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company inverse: a musical theatre company opportunity evaluation for stonnington city council double i cmr final draft 3 july 2000 – PowerPoint PPT presentation

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1
COMPANY INVERSE A MUSICAL THEATRE
COMPANY OPPORTUNITY EVALUATION FOR STONNINGTON
CITY COUNCIL

Double i CMR Final Draft 3
July 2000
2
The Proposal
For Stonnington City Council to support the
establishment of COMPANY INVERSE, Australias
first not-for-profit Musical Theatre Company in
the Chapel Street Tourist precinct at Stonnington
City Centre (Prahran). Company Inverse is
seeking the following support 
3
The Proposal (cont)
  • In return, Company Inverse will provide
  • social and cultural benefits for Stonnington City
    Council and its community
  • recognition and image for pioneering the
    initiative associate the company logo with an
    initiative of Stonnington City Council, thereby
    providing council with national/international
    brand exposure
  • an opportunity for a nominated Stonnington City
    Council representative to sit on the Company
    Inverse board.

4
The Business Opportunity
  • Vision

Company Inverses vision is to secure the future
of Australian- created Musical Theatre by
creating a one-stop shop for the evaluation and
development of new Australian musical theatre
product, and to enable best fit of such product
with established networks, or the development of
new market opportunities.
  • The opportunity

To fill a gap in the arts industry to enable
local creative talent to incubate and develop all
aspects of musical production by providing a
network for collaboration and communication by
Australian composers and lyricists and establish
a sustainable framework for the creation,
development and marketing of Australian musical
theatre works (locally, nationally and
internationally). This will increase the profile
and market share of these musicals and increase
the opportunities for Australian talent. Also
there exists an advocacy role for the place of
musical theatre within our national culture.
5
The Opportunity Evaluation Objective
  • The objective of this Opportunity Evaluation is
    to investigate whether Stonnington City Council
    should invest in Company Inverse as a Musical
    Theatre Company based in the Stonnington
    precinct. We have used an opportunity
    evaluation model to assess the benefits to
    Stonnington City Council and its community.
    Benefits have been categorised in terms of
  • Social and cultural benefit
  • Economic returns, and
  • Recognition and image for pioneering the
    initiative.

6
Why should Stonnington City Council be involved?
  • Association with Company Inverse will provide the
    following benefits
  • Alliance of the Stonnington Brand with innovative
    leadership in culture and the arts.
  • Attraction of media and focus to the Stonnington
    precinct, including media exposure on a national
    level. Potential to be one of Stonningtons
    largest positive branding products, as Company
    Inverse, an initiative of the City of
    Stonnington will be cross-promoted on all allied
    sponsor brandings, such as Ticketmaster mailouts
    and website.

7
Why should Stonnington City Council be involved?
  • Local community cultural benefit as it initiates
    a dynamic, broad appeal asset to local
    environment.
  • Entertainment industry (3 billion industry - ABS
    1996) focus to the Stonnington precinct and
    alliance with peak industry body
  • Positive market positioning for the Stonnington
    Brand within corporate market place, in terms of
    partners/networks.
  • Recognition and image for pioneering the
    initiative.
  • Utilisation of existing physical asset/buildings,
    including the presentation/marketing of these
    assets to the Entertainment Community.
  • Ideal match for contents of City of Art  plan.

8
Why the Stonnington precinct?
  • Inner city precinct with national and
    international recognition as leading edge
    destination for shopping, dining, entertainment
    and cultural experiences.
  • Stonnington City Council has a reputation and a
    trade record as a visionary, progressive and
    innovative local government industry leader.
  • The high presence of Melbourne-based business and
    arts industry leaders.

9
Why the Stonnington precinct? (Cont)
  • Stonnington City as Art Plan - 2000 Beyond
    identified a strong, dynamic Cultural Industries
    Business Sector exists in Stonnington, evidenced
    by a total of 780 individual arts/culture related
    businesses and over 45 community and cultural
    venues and organisations
  • Two major segments within the plan support the
    citys investment in this proposal, namely
  • - Creative Arts  - investing in creativity and
    developing opportunities for local artists and
    groups to create new works, and
  • - Business Arts  - adding value to the
    business of culture by creating a co-operative
    climate for innovation and investment.

