IMAX Corporation

Case solution
Company overview

“IMAX Corporation is one of the world's leading entertainment technology companies, specializing in
immersive motion picture technologies. The worldwide IMAX® theatre network is among the most
important and successful theatrical distribution platforms for blockbuster films around the globe, with
IMAX theatres delivering the world's best cinematic presentations using proprietary IMAX, IMAX® 3D,
and IMAX DMR® technology” [ CITATION IMA10 \l 1045 ].

“The IMAX company is known to be one of the highest quality, most immersive motion picture
entertainment in the world. As the IMAX theatre network grows, the reputation of the IMAX brand
improves as well. IMAX theatres are located in both commercial multiplexes and educational institutions
throughout the world. More than one billion people have had An IMAX Experience® since the first IMAX
theatre opened in 1970. As of September 30, 2010, there were 470 IMAX theatres (348 commercial, 122
institutional) operating in 45 countries” [ CITATION BNE10 \l 1045 ].

“As the Company continues to evolve, its potential in the commercial marketplace evolves too.
While IMAX remains committed to its roots in museums and science centers, the Company is at the
same time rapidly expanding its commercial theatre network. IMAX has forged strategic alliances,
relationships and joint ventures with some of the most prominent exhibitors in the world, including
AMC Entertainment, Regal Cinemas, Inc., National Amusements, ODEON & UCI CINEMAS, CJ CGV,
Wanda Cinema Line Co. Ltd., Tokyu Cinemas and many more” [ CITATION IMA10 \l 1045 ].

“The original IMAX growth strategy was to focus on the institutional large screen theatre market
and producing and distributing documentary style films. As a result, most of the existing IMAX Theatres
are located at institutions such as museums and science centres. In the last ten years, IMAX has changed
its focus to more commercially orientated enterprises. The result has been rapid growth in the number
of agreements entered into with commercial operators and operators of non-institutional
entertainment complexes. The IMAX brand is internationally recognised for extraordinary and
immersive family experiences” [ CITATION Wor07 \l 1045 ].

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Corporate Strategy

A corporate strategy is one that specifies what type of business a company is in or wants to be in and
what it wants to do with those businesses. It’s based on the mission and goals of the organization. The
IMAX’s mission statement is given by co-CEO Gelfond:

“It’s designed to deliver the world’s most immersive movie experience” [ CITATION Dat10 \l 1045 ]

Current strategy
Vertical Integration

IMAX is works on vertical integration as it works on processing, distribution and exhibition of its own
films.

IMAX initially was focused on large format films that were educational. This is why the theatres
were located in institutions, museums, aquariums and national parks. IMAX’s forward integration took
place when it became the distributor of its own produced films. IMAX is relatively small when it is
compared to its rival studios and theatres, but it still leads the industry when it comes to producing
images in a large format. IMAX not only plays its own films in its theatres, but gives it also gives its films
to other theatres so that they would be promoted there.

As it was earlier discussed, IMAX is mainly focused on producing large scale films. To do so, they
require special cameras, projectors, screens, etc. In the past 15 years, IMAX has acquired these
companies:

 Imagery Rentals (1995) – Whole ownership

 Mainframe Entertainment Inc. (1999) – Minority shares
 Sonics Associates Inc. (2009) - Whole ownership
 David Keighley Production (2009)
 Digital Projection International Ltd. (2000)
 Cinema Plus Ltd. (2006) [ CITATION Dat10 \l 1045 ].

IMAX has a subsidiary company (51% ownership in that company) - Sonics Associates Inc., which
is an audio development company. It manufactures the sound systems for IMAX. David Keighley
Production, which is wholly owned by IMAX, works on the post production of its films.

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 Most of the firms mentioned above are the suppliers of IMAX. Through integration, IMAX has
reduced the chances of suppliers effecting the prices. When IMAX made itself independent in the
aspects required to deliver high-quality large format film, it gained access to all the new technology
which today is an essential element in IMAX’s survival.

Through backward integration, IMAX has made itself stronger by being its own supplier. It has
gained control over the technology of the systems that produce 2D or 3D film as well as audio systems.

