MMICC 2010 - UCB

CIRQUE DU SOLEIL

PARTNERSHIP ANALYSIS AND RECOMMENDATIONS FOR FUTURE EXPANSION

PRESENTED BYWYNNE CHYOU | NIKITA MAHESHWARI | GANNON SHIH |

JENNY ZHOUHAAS SCHOOL OF BUSINESS

2010

AGENDA

I. Situational AnalysisII. Current ObjectivesIII. Executive SummaryIV.RecommendationsV. Financial AnalysisVI. ImplementationVII. Q&ASituational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion

2010

SITUATIONAL ANALYSIS| CIRQUE DU SOLEIL VALUES

Creativity: Never compromise creativity; full creative control

Exclusivity: We don’t bring the show to you; each location has its own show

Expertise: Concentrate on what we are good at without stretching ourselves too thin

Mission Goal: Pursue high-growth markets and opportunities without compromising on any of our core values

Core Values

Situational Analysis | Executive Summary | Recommendations | Impact Analysis | Conclusion

2010

SITUATIONAL ANALYSIS| FAILED PROJECTS

Failed ProjectReason for

FailureCore Value Violated

London Battersea

Project

Montreal Cirque Complex

Columbia Pictures

Battleship

Lack of creative control;

Slowness of development

Limited creative involvement

Lack of expertise in new industries eroded

investor confidence

Creativity

Creativity

Expertise

Past failed projects violated core values


2010

SITUATIONAL ANALYSIS| CURRENT ISSUES AND OBJECTIVES

Current Objectives

Select Compatible Partners for show expansion

Avoid Brand Cannibalization in Vegas

Enter new industries and overcome inexperience issues

Show Distribution: Resident vs. Arena vs. Big top

Build revenues in existing locations


2010

Enter nightlife business in areas with established

presence

Leverage existing partnership with MGM Mirage to develop new

resident shows in attractive cities

EXECUTIVE SUMMARY| RECOMMENDATION OVERVIEW

Expand Develop Attract

Launch Reality TV Series to build

brand recognition

Recommendation 1

Recommendation 2

Recommendation 3


2010

RECOMMENDATION 1| RESIDENT VS. TOURING

Profitability

Occupancy

Break-Even

Highest Ticket Price

Shows Per Year

Resident Shows Touring Shows

Higher Margins

90-95% 80%

60% 65%

$150 $100

480 shows 324 shows

Lower Margins

Objective: Grow shows in the Resident segment

Although resident shows require a larger capital expenditure, they deliver more value in the longer term due to higher profitability


2010

Creative freedom

Sustainability

Socially Responsible

High ROI

Four Criteria for Establishing Partnerships

RECOMMENDATION 1| PARTNERSHIP CRITERIA


2010

RECOMMENDATION 1| PARTNERSHIP CRITERIAMGM is a trustworthy, experienced partner to continue resident expansions

Creative freedom

Sustainability

Socially Responsible

High ROI

Four Criteria for Establishing Partnerships


2010

RECOMMENDATION 1| EXPAND MGM PARTNERSHIP

City Tourism Growth

Tourist Shopping

Expenditures

Room for CdU Show

Establishment

Macau

Abu Dhabi

Atlantic City

Detroit

Cirque du Soleil should expand into Abu Dhabi, Atlantic City, and Macau

Detroit is not a viable expansion due to low tourism growth and low revenue potentials


2010

RECOMMENDATION 1| RESIDENT EXPANSION BEYOND MGM

Several cities of high potential exist that are not currently in MGM`s plans

LEGEND LONDON NEW YORK CITY LOS ANGELES BERLIN SYDNEY SHANGHAI

$39.0 Billion

Potential Expansion

Source: www.ChinaDaily.com

Source: www.sflnc.com

Cirque du Soleil should strongly consider future establishments in Shanghai, New York City and Los Angeles due to high tourism

revenue and traffic

Tourism Revenue in 2007 ($Can)

Shanghai

Los Angeles

London

$13.3 Billion

New York City

Berlin

Sydney

$28.9 Billion

$11.3 Billion

$9.7 Billion

$12.1 Billion


2010

RECOMMENDATION 1| ACCOMPLISHMENTS

Current Objectives







2010

RECOMMENDATION 2| EXPANSION INTO NIGHT LOUNGES

Create a unique night long Cirque du Soleil experience that maintains Cirque`s image as a creative, exclusive brand