10
Industry Statement of Support and Need
 I am writing to commit my strongest support to
the proposal of establishing a company dedicated
to the creation, support and development of new
Australian musicals. Any efforts to help
consolidate the foundations of new work
development in this country would benefit the
industry on all levels - producers, venues,
artists and, ultimately, audiences. Ultimately
this initial investment pays off many times over,
for our industry, our culture and our nation. I
wish you the best for your endeavours and offer
any support that I can. You are filling a great
need, one that has gone unserved for too long. 
John Frost Australian Theatre s Most
Successful Commercial Producer.
11
Company Inverse 3 Year Financial Summary
12
Conclusions
The seed funding from SCC is required as a first
step to realising the potential for Company
Inverse. The seed funding will enable Company
Inverse to commence operations and begin the
tasks of securing other sponsorship and revenue,
developing a business plan, consolidating
national and international partnerships and
realising their market entry strategy.
Company Inverse has demonstrated support for its
establishment evidenced by-
  • Interest by key players to sit on a high level
    Board
  • Interest from high profile artists and business
    people to act as patrons and supporters of the
    company
  • Interest from nationally recognized arts
    organisations including Arts Victoria, MTC, VAC
  • Initial high level sponsor interest (including
    Ticketmaster, Millmaine Entertainment, SEL,
    Qantas, Marriner Theatres and Macpherson
    Promotions)

13
Conclusions (cont)
Additional sponsorship will be required beyond
the SCC s contribution. However a ground
breaking initiative such as this requres a
progressive community leader to provide the
intial impetus to get the ball rolling. It has
been evidenced that previous endeavors similar to
Company Inverse have failed because the Arts and
Entertainment Industries percieved them as solely
commercial endeavours, and it is expected that
the stage one commitment of Stonnington City
Council will allay those fears and open other
potential revenue opportunities for the company
(Federal and State funding, philanthropic
giving). It is expected that commitments from
state, federal and philanthropic funding bodies
and revenues from originating producer and
publishing royalties will in time replace
original sponsor load.
14
Recommendations
Although the Opportunity Evaluation supports the
view that there are very many good indicators for
success for the establishment of Company Inverse,
there are correspondingly a couple of risks that
need to be mitigated before Stonnington City
Council should provide full commitment to this
project. We therefore recommend that a two stage
approval process be adopted
  • Stage 1 Stonnington City Council commits now to
    provide
  • Stage 1 seeding grant of 30,000 to commence
    company operations and prepare a Business Plan
  • Fitted-out office space for three workers at
    Prahran Town Hall for a 6 month probationary
    period
  • Kris Stewart and Sam Schwarz provide Stonnington
    City Council with personal guarantees that
    should Stonnington City Council decide to provide
    full commitment to supporting Company Inverse
    that they will remain committed to the project
    for at least 3 years, and will leave the Council
    with no financial liabilities

15
Recommendations (cont)
  • Stage 2 On the basis that within 6 months
  • a detailed Business Plan has been prepared and
    the outcome supports the sustainability of
    Company Inverse, and
  • Company Inverse has obtained formal commitment
    from major sponsors to at least 265,000 for the
    first year of operations, plus 175,000 for each
    of the next 2 years, then

Stonnington City Council would commit to provide
  • Stage 2 seeding grant of 70,000 to continue
    company operations for the balance of the first
    year
  • Fitted-out office space for three workers at
    Prahran Town Hall for a guaranteed period of 3
    years
  • Provide strong public support for the
    establishment of Company Inverse at the time of
    the public launch

16
Contents
  • The Opportunity Evaluation Screening Process
  • The 2-stage Screening Process
  • This is based on the work by Jeffrey Timmons and
    a frequently used investment evaluation tool.
  • Stage 1 The First Cut
  • Stage 2 Detailed Screen
  • Attachments
  • A. Opportunity Screening Benefits
  • B. First Cut Screen