Horizontal Integration
Direct competition

IMAX had only two competitors that produced film in the large format. One was Iwerks, another one
was Megasystems. IMAX has expanded its operations to the commercial business (e.g. converting 35mm
Hollywood films into large format), Iwerks did not do that. It only limited itself to ride simulation
packages that are located in theme parks and museums. Megasystem, which formerly produced
projection systems, has recently stopped producing these systems, and it has renamed itself Pollavision.
It is now only involved in consultancy services of the large format film theaters. IMAX, Iwerks and
Pollavision all were the manufacturers of high definition film projection systems, and the only
organization left in the market that converts commercial movies into large format is IMAX [ CITATION
Sma10 \l 1045 ].

Indirect competition

In the market of studios and theaters, IMAX is relatively small. In my opinion, it would not affect IMAX if
it did not merge with other studios. Its success is due to the fact that consumers have become fully
aware of IMAX format movies, and there is and increasing demand for watching movies in large format.
It if merges with one major movie studio (e.g. Disney), it will not be easy for it to cooperate with other
studios.

A good option for IMAX would be launching more commercial theatres, where it can run
converted large format Hollywood movies. This would it enable it to compete against large theatres like
Regal Enternaintment Group.

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Environmental Analysis

IMAX as a global firm interacts with multiple factors. The company takes inputs and distributes its
output. Like every organization, IMAX has its internal and external environment which affects its output.

Internal Environment
Strengths
 Unique, innovative product
 Good location of IMAX theatres
 Changing repertoire of films
 Educational links (e.g. schools; libraries, teachers)
 IMAX worldwide brand consciousness

Weaknesses
 Documentary style when there is an increasing demands for other content type
 Lack of variety in movies

IMAX’s internal environment includes procedures and inputs which are used to achieve its strategic
goals. The company has successfully developed 3D cameras and other equipment to produce realistic 3D
images. Images screened by IMAX are brighter and sharper than those found in conventional movie
theatres. The company has also invented new techniques of 3D directional sound, offering its customers
both audio clarity and depth.

One of the main focuses of IMAX Corp. is research and development, as it wants to present
movies using the newest technological methods and systems available on the market. Quite a large
portion of its revenue is redistributed towards R & D part of its business.

Worth mentioning is the fact that IMAX is help its customers on theatre design, supervises the
installation of their systems, trains the entire theater staff, and maintains the installed system.

External Environment
Opportunities:

 Increase in the demand of Hollywood productions

 High popularity of watching IMAX movies

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  Joint ventures with other studios
 Opening more IMAX theatres (utilizing space in existing multiplexes or reconfiguring existing
multiplex screens into IMAX format)
 Opening up IMAX theatres in developing countries (e.g. BRIC)
 Lack of competitors converting movies into large format
 Special significance given by Motion Picture Association of America to documentary movies
segment

Threats:

 Conventional cinemas
 Piracy of movies
 High quality DVDs and BluRays
 Home theatre entertainment systems
 Joint partnerships (AMC with its own big screen theatres)
 Political intervention
 Change in taste of the consumer

There are multiple factors that affect IMAX’s performance. For example, customers represent potential
uncertainty to IMAX because of their changing tastes. Knowing this, IMAX should make more
educational and entertainment movies that can be shown in the full screen format. The demand for
technologically based and animated movies is growing and IMAX ought to consider merging with some
larger players in the industry (e.g. Pixar) to be able to fulfill the needs of its consumers.

Despite the fact that IMAX has already developed the knowledge, skills and capabilities needed
to design and assemble complicated 3D movie systems, most of its equipment is purchased from the
contracted parties to whom IMAX has maintained long and usually successful relationships.

Presently, IMAX has to compete with digital cable providers, satellite TV, DVDs, BluRay discs
and the internet. All these media give customers a much more extent choice than just few years ago.

One should also remember socio-cultural, political/legal, demographic and technological factors
that indirectly affect IMAX’s overall performance. Movies presented in IMAX theatres should represent
the high socio-cultural content, due to the fact it is mostly viewed by university and college educated
audiences. Most of the IMAX customers falls in the age range of 19 to 65, and IMAX’s current and future
projects should fulfill desires of that group [ CITATION The10 \l 1045 ].