Lounge Theme Marketing Strategy

"Only 20% actually stay at the casino hotel but show goers drop an average of $30 apiece [elsewhere]" -- B.Baldwin

`Soleil by Night`• Masquerade themed

lounges• Showcase colorful decor

& latest technology• High ceilings and

acrobats throughout

2 Prong Strategy• Cross-selling tickets

between show and club• Synergies in marketing

expenses• Promote club in current

shows


2010

RECOMMENDATION 2| EXPANSION INTO NIGHT LOUNGES " SOLEIL BY NIGHT "

Create Cirque du Soleil themed night clubs to increase avg. expenditure per consumer and avoid cannibalization of existing shows.

Target Location Criteria Short Term vs. Long Term

Location with Cirque du Soleil Show

Places where people stay overnight

Places with lively night life

Length Place Partner

Short Term Vegas

Long Term •Atlantic City•Macau•Abu Dhabi


2010

RECOMMENDATION 2| IMPLEMENTATION CASE IN LAS VEGAS

Identify poor performing, low profit generating lounges and leverage partnerships to rent that venue

Criteria Met:

Venue located 1 block from MGM hotel

Low profitability, threat of bankruptcy with pressure to sell or close

Large venue with in place infrastructure for Cirque du Soleil design

Case Study: Prive and Living Room Nightclub in Las Vegas


2010


Current Objectives







2010

RECOMMENDATION 3| TALENT REALITY SHOW ‘THE ARTISTE’

Strengthen presence on television media and increase brand awareness among new demographics

The Artiste: Become a part of the Next Cirque du Soleil Show...

The Basis

• Weekly challenges are assigned to candidates and weekly elimination rounds procure finalist

• Cirque du Soleil staff will coach candidates prior to challenge events

Network Logistics

ABC Network : ABC is already a subsidiary of Disney, an existing partner

Location Logistics

USA: there is a large Cirque du Soleil presence in North America and huge trend in large reality show viewership


2010

RECOMMENDATION 3| TALENT REALITY SHOW CASE STUDIES

• The Apprentice applicant process

• Donald Trump assigns weekly challenges to candidates

• Aired 15 episodes per season for 4 seasons

• Earned #7 in number of viewers, with 20.7M viewers weekly

• Has greatly increased brand recognition of the Trump brand and logo

The Apprentice

Similar reality shows with parallel structure have enjoyed success

• Applicants are pre-selected through application process

• Elimination fights occur weekly

• Aired 129 episodes total• Boosted an esoteric

"UFC" brand into mainstream viewership and recognition

The Ultimate Fighter


2010







Current Objectives


2010

IMPACT ANALYSIS

Single Resident Expansion

Single Nightclub Expansion

Reality Show

IRR Payback

1-Yr: 94% 5-Yr: 216% 0.52 Years

2-Yr: 24% 5-Yr: 64.9% 1.43 Years

1-Yr: 30% 2-Yr: 331% 0.77 Years


2010

CONCLUSION| IMPLEMENTATION TIMELINE

Task Year 0 Year 1 Year 2 Year 3 Year 4 Year 5+Recommendation 1: Residence Expansions

Development of program Begin partnership talks with MGM Construction of theater Acrobat training Hiring of acrobats and technicians Promotion of the event

Begin showing

Recommendation 2: Club "Soleil Night" Development talks with MGM Secure rental of club venue Promotion of club Hiring of staff Evaluate success Expand nightclub reach to branches

Remodel club venue

Recommendation 3: Reality TV Show Develop program proposal and business model Establish deal with a potential network Hold auditions and hire cast and technicians Filming of program Airing of program

Promotion through advertisement of show


2010

CONCLUSION| RECOMMENDATION SUMMARY

Expand Into New Markets

``Soleil by Night`` The Artiste

Access

Spending ⁄Location

Occupancy Rate

Expand Develop Attract

Creativity . Sustainability . Profitability


2010

Q&A

ContentSituational Analysis - ValuesSituational Analysis – FailuresSituational Analysis – Current IssuesExecutive SummaryRecommendation 1Recommendation 2Recommendation 3Impact AnalysisConclusion – SummaryImplementation Timeline