17
The 2 Stage Screening Process
  • Stage 1 The First Cut
  • Stage 1 of the screening process involves a quick
    audit of the knowledge of the opportunity from
    the key stakeholders. In this evaluation, the
    market, economics, competitive advantage, team,
    risks and presence of any fatal flaws are briefly
    evaluated using the Leichardt Scale to provide a
    visual appreciation of the broad merits of the
    idea. If most of the scores appear between 5 and
    10, then the decision can be made to move to
    Stage 2.
  • Stage 2 Detailed Screen
  • Stage 2 involves more detailed analysis on the
    basis of hard data and hard evidence. It expands
    on the areas of the First Cut. Although the
    Detailed Screen is more detailed than the First
    Cut, it does not go to the depth of analysis as
    required by a Business Plan. The key focus of
    our Opportunity Evaluation approach is to quickly
    show whether an opportunity exists before moving
    to the Business Plan.

18
The 2 Stage Screening Process (cont)
  • The difference between the Opportunity Screening
    and Business Planning approach is that
    Opportunity Screening focuses more on the Why?
    and the What? of the Opportunity rather than the
    implementation. If the Opportunity is not there,
    then there is no need to go to the trouble of
    doing the detailed planning.
  • Further reasons for carrying out Opportunity
    Screening rather than Business Planning are
    summarized in Attachment A.

19
Stage 1 - The First Cut
From the First Cut Opportunity Evaluation
(details are contained in Attachment B), the
following conclusions were drawn
  • Market Needs seem clear, Customers are
    identifiable, and Products are able to value-add
    to customer needs Risks to success are
    associated with the large market size, low growth
    rates low gross margins
  • Economics The opportunity will have low
    commercial return, low capital cost but will
    generate high strategic value
  • Competitive Advantage Company Inverse is able
    to control distribution channels and marketing
    it has a strong management team, and it should be
    able to create high barriers to entry
  • Risks and Fatal Flaws Although a number of
    risks could be identified, there appeared to be
    nothing which would constitute a fatal flaw which
    would prevent proceeding to the next stage.

20
CHECKPOINT!
Do the broad merits of the First Cut Opportunity
Screen warrant moving to Detailed Screening?
  • Yes - many of the First Cut scores were at the
    higher end of the scale, therefore lending
    support to making a more detailed evaluation of
    the opportunity

?
21
Stage 2 - The Detailed Screen
In proceeding with the Stage 2 - Detailed Screen,
the Company Inverse opportunity was evaluated
under the following headings
  • Description of the business opportunity
  • Description of the product
  • Opportunity Conditions
  • Evidence
  • Total market size trends
  • Primary customers
  • Competition - vulnerabilityi.e.s?

22
Stage 2 - The Detailed Screen (cont...)
  • Window of opportunity - perishability?
  • Market Structure
  • Entry Strategy
  • Competitive Advantages - Sustainable
  • Economics
  • Degree of Control
  • Team capabilities
  • Programme
  • S.W.O.T. analysis

23
Stage 2 - The Detailed Screen (cont...)
  • Financials - Margins, Cash Flow, Profit, Start Up
    Capital, PL, Sensitivity
  • Harvest Potential
  • Exit Mechanism
  • Major Assumptions Risks
  • Fatal Flaws / Issues

24
The Business Opportunity
  • Vision

Company Inverses vision is to secure the future
of Australian created Musical Theatre by creating
a one-stop shop for the evaluation and
development of new Australian musical theatre
product, and to enable best fit of such product
with established networks, or the development of
new market opportunities.
  • The opportunity