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Porter’s Five Forces Model

1. Threat of Substitute Products

Threat of substitute products means that IMAX customers can easily switch to IMAX’s competitor
product [ CITATION Pea \l 1045 ]. IMAX is the largest and most exciting movie format, with vivid clear
images that are almost ten times larger than traditional cinema format. There would be a high threat of
substitute if there were substitute products available against the ones offered by IMAX. In this case,
customers could easily find the product or service that IMAX offers at the same or lesser price, and the
quality of the IMAX competitors product increase.

IMAX customers can easily switch to substitute products (e.g. film cinema), but the screens in
IMAX theatres are the biggest in the world offering and they offer a very different experience than
regular screens [ CITATION Wor07 \l 1045 ]. Sound is also critical in case of IMAX experience. The film
soundtracks are delivered through a top of the line digital surround sound system manufactured by
Sonics Associates Inc., which is one of the top companies in sound system design.

Presently it is easy to find DVD’s and VCD’s with great resolution. Even in regular cinemas the
quality of the projected films is excellent. That might be the reason for customers not to go to IMAX
theatre and pay an extra $4 to $5 to watch a movie in 3D [ CITATION Yah10 \l 1045 ].

2. Threat of New Entrants

A new film industry into the market would also weaken IMAX’s market power. Particular segments are
more attractive if there are high entry barriers and low exit barriers. According to market research
carried out by World’s Biggest Screens Pty Ltd., “IMAX can sustain its position as a premium cinema
destination not simply because it offers a better experience than other cinema destinations, but because
it offers a very original cinema experience. IMAX is perceived as being at the cutting edge of new cinema
that offers new experiences in film. It is also about the strong sense of realism of the film style which
allows costumers the feeling of destination exploration, which is, in other words, the feeling of “being
there”” [ CITATION Wor07 \l 1045 ].

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 3. Industry Rivalry

Industry rivalry “means the intensity of competition among the existing film theatres in the market.
Intensity of rivalry depends on the number of theatres and their capabilities” [ CITATION Pea \l 1045 ].
Poor film line up, combined with the aftershocks of company restructuring in year 2000 resulted in low
attendance figures for IMAX [ CITATION Wor07 \l 1045 ]. Presently, IMAX’s marketing objectives are “to
release a minimum of 6-8 new films in each market it operates in, to introduce a group-sales program
with a focus on niche visitor groups (e.g. schools, organized groups), and to develop value-based
promotions to drive business in traditionally softer trading periods. These marketing objectives are going
to be executed using the full range of the marketing mix” [ CITATION Dat10 \l 1045 ].

4. Bargaining Power Of Suppliers

Bargaining Power of suppliers means the strength of the position of a film theatre, which is  how much
the film theatre’s suppliers have control over increasing the price of supplied products. It’s quite obvious
that film marketing mix consists of elements. (i.e. advertising, publicity & promotions, word of mouth,
website and e-communications) [ CITATION IMA10 \l 1045 ]. Moives are usually released every 2 months
in a staggered program timed to coincide, where possible, with key school holiday periods. The release
of a new film is the prime driver to attendance.

Recently 3D movies popularity have gone beyond popularity of 2D films. However, “there is a
limited supply of 3D films to choose from because they are much more expensive to make” [ CITATION
IMA10 \l 1045 ]. Movie makers often examine the “victory” of previous releases and the probable
audience reaction to new ones. For instance, if particular a film did well overseas, it ought to do well in
some foreign markets as well. Research is conducted on regular basis to find positions that shows
prospect in a new market and possibly encourage new movie theatre costumers.

When suppliers have more control over supplies and its prices, as it is the case in the movie
industry, segment appears to be less attractive. The best option is to create a win-win relationship with
suppliers and have multi-sources of supply.

5. Bargaining Power Of Buyers

According to market research carried out by World’s Biggest Screens Pty Ltd., 78% of people who have
seen an IMAX film express the intent to return [ CITATION Wor07 \l 1045 ]. There are some specific

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aspects of IMAX which encourage people to do so. One such aspect is when the theatre itself is utilized
to advertise new releases. There are usually light boxes featuring “Coming Soon” movies and stands
brochures of these movies. Also, presenting trailers at least three months prior to the feature release is
an appropriate strategy [ CITATION Dat10 \l 1045 ].

