Imax Case Study

        IMAX has been a staple in many of the countries museum environments for years, showing off their large screen, great sound, and amazing picture quality documentaries. But, by 2007, they suffered a loss in operational income along side a decrease in sales revenue due to a number of factors including new technology, changing of consumer preferences, as well as different mediums becoming more and more popular. IMAX had a decision to make, to completely diversify, or to focus on being one of the very few producers of large screen theater equipment?

        IMAX was involved in an array of different incomes. The most profitable being the IMAX system sales at 51% followed by films and theater operations at 32% and 14% of total income respectively, leaving way for alternative strategies. Since IMAX is a smaller company, one strategy they they could incorporate would be to merge with a larger production company to produce more educational and entertainment movies that can be shown in their larger format. Since they are already industry leaders in the technology of the large format film segment, they could concentrate on increasing revenue through film. IMAX was already in the process of reformatting Hollywood films into their format to release in theaters. The movies that are released in the IMAX capable theaters, are shown for a longer duration of time thus more chance to increase revenues. In 2002 Beauty and the Beast was released after the initial launch for 22 weeks in 67 IMAX theaters bringing in a revenue of $32 million. If they were worried about releasing large format converted Hollywood films during the same time as the initial release date, The Day the Earth Stood Still, when released, sold an average revenue per theater of $30,800 in the large screen format compared to an $8,100 average revenue for national theaters.

        Merging with a larger corporation can be a great asset for IMAX, however, there could be problems as well. Making movies is not cheap. Getting film rights paying for location, actors, transportation and all create huge multi-million dollar budgets that put a lot of pressure to recoup. Just because they are now affiliated with a major company also does not guarantee success. With an ever changing technology, consumers are now finding other ways to view films via digital download or purchase of DVD’s or even piracy. Government regulations and censorship also play a huge part in the success or failure of the film industry.