To provide a network for collaboration and
communication by Australian composers and
lyricists and establish a sustainable framework
for the creation, development and marketing of
Australian works (locally, nationally and
internationally). This will increase the profile
and market share of these musicals and increase
the opportunities for Australian talent. Also
there exists an advocacy role for the place of
musical theatre within our national culture.
25
The Product
Company Inverse will provide the following
Products and Services to the Australian musical
theatre industry
A. Assisting the development of composers and
lyricists of New Australian Musicals B. Promotin
g, developing and marketing New Australian
Musicals nationally and internationally C. Produ
cing small to medium scale productions for
on-selling D. Advocacy of the Musical Theatre
industry in Australia
26
The Product - Writers and Scripts
With regard to assisting with the development of
writers and scripts for new Australian musicals,
the nature of the product, tools and the various
sources of income are summarised below
Product Nature
Tools
Income Source
Establishing focus for the Australian Musical
industry, building interaction and facilitating
collaboration
Providing a referral service for authors,
producers, set and costume designers Acting as a
national and international conduit for
collaboration and Co-production Review,
mentoring, workshops, collaboration,
networking Review, mentoring, workshops,
collaboration, networking
Based on annual sponsorship and funding
levels Based on annual sponsorship and funding
levels Based on annual sponsorship and funding
levels Based on annual sponsorship and funding
levels
  • Between different writers
  • Between writers and producers

The evaluation of new Australian musicals, and
workshopping to develop potential The skill
development of Australian authors, producers, set
and costume designers
27
The Product - Promoting, Developing and Selling
With regard to promoting, developing and selling
new Australian musicals nationally and
internationally, the nature of the product, tools
and the various sources of income are summarised
below
Product Nature
Tools
Income Source
Promoting the excellence of new Australian
musicals internationally The marketing of
Australian works to producers / presenters and
performing arts bodies Providing development
services to the industry
Marketing, promotion and collaboration Marketing,
selling. collaboration, Co-production,
contracting Development workshops
Requires funding from industry, training and arts
bodies Revenue raised by royalties split between
Company Inverse and authors Fee for service
28
The Product - Producing
With regard to producing small to medium scale
productions for on-selling, the nature of the
product, tools and the various sources of income
are summarised below
Product Nature
Tools
Income Source
Producing concerts and full productions of new
Australian musicals - productions for whom
opportunity doesnt currently exist
Script development, production development
workshops, final production
Revenue raised by ticket sales and
commissions Economies of scale require
scaled-down operations / costs Revenue raised by
ongoing Originating Producers Royalty Revenue
raised by Publishing rights
29
The Product - Advocacy
With regard to advocacy of the Musical Theatre
industry in Australia, the nature of the product,
tools and the various sources of income are
summarised below
Product Nature
Tools
Income Source
The advocating of musical theatre as a major form
of art, entertainment and a significant industry
Establishing focus, promotion, collaboration,
lobbying
Funding from industry and training bodies
30
The Product - How it Works
  • Company Inverse will work through initiation of
    the following key programmes to support its core
    business
  • The American Society of Composers, Authors and
    Publishers Program (ASCAP), which will take
    worlds-best artists and bring them to Australia
    to work with our emerging authors
  • The Ferrier Prize, which will be an award for
    unproduced new Australian musicals that will help
    us discover the as-yet unknown talents in
    Australia
  • The commissions, which will seed-fund new
    Australian musicals from industry professionals
    (allow us to develop works that target perceived
    industry and cultural needs)
  • The workshops programs, which will develop works
    and make them industry ready

31
The Product - How it Works (cont)
  • The national marketing of developed works to
    performing arts organizations
  • The presentation of new Australian musicals at
    International Festivals and Industry Conventions
    and our cultural exchange programs with
    international companies
  • The companys mounting of full-productions/co-prod
    uctions of new Australian musicals, potentially
    in partnership with National Festivals or touring
    networks.

32
Key Market Information
  • The place of culture, performing arts and musical
    theatre in Australia
  • Arts and Culture industry within Australia had a
    turnover of 19.6B on 1996/97 (equivalent of 2.5
    of GNP and larger than the industries of road
    transport and house building).
  • 7 of Australian workforce is employed in Arts
    and Cultural activities (ABS 1996/97).
  • 1399 businesses currently operate in the
    performing arts (ABS 1996/97), with 881 of these
    working in music and theatre.
  • Most popular of the performing arts (ABS
    1996/97) was Musical Theatre with 3.3m attendees,
    surpassing pop music, which had 3.1m.
  • In 1995 ABS survey, 2.7m Australians attended a
    musical theatre event, the equivalent of 21 of
    Australia s adult population.