Bargaining power of buyers can be decreased by offering differentiated types of movie theatres.
If IMAX is providing service to a huge quantity of ordering buyers, then these buyers would definitely
have the power to dictate IMAX the price.

Competitive advantage

According to Michael Porter, there are three different base strategies which allow companies to gain
competitive advantages. They are:

 Differentiation strategy

 Cost leadership strategy

 Focus strategy

In the case of IMAX, a main reason for continuing forward, backward and horizontal strategies is to gain
cost leadership benefits. IMAX as quite diversified business that is considered a part of different
industries, that are horizontally integrated. The purpose of such an integration is to keep overhead at
minimum level, and cut the business’ costs as much as possible. It would be reasonable for IMAX to
make and distribute its own movies in digital format. This would let the company to cut its operational
cost significantly.

As it is going about its differentiation strategy, IMAX has a unique feature of its large format
films. That differentiated company with others production houses and filmmakers.

IMAX’s library of films and fact of locating itself in prestigious venues had created a unique
brand image. The goal of IMAX is to provide his customers with high quality entertainment and
documentary movies with 3D images and top quality sounds.

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 If only IMAX would be able to continue improvements of the quality and reliability of its
products, it may gain even larger competitive advantage that won’t be easy to be taken away. To create
such a strong competitive advantage a firm must be able to sustain its core competencies. IMAX must
continue developing the skills, knowledge and capabilities needed in designing and assembling the vital
elements in its equipment and follow fast pace of technological changes.

When it comes to growth opportunity for IMAX, firm should focus on retention of the current
customers and attracting new audience. According to IMAX website, “more than 20 percent of its
audience were school group, about 70 per cent of its viewers were between 19 and 65 years of age, and
the majority were college or university educated” [ CITATION IMA10 \l 1045 ]. IMAX needed to find a
way to attract this demographic group. Company should stay focused on entertainment movies and
documentaries.

Conclusion

In year 2007 over 50% of the total revenue was generated by IMAX system sales like cameras, screens,
projection systems. As IMAX has an advantage over the technology of larger-than-life image production,
it should continue investing in R&D to provide outstanding systems used both to produce 2D and 3D
films [ CITATION Sma10 \l 1045 ].

Presently many studios convert their movies into IMAX format, but IMAX gains not that much
from it. As IMAX is not part of any studio, it does not get big share in the profit. It seems like the growth
in converting movies is high but the IMAX’s market share is low.

In the motion picture industry, documentary segment is considered more significant than the
others. The Motion Picture Association of America gives out separate awards for documentary movies in
the grand Oscar Award. IMAX is originally known for producing documentary movies. Since year 2008
IMAX itself produced only one documentary - Space Station, and it looks like it’s not growing on the
pace it should [ CITATION His10 \l 1045 ].

IMAX’s strategy for the coming years is “to entice consumers happiest in front of 60-inch plasma
screen TV. In order to get a consumers out of their homes and make them go and watch an IMAX format
movie, the company needs to give them something amazing and something special. And so far IMAX
does it” [ CITATION IMA10 \l 1045 ].

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References:
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2. BNET. (2010, XII). BNET - Interactive Business Network. Pobrano z lokalizacji

http://www.bnet.com/company/imax+corp.

3. DataMonitor. (2010). IMAX Corporation company profile. London: DataMonitor.

4. Historica Foundation of Canada. (2010, XII). The Canadian Encyclopedia. Pobrano z lokalizacji
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6. Pearce, J., & Robinsons, R. (2006). Strategic Management (6th edition). Pearson Inc.

7. SmallCapWatch LLC. (2010, XII). Small Cap Watch. Pobrano z lokalizacji

http://www.smallcapwatch.com/company.asp?TICKER=imax

8. TheStockAdvisors. (2010, XII). The Stock Advisors. Pobrano z lokalizacji IMAX: The big picture:
http://www.thestockadvisors.com/For-Traders/IMAX-IMAX-The-big-picture.html

9. World’s Biggest Screens Pty Ltd. (2007). Big Screen Business. Sydney.

10. Yahoo! Finance. (2010, XII). Yahoo! News Network. Pobrano z lokalizacji
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