Appendix Slides (cont.)Why Not Expand Touring ShowsArena Over Big TopCirque du Soleil`s Value-add for CasinosTop 10 Gambling GetawaysWhy Cirque Complex Did Not Work

FinancialsHistorical Revenue & Ticket Sales DataShow Profit ModelShow Break-Even AnalysisResident Show Expansion ModelNightclub ROI (1)Nightclub ROI (2)Nightclub Revenue ProjectionNightclub Operating Profit ProjectionReality Show Revenue ProjectionReality Show Operating Profit ProjectionAlternative StrategiesCompetitor Analysis

Appendix SlidesRisks & Mitigations (Rec 1)Risks & Mitigations (Rec 2)Risks & Mitigations (Rec 3)Partnership ImplementationManaging CreativityMitigating Creativity Risks


2010

APPENDIX|RISKS & MITIGATIONS

Risks for Recommendation 1: Expansion

Mitigation

Large investment expenditure for venue construction does not receive due ROI

Historical growth has shown that even worst-case is still sufficient

Competing with established competitor shows in target geographic location

Differentiate the show as exclusive with premium ticket pricing

Cultural differences per geographic location may hinder acceptance of a show

Tailor new show to the specific regions culture


2010


Risks for Recommendation 2: Night Club

Mitigation

Inability to find a new locale for venue on the Vegas strip

Expand into an existing venue that by leasing

Cannibalism of existing MGM-owned clubs and equivalents in its hotels

Look into revamping poor performing clubs outside of MGM

Low attendance rate or insufficient brand awareness of new club development

Extensively use promotions, advertisements and discounts


2010


Risks for Recommendation 3: Reality TV

Mitigation

Low amount of viewers due either to unawareness or disinterest

Promote heavily with existing membership base

Lack of advertisement sponsors to generate sufficient revenue returns

Leverage existing partnerships and introduce new show to them

Reality TV and related industry is not our expertise

Hire outside directors as well as utilize past case studies


2010

APPENDIX| PARTNERSHIP IMPLEMENTATION

City

Los Angeles

Example of Partner

Example Shows

Kodak Theater “Hollywood“

Los Angeles Pantages Theater “Hollywood“

Capacity

3,401

2,703

Shanghai Grand Theater “Asia“1,800

New York City Broadway Theater “Broadway“

New York City WaMu Theater “In the City“

500

5,600


2010

APPENDIX| MANAGING CREATIVITY

``Always put creativity first``

``Maintain full creative control``

``Show comes before business``

Creativity is the Cornerstone of Cirque du Soleil

Guiding Quotes by Management

How to Maintain Creative Edge

Rotate Stage Directors

Set strict partnership selection criteria

No outsourcing talent

Spend 2-3 years planning shows


2010

APPENDIX| MITIGATING CREATIVITY RISKS

Don`t OverextendExample: Cirque Complex

Familiar Territory

Leverage Existing Partnerships

(MGM for masquerade)

Start in Existing Markets

(Las Vegas)


2010

Demand High Prices and Margins

Maintain prestigious image value

We want to be a ``diamond``

APPENDIX| WHY NOT EXPAND TOURING SHOWS

ExclusivityCore Value

``We deliberately chose a strategy of exclusivity``

Maintain current number of tour shows (7)

Maintain current tour locations and length

Arena over Big-Top

How


2010

APPENDIX| WHY ARENA STYLE OVER BIG TOP STYLE

Arenas are more efficient to set-up, less expensive to operate, and more modern

Show Length

Set-up Employees

Set-up Time

Take-down Time

Capacity

Arena Big Top

96 people 200 people

9 hours 9 days

2 hours 2.5 days

2,500 seats 8,000-12,000 seats

Less Than WeekFull Week

Source: Gateway


http://media.www.unogateway.com/media/storage/paper968/news/2010/03/23/Entertainment/Cirque.Du.Soleil.Paints.The.Town.With.HighFlying.Specticle-3892955.shtml


2010

APPENDIX| CIRQUE DU SOLEIL`S VALUE-ADD FOR CASINOS

Introduction of a Cirque du Soleil Show has benefited MGM Mirage`s other segments