33
Evidence of Market Demand
  • General Market Needs
  • Currently an identifiable market need in
    Australia for musical theatre (3.32m attendees in
    1996/97 Financial Year).
  • Due to lack of Australian product, the
    musical theatre market is being filled largely by
    American, British and European product.
  • The Australian audience wants more varied
    product at reasonable cost, as well as product
    outside of metropolitan centres.
  • There is also an identifiable need from
    producers and presenters for new works. They
    want polished and developed Music Theatre product
    that matches producing organisation needs for
    less investment than doing it individually. Such
    users include
  • commercial producers
  • subsidised theatre companies
  • Arts centres
  • regional touring networks
  • educational touring programs
  • educational institutions
  • amateur theatres
  • casinos

34
Evidence of Market Demand (cont)
  • Stonnington City Council Needs
  • To contribute to its mission to work in
    partnership with the community to add to the
    quality of people s lives through the
    preservation and enhancement of Stonnington s
    assets and the provision of innovative, equitable
    and quality services.
  • To enhance the amenity of the precinct so
    that is remains a sought-after location in which
    to live, work and do business.
  • To develop Chapel off Chapel as the Council s
    major Arts Centre to play a significant role in
    assisting creativity through a diverse range and
    style of performances.
  • To generate opportunities for creative
    collaborations with key arts organisations and
    theatre companies.

35
Evidence - The Customers
  • Who are the Customers?
  • Creative-Industry Professionals
  • writers, directors, performers
  • 50 of the new business focus.
  • business growth will rely on quality networks of
    contacts in Australia and overseas.
  • Business - Producers and Promotors
  • commercial producers, presenters, funding bodies,
    sponsors.
  • 30 of the new business focus.
  • growth is limited, however opportunity will grow
    as the business gathers a strong reputation.
  • Public Audience
  • large and diverse.
  • 20 of new business focus.
  • highly competitive market due to wide range of
    other
  • entertainment options.

36
Evidence - The Competition
Where is the Competition?
  • The main competion comes from overseas sourcing
    of product, and local production, such as Sound
    of Music.
  • Producing organisations (can be either
    competitors or collaborators) such as Cameron
    Mackintosh, Edgley International, David Atkins,
    Jacobsen, Melbourne Theatre Company.
  • Non-live entertainment.
  • American productions, such as Disney.

37
Market Value
What Value is Added for Customers?
  • For the creative industry professionals, provide
    a one-stop-shop to create more of a sellers
    market for their creations.
  • For producers and presenters, Company Inverse can
    polish and develop musical theatre product to the
    required standards, but at less cost than doing
    it individually (introduce some economy of
    scale).
  • For Australian audiences, create a focus / outlet
    for creative expression re research and
    development of new Australian musical product.
  • General by providing
  • An advocacy role in the promotion of the cultural
    necessity of Australian product - need to address
    the perception that overseas product must be
    better.
  • An education role in skill development of
    training musical theatre artists.
  • A networking role in linking artists to the
    market and providing an information exchange.

38
Market Window
Window of Opportunity?
  • Current opportunities exist due to recent United
    States venture by Company Inverse.
  • Potential to ally international activities with
    increased post-Olympics knowledge of Australia
    and its comtemporary culture.
  • Political climate seems right at this time
  • Would lose energy and support from some major
    sponsors if this venture does not become reality
    in six months and the potential remains to lose
    key personnel.
  • focus on regional / outer suburb producing
    networks
  • Stonnington City Council has good match in terms
    of aspiration.


Overall the window of opportunity seems no more
than 3 months due to potential to lose the
support of key personnel.
39
Market - Product Substitutes
What Product Substitutes Exist?
  • Producing organisations (can be either
    collaborators or competitors)
  • Non - live entertainment
  • American productions
  • Overseas sourced, local productions

40
Market Structure
How is the Market Structured?
  • Creative - Industry Professionals
  • Small select
  • Easy to identify and target
  • Largely creative - writers, composers, directors,
    performers
  • Limited growth
  • Target - best of the best, best of the emerging
  • Business - Producers and Promoters
  • Small select
  • Easy to identify and target
  • Highly competitive
  • Limited growth
  • Fickle market - investors prone to move with
    entertainment fashion
  • Public Audience
  • Large and diverse
  • Traditionally aged 28-70
  • Consumer choice largely driven by the female
    partner
  • Opportunity to expand audience participation
    beyond one
  • show per year

41
Market - The Value Chain
THE TRADITIONAL VALUE CHAIN
Script Idea
First Draft
S C R E E N I N G
S C R E E N I N G
Collaboration
FINAL PRODUCTION Large investment, taken to
audiences with sets costumes, cast etc.
Producing Presenting Organisations (John
Frost, MTC)
Developmental Workshop Process Producer Funded.
(repeated many times)
Review Cycle
REJECTION
REJECTION
PHASE C
PHASE A
PHASE B
Eight Weeks Rehearsal Many months Pre-production
Nine Months to Three Years
Nine to Eighteen Months
COMPANY INVERSE VALUE-ADDING ACTIVITIES
42
Market - The Value Chain (cont)
For Phase A of the Value Chain
  • Market Gaps identified in Phase A of the
    Tradition Value Chain are
  • Little matching of Industry needs with writer
    activity.
  • Little return / investment to skill development.
  • No focal point or support system.
  • Works not completed as no financial support at
    early stage.
  • Fitting the Gaps and Value Adding of Company
    Inverse are by
  • Investment in skill development (ASCAP, Ferrier
    Programs).
  • Linking Artists to the Market.
  • Seeding Projects.
  • Servicing of script ideas to meet market needs.
  • Providing network and information exchange.
  • Advocating cultural necessity of Australian
    Musical Theatre.
  • Opening new stakeholders in Aust MT
    (non-commercial funders).

43
Market - The Value Chain (cont)
For Phase B of the Value Chain
  • Market Gaps identified in Phase B of the
    Tradition Value Chain are
  • Reject Rate too high.
  • Evaluation and development very financial, labour
    and skill intensive.
  • Focussed solely on commercial (not cultural
    needs).
  • Process repeated by each individual Producer.
  • Fitting the Gaps and Value Adding of Company
    Inverse are by
  • Creating a sellers  market, by establishing a
    one-stop shop.
  • Creating economy of Scale - focus to produce
    critical mass.
  • Identifying Centralised skill base for evaluation
    and development.
  • Packaging and marketing finished works to
    appropriate producers.

44
Market - The Value Chain (cont)
For Phase C of the Value Chain
  • Market Gaps indentified in Phase C of the
    Tradition Value Chain are
  • Simpler to import rather than invest in
    Australian Product.
  • The scale of projects needed to generate a
    profit.
  • Fitting the Gaps and Value Adding of Company
    Inverse are by
  • Providing full production for audiences that
    otherwise may not have access to Musical Theatre.

45
Market Entry
Market Entry Strategy
  • Identify target key producers, presenters,
    funding bodies - both government non
    government, venues and presenting venues, and
    sponsors.
  • Identify key date for launch of company. Must
    fall prior to opening of next major musical in
    Melbourne - November 2000.
  • Launch company with media driven campaign
    spanning four weeks, so as to heighten
    expectation and develop curiosity.
  • Together with launching kit, provide mission
    statement, strategy, major activities, values and
    role to be filled within the industry.
  • Launch company in 2 stages, a media announcement
    launch followed by an afternoon of discussions,
    networking and Q A.

46
CHECKPOINT!
  • Do we have sufficient market (rather than
    product) focus to support the venture? Yes,
    there appears to be identifiable market gaps for
    which Company Inverse can provide significant
    value.

47
CHECKPOINT!
  • Do we have enough experience to tackle this
    venture? Yes, Kris Stewart and his team have
    much hands-on experience with the successful
    production and presentation of musical theatre
    events. Kris is a multi-award winning director
    for his work in new musicals (1997 Emerging
    director Prize, 2000 Murdoch Prize, 2001
    Churchill Fellowship) and is widely respected as
    a leader within the industry, as is attested in
    the letters of support for this project and an
    article on Kris from Feedback, the Musical
    Theatre and Cabaret Industry Journal. He has
    obtained an in-principle commitment from Sam
    Schwarz to work as General Manager, and Sam has
    many years of experience across Musical Theatre,
    including currently working as Major Events
    Manager for the Australian Entertainment Industry
    Association (AEIA).

48
Competitive Advantage Issues
  • Company Inverse will generate competitive
    advantage through having the following
    attributes
  • Providing the only one-stop-shop for
    collaboration, networking and workshopping of
    Australian musical theatre for production and
    presentation.
  • The people resources available now to create
    strong leadership in the industry.
  • Strong contacts and networks in the musical
    theatre industry to influence the channels of
    distribution.
  • The following issues need to be addressed in
    managing the financial return on investment
  • Product produces a limited commercial return.
  • Limited opportunity for premium pricing.
  • Good control over expenses, but sustainability
    dependent upon obtaining ongoing commitment from
    sponsors.

49
Competitive Advantage Issues (cont)
  • Fixed And Variable Costs

It is of great benefit in a business start up to
have a low ratio of fixed to variable costs. For
2000/01, Company Inverse projects the following
position
  • Fixed Costs
  • Office Fitout 31,900
  • Total 31,900
  • Variable Costs
  • Project Costs 220,000
  • Sponsorships/Administration 83,000
  • Artistic/Project Development 73,440
  • Publicity 45,000
  • Total 421,440

50
CHECKPOINT!
  • Do we have sufficient competitive advantage?
  • Although there appears to be some weaknesses in
    the degree of control over the financial return
    for this investment, the overall conclusion is
    that Company Inverse will have sufficient
    competitive advantage to underpin the success of
    this venture through the use of

?
  • The one-stop shop approach
  • Its people
  • Its contacts

51
Management Team Issues
Entrepreneurial Team
  • Key team members in Kris Stewart and Sam Schwarz
    have a successful track record in the production
    and presentation of musical theatre and have an
    extensive network of contacts, including
    potential sponsors. Kris has worked across
    Australias subsidized and commercial theatre
    organizations, while Sam has had daily contact
    with our potential customers while at AEIA, and
    has put together the sponsorship for the Helmann
    Awards, amongst other projects.
  • Kris Stewart and Sam Schwarz have been involved
    in the successful start up of other businesses
    including Particular Productions and the South
    Australian Youth Theatre Company.
  • Kris Stewart has clear understanding of the
    requirements of the management team and has
    selected strong candidates for the positions of
    Artistic Director (Kris), General Manager (Sam
    Schwarz) and Communications Director (to be
    assigned)

52
Management Team Issues (cont)
The Board
  • A sample of people who have stated an interest in
    joining the Board include John Frost, Ann Tonks
    (MTC), Tim Jacobs and Milos Melandinovis (VAC),
    David Penfold (Managing Director of Mike Walshs
    theatre interests) and Sue Nattrass.

53
CHECKPOINT!
  • Do we have or can we get the right team?

Yes, one of the key strengths of this venture is
the composition of the management team and the
potential strength of the Board that can be
assembled by Kris Stewart.
?
54
2 Year Program of Events
55
SWOT Analysis
  • Strengths (Internal Focus)
  • Management team and potential Board structure.
  • Strong network of good contacts.
  • Relatively low fixed costs.
  • Stonnington City Council support.
  • Strong musical theatre industry support.
  • Sponsorship and letters of endorsement.
  • Creating a cultural asset.
  • Product development can be tailored to meet
    client needs.

56
SWOT Analysis (cont)
  • Weaknesses (Internal Focus)

Associated Strategies
  • Limited commercial returns
  • Company is a not-for-profit organisation and is
    structured with a low fixed cost to variable cost
    ratio
  • Reliance on sponsor support
  • Identify target key sponsors for the industry
  • Capacity to service sponsor needs
  • Carry out structured survey of sponsor needs to
    ensure that the product delivered is of value to
    them
  • Potential to stray from core business
  • Clearly articulate business milestones and
    regularly monitor activity against milestones
  • Ensure that focus of the team remains on the
    business milestones
  • Time and resources may be stretched given the
    national / international vision
  • Company fixed costs kept low and variable costs
    tailored to meet development and establishment
    period
  • Product lead time
  • Completely new business
  • Focus on business plan and sponsors

57
SWOT Analysis (cont)
  • Opportunities (External Focus)
  • Can lever up from existing good international
    business models.
  • No other Australian company is providing the same
    service.
  • Sharing of risk amongst current producers and
    presenters.
  • Melbournes strong cultural positioning.
  • Australia is becoming more prominent /
    fashionable globally.
  • Current Government commitment to regional
    Australia.

