  Where did they get these cheery delicious snacks?  Target!  (Sears, you lose again, even though this was your idea in the first place!) And while waiting in line, I saw the Giant Surprise that H & M, one of my favorites, will be opening in our mall in less than two weeks.  The fast-fashion Swedish retailer made the excellent choice not to locate in a struggling new “upscale” lifestyle center in Oxnard (oxymoron, lifestyle center: Oxnard) which would have been a huge mistake!

As a very wise presidential candidate once said, “it’s the economy stupid!” and retailers that have learned to provide VALUE and fun in the shopping experience and in the goods and services they offer are faring well.  TJX, Ross, Forever 21 and now Bloomingdale’s Outlets are giving consumers what they want and need in today’s difficult world.  Free stuff, fun stuff, inexpensive stuff, value for the money!

So while the economic indicators continue to stump the experts, the American consumer is not giving up!  They will continue to shop (less and cheaper), eat sugar and popcorn, and hope for the much badly needed turnaround.  And this, my friends, is a self-fulfilling prophecy for a better year in 2012!