Casino Show Seats Benefit

New York New York Zumanity 1,250 23% increase in Net Revenue

The Mirage Love 2,000 $25 mn growth in EBITDA impact in following year

MGM Grand Ka 2,000 13% increase in slot revenues

Note: Show goers drop an average of $30 apiece on dinner or drinks


2010

APPENDIX| TOP 10 GAMBLING GETAWAYS

1. Aruba2. Atlantic City3. Goa4. Las Vegas5. Macau6. Mississippi Gulf Coast7. Monte Carlo

Source: msnbc

1. Las Vegas2. Macau3. Atlantic City4. Australia5. Mississippi6. France7. Los Angeles

Source: Casino City Times

MSNBC Casino City Times


source:%20http://www.msnbc.msn.com/id/22013696/

http://www.casinocitytimes.com/news/article/top-10-gambling-destinations-169152

2010

APPENDIX| WHY THE CIRQUE COMPLEX DID NOT WORK

`Interactive museums, night clubs where customers dance in water and hotels that add a surreality to five-star service`

Location Features Cost Reasons Failed Takeaway

London`s Battersea Power Station

High-end retailRestaurantEntertainment Center2,000-seat Theater2 HotelsConvention Center

1 Bn Pounds +

Slowness of Developments

Lack of creative Control over

Project

Choose partnerships carefully with

focus on vision and creative control

Montreal 100-room Hotel, Spa, RestaurantMulti-use Theater

C$100Mn

Lack of investors

Lack of expertise in hotels and restaurants

business

Concentrate on what we are good at


2010

Year Revenues ($C) % GrowthAnnual Tickets

Sold (Mil) % Growth Revenue/# TicketsCumulative Tickets

Sold (Mil)1992 35 -- 0.5 -- 70.0 3.01993 50 42.86% 1.0 100.00% 50.0 4.01994 80 60.00% 2.0 100.00% 40.0 6.01995 100 25.00% 2.0 0.00% 50.0 8.01996 140 40.00% 2.5 25.00% 56.0 10.01997 150 7.14% 2.5 0.00% 60.0 13.01998 180 20.00% 2.5 0.00% 72.0 15.01999 300 66.67% 4.0 60.00% 75.0 19.02000 380 26.67% 4.0 0.00% 95.0 23.02001 420 10.53% 5.0 25.00% 84.0 28.02002 450 7.14% 6.0 20.00% 75.0 34.02003 475 5.56% 7.0 16.67% 67.9 41.02004 500 5.26% 7.0 0.00% 71.4 48.02005 590 18.00% 7.0 0.00% 84.3 54.02006 630 6.78% 8.0 14.29% 78.8 61.02007 700 11.11% 10.0 25.00% 70.0 71.0

APPENDIX|HISTORICAL REVENUE & TICKET SALE DATA


2010

APPENDIX|SHOW PROFIT MODEL

Resident Show Touring Show Fixed Cost

Big top $0 $13,000,000Equipment $0 $7,000,000Production $15,000,000 $30,000,000

Total $15,000,000 $50,000,000

Average ticket price $120 $150

Average Profit Margin 80% 80%Total Operating Expenses/ Show $164,160 $240,000

Shows per week 10 9Weeks per year 48 36Shows per year 480 324Available seats per show 1900 2500Occupancy rate 90% 80%Occupied seats per show 1710 2000Occupied seats per year 820800 648000

Total Revenue (M) $98,496,000 $97,200,000Revenue per show $205,200 $300,000Profit per show $41,040 $60,000


2010

APPENDIX|SHOW BREAK-EVEN ANALYSIS

Resident Show Touring Show Average ticket price $120 $150Shows per year 480 324Available seats per show 1900 2500Profit per show $41,040.00 60,000.00$

Break-Even StatisticsBreakeven occupancy rate 60% 65%Revenue at Break-even Occupancy $65,664,000 $78,975,000Revenue per show to Break-even $136,800 $243,750Shows to Break-even 365.5 833.3Years to Break-even 0.76 years 2.57 years


2010

APPENDIX|RESIDENT SHOW EXPANSION MODEL

Year0 1 2 3 4 5

Number of shows opened 0 1 0 0 0 0Total Shows 0 1 1 1 1 1Average ticket price $120 $120 $130 $130 $130 $130Shows per year 480 480 480 480 480 480

Avg. Available seats per show 2000 2000 2000 2000 2000 2000Occupancy rate 90% 90% 90% 93% 93% 95%Occupied seats per show 1,800 1,800 1,800 1,860 1,860 1,900Occupied seats per year 864,000 864,000 864,000 892,800 892,800 912,000Revenue per new show $0 $103,680,000 $0 $0 $0 $0Total Revenue $0 $103,680,000 $112,320,000 $116,064,000 $116,064,000 $118,560,000

Production costs per show 180,000,000$ 180,000,000$ 180,000,000$ 180,000,000$ 180,000,000$ 180,000,000$ Production Costs to MGM 91.7% 91.7% 91.7% 91.7% 91.7% 91.7%

Fixed Cost : Production Costs $15,000,012 $0 $0 $0 $0 $0Variable Cost: Theater and Show Ops $0 $88,128,000 $88,128,000 $88,128,000 $88,128,000 $88,128,000Total Cost $15,000,012 $88,128,000 $88,128,000 $88,128,000 $88,128,000 $88,128,000

Operating profit -$15,000,012 $15,552,000 $24,192,000 $27,936,000 $27,936,000 $30,432,000Creative Royalty $13,478,400 $14,601,600 $15,088,320 $15,088,320 $15,412,800Net Cash Flow -$15,000,012 $29,030,400 $38,793,600 $43,024,320 $43,024,320 $45,844,800

1-Year IRR 94%5-Year IRR 216%Break-even 0.52 Years


2010

APPENDIX|SHOW PROFIT MODEL

Resident Show Touring Show Fixed Cost

Big top $0 $13,000,000Equipment $0 $7,000,000Production $15,000,000 $30,000,000

Total $15,000,000 $50,000,000

Average ticket price $120 $150

Average Profit Margin 80% 80%Total Operating Expenses/ Show $164,160 $240,000

Shows per week 10 9Weeks per year 48 36Shows per year 480 324Available seats per show 1900 2500Occupancy rate 90% 80%Occupied seats per show 1710 2000Occupied seats per year 820800 648000

Total Revenue (M) $98,496,000 $97,200,000Revenue per show $205,200 $300,000Profit per show $41,040 $60,000


2010

APPENDIX|NIGHTCLUB ROI (PART 1)

2008 2009 2010 2011 2012 2013Total clubs 1 1 1 1 1Club capacity 2,000 2,000 2,000 2,000 2,000Club occupancy rate 60% 60% 60% 60% 60%Average club occupancy 1,200 1,200 1,200 1,200 1,200

Cirque attendees 1,800 1,800 1,860 1,860 1,900% of Cirque attendees 35% 45% 55% 60% 60%Cirque and club attendees 630 810 1,023 1,116 1,140Outside attendees 570 390 177 84 60

Entrance price - Cirque attendees $40 $40 $45 $45 $50Entrance price - Outside attendees $50 $50 $55 $55 $60Consumption expenditure per person $40 $45 $50 $55 $60

Cirque attendee revenue $25,200 $32,400 $46,035 $50,220 $57,000Outside attendee revenue $28,500 $19,500 $9,735 $4,620 $3,600Consumption revenue $48,000 $54,000 $60,000 $66,000 $72,000

Number of Tables 50 50 50 50 50Table Occupancy rate 50% 50% 50% 50% 50%Table Reservations 25 25 25 25 25Price per Table $3,000 $3,000 $3,000 $3,000 $3,000Table Revenue $75,000 $75,000 $75,000 $75,000 $75,000

Total Ticket Revenue $53,700 $51,900 $55,770 $54,840 $60,600Total Consumption Revenue $48,000 $54,000 $60,000 $66,000 $72,000Nights open a year 234 234 234 234 234Annual revenue per club $12,565,800 $12,144,600 $13,050,180 $12,832,560 $14,180,400


2010

APPENDIX|NIGHTCLUB ROI (PART 2)

2008 2009 2010 2011 2012 2013Total nightclub revenue $12,565,800 $12,144,600 $13,050,180 $12,832,560 $14,180,400Consumption Margin 70% 70% 70% 70% 70%Total COGS 14,400.00$ 16,200.00$ 18,000.00$ 19,800.00$ 21,600.00$ Gross Profit $12,551,400.00 $12,128,400.00 $13,032,180.00 $12,812,760.00 $14,158,800.00

Expenses (per club)SG&A 2,513,160.00$ 2,428,920.00$ 2,610,036.00$ 2,566,512.00$ 2,836,080.00$ Rent Expense 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ Utilities Expense 628,290.00$ 607,230.00$ 652,509.00$ 641,628.00$ 709,020.00$

Total Expenses (per club) 5,541,450.00$ 5,436,150.00$ 5,662,545.00$ 5,608,140.00$ 5,945,100.00$ Total Operating Expenses 5,541,450.00$ 5,436,150.00$ 5,662,545.00$ 5,608,140.00$ 5,945,100.00$

Operating Profit $7,009,950.00 $6,692,250.00 $7,369,635.00 $7,204,620.00 $8,213,700.00Net Cash Flow 10,000,000-$ $7,009,950.00 $6,692,250.00 $7,369,635.00 $7,204,620.00 $8,213,700.00

2-Yr IRR 24.0%5-Yr IRR 64.9%Payback Period 1.43


2010

APPENDIX|NIGHTCLUB REVENUE PROJECTION

2009 2010 2011 2012 2013Number of new clubs 1 3 0 0 0Total clubs 1 4 4 4 4Club capacity 2,000 2,000 2,000 2,000 2,000Club occupancy rate 60% 60% 60% 60% 60%Average club occupancy 1,200 1,200 1,200 1,200 1,200

Cirque attendees 1,800 1,800 1,860 1,860 1,900% of Cirque attendees 35% 45% 55% 60% 60%Cirque and club attendees 630 810 1,023 1,116 1,140Outside attendees 570 390 177 84 60

Entrance price - Cirque attendees $40 $40 $45 $45 $50Entrance price - Outside attendees $50 $50 $55 $55 $60Consumption expenditure per person $40 $45 $50 $55 $60

Number of Tables 50 50 50 50 50Table Occupancy rate 50% 50% 50% 50% 50%Table Reservations 25 25 25 25 25Price per Table $3,000 $3,000 $3,000 $3,000 $3,000Table Revenue $75,000 $75,000 $75,000 $75,000 $75,000

Total Ticket Revenue $53,700 $51,900 $55,770 $54,840 $60,600Total Consumption Revenue $48,000 $54,000 $60,000 $66,000 $72,000Nights open a year 234 234 234 234 234Annual revenue per club $12,565,800 $12,144,600 $13,050,180 $12,832,560 $14,180,400


2010

APPENDIX|NIGHTCLUB OPERATING PROFIT PROJECTION

2008 2009 2010 2011 2012 2013Total nightclub revenue $12,565,800 $48,578,400 $52,200,720 $51,330,240 $56,721,600Consumption Margin 70% 70% 70% 70% 70%Total COGS 14,400.00$ 16,200.00$ 18,000.00$ 19,800.00$ 21,600.00$ Gross Profit $12,551,400.00 $48,562,200.00 $52,182,720.00 $51,310,440.00 $56,700,000.00

Expenses (per club)SG&A 2,513,160.00$ 2,428,920.00$ 2,610,036.00$ 2,566,512.00$ 2,836,080.00$ Rent Expense 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ 2,400,000.00$ Utilities Expense 628,290.00$ 607,230.00$ 652,509.00$ 641,628.00$ 709,020.00$

Total Expenses (per club) 5,541,450.00$ 5,436,150.00$ 5,662,545.00$ 5,608,140.00$ 5,945,100.00$ Total Operating Expenses 5,541,450.00$ 21,744,600.00$ 22,650,180.00$ 22,432,560.00$ 23,780,400.00$

Operating Profit $7,009,950.00 $26,817,600.00 $29,532,540.00 $28,877,880.00 $32,919,600.00


2010

APPENDIX|REALITY SHOW REVENUE PROJECTION

2008 2009 2010 2011 2012 2013Revenue

Touring Shows Average number of seats 2,000 2,000 2,000 2,000 2,000 Number of shows 6 7 6 6 6Total number of seats 12,000 14,000 12,000 12,000 12,000Total shows per year 324 324 324 324 324Annual seats 3,888,000 4,536,000 3,888,000 3,888,000 3,888,000

Resident Shows Average number of seats 1,710 1,710 1,710 1,710 1,710 Number of shows 7 8 8 8 8Total number of seats 11,970 13,680 13,680 13,680 13,680Total shows per year 480 480 480 480 480Annual seats 5,745,600 6,566,400 6,566,400 6,566,400 6,566,400

Total number of seats 9,633,600 11,237,270 10,611,722 10,602,964 10,772,489% increase in attendees 1.4% 1.4% 1.4% 3.0% 3.0%Total increase in attendees 134870.4 157,322 148,564 318,089 323,175

Average price per ticket $100 $100 $100 $100 $100Increase in attendee revenue $13,487,040 $15,732,179 $14,856,410 $31,808,892 $32,317,467

% of attendees who purchase DVDs 0% 20% 20% 20% 20%Price per DVD 25 25 25 25 25DVD Revenue $0 $56,186,352 $53,058,609 $53,014,821 $53,862,445

Total Revenue $13,487,040 $71,918,531 $67,915,019 $84,823,713 $86,179,911


2010

APPENDIX|REALITY SHOW OPERATING PROFIT PROJECTION

2008 2009 2010 2011 2012 2013Total Revenue $13,487,040 $71,918,531 $67,915,019 $84,823,713 $86,179,911

Operating costs:Average cost per episode $700,000 $700,000 $700,000 $700,000 $700,000Number of episodes 10 10 10 10 10Production costs $7,000,000 $7,000,000 $7,000,000 $7,000,000 $7,000,000Winner's new contract 0 75,000 75,000 75,000 75,000Total costs $7,000,000 $7,075,000 $7,075,000 $7,075,000 $7,075,000

Operating profit $6,487,040 $64,843,531 $60,840,019 $77,748,713 $79,104,911Development Cost -$5,000,000Net Cash Flow -$5,000,000 $6,487,040 $64,843,531 $60,840,019 $77,748,713 $79,104,911

1-Yr IRR 30%2-Yr IRR 331%Payback 0.77


2010

APPENDIX| ALTERNATIVE STRATEGIES

Alternative Strategy

Pros Cons

Cruises -Targets high-end sophisticated customers-Global audience-Infrastructure available for general shows

-Lower viewership per performance-Limited number of shows per week-Low ROI

Hotel Operation -Huge revenue potential-Potential venue for future shows

-Lack of experience in this business segment-High fixed cost to operate

Interactive Museum - Engages cutting-edge technologies

-Low Revenue potential-Many competing museums, lack of differentiation

High-End Dining - New market segment -Not our expertise-Chain could overextend brand


2010

APPENDIX| COMPETITIVE POSITIONING

Competitor Line of Business The Cirque Advantage

Dragone • Director from Cirque du Soleil•Similar Productions•Upcoming Project in Macau

•Larger scale•Partnerships with global businesses

Feld Entertainment • Ringling Bros.•Disney on Ice•Disney Live

• Different Target Demographic of Adults vs. Families•No repeats of shows

Dodger Properties •Major Broadway Productions

•Huge creative team that handles all aspects of creative process•Production of more creative, interpretive shows

Source: Businessweek





2010

APPENDIX| WHY ABU DHABI & ATLANTIC CITY

• The survey demonstrates that Atlantic City remains an attractive destination for tourists

• 96% of visitors view Atlantic City as becoming more attractive.• 99% would recommend Atlantic City to friends or family

members.• Eleven casinos where you also get to enjoy the pleasures of

celebrity chef restaurants, nightclubs in New York style and sprawling spas. historic concert hall where musical bands like The Police, The Rolling Stones and Madonna

• Casinos are great attractions with sparkling new retail, dining and entertainment complexes like The Pier Shops at Caesars (where Tiffany & Gucci boutiques hold court) and the Havana-inspired The Quarter at Tropicana.

Tourism Reviews


2010

Annual Visit-Trips to Atlantic City (in thousands)

Year Automobile Casino Bus Franchise Bus Air Rail Total

2008 25,903 4,910 505 250 245 31,8132007 26,929 5,408 501 260 202 33,3002006 27,545 6,041 526 260 162 34,5342005 27,889 6,104 519 261 151 34,9242004 25,815 6,600 495 261 152 33,3232003 24,553 6,764 504 261 142 32,223 2002 24,676 7,586 514 268 143 33,1882001 23,501 7,985 519 276 139 32,4202000 23,177 9,015 536 323 133 33,1841999 23,247 9,342 539 396 128 33,6521998 23,293 9,903 530 447 127 34,300

Source: South Jersey Transportation Authority

APPENDIX| WHY ABU DHABI & ATLANTIC CITY


MMICC 2010 - UCB

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