58
SWOT Analysis (cont)
  • Threats (External Focus)

Associated Strategies
  • Vigorously carry out the advocacy role in the
    promotion of the cultural necessity of Australian
    product
  • Fickle / volatile arts / personality industry
  • Fickle / public / media environment
  • Public and government apathy to the arts
  • Public and government apathy to Australian
    product
  • Foreign musical theatre product
  • Crowded arts market place
  • Other forms of entertainment
  • Create and implement a marketing plan to promote
    the benefits of Australian product over other
    forms of entertainment
  • Quickly seize the high ground through an
    aggressive corporate positioning strategy
  • Someone else could seize the window of opportunity
  • Limited corporate support for arts
  • Identify and target key corporate citizens for
    financial and other support
  • Prepare Opportunity Evaluation and detailed
    Business Plan to demonstrate the market potential
    and sustainability of the new business venture
  • Stonnington City Council political environment

59
Financial Objectives
  • Company Inverse is structured to be a small (lt1m
    turnover a year) not-for-profit company which
    will have national and international cultural
    impact. At year one, the weight of financial
    support for the company will rest with early
    stakeholders (Stonnington City Council and
    Industry Partners, which includes producers,
    venues, ticketing agencies etc). As the Advocacy
    element of the company consolidates and the
    companys activities get widely known, the weight
    of financial support will diversify to include
    other government and philanthropic bodies, and
    expand to include potential royalty and
    publishing revenues. It is always intended that
    Company Inverse always remain at its initial
    scale and level of independence.
  • By end of September 2000, it is expected that
    commitment to 80 of the first years sponsorship
    requirement (outside of SCC) of 330,000 will be
    obtained, namely 265,000.
  • In line with its not-for-profit company approach,
    Kris Stewart and Sam Schwarz will manage the new
    venture in accordance with the following
    financial charter
  • No financial commitments will be made that put
    the company into negative cashflow
  • Stonnington City Council will not be put into a
    financially liable situation outside of the
    initial seed funding commitment
  • Although remuneration for Kris and Sam will be
    tailored to suit cashflow, they will put in
    maximum effort to ensure the success of the new
    venture (their remuneration will be tailored to
    about 25 of the major sponsorship dollar
    commitment for each year)

60
Company Inverse 3 Year Financial Summary
61
Economic and Harvest Issues
  • Financial Analysis Sensitivity -
  • Sponsorship funds are reduced by 50 - By
    keeping fixed costs low, Company Inverse has
    high potential to tailor its expenditure to suit
    the income/sponsorship levels actually achieved.
    In this case, it is forseen that the Company
    would reduce its level of activity (particularly
    international), return to its stakeholders to
    explore the possibility of adapting each
    projects cost structure, and focus on core
    advocacy activity. If this happened in year 2,
    then 250,000 of projected expenditure would be
    saved by cutting out the international program
    (60,000), reducing salaries (60,000) and (what
    else??)
  • Job Costs increase by 10 - If the Project Cost
    budget blows out by 10, then the 27,000 would
    be saved by reduction in the international
    program (???) and reducing salaries (???)

62
Economic and Harvest Issues (cont) (Kris to redo)
  • Exit Strategies
  • SCENARIO A Business proves to be sustainable in
    2 years time but shareholders want to exit
    Company Inverse
  • SCENARIO B Business proves to be unsustainable
    in 2 years time (Kris to provide dot point
    response in terms of the exit strategy for
    Company Inverse. Need to assess impact on SCC,
    sponsors, disposal of fixed cost)

Lets presume that by shareholders we mean
stakeholders. The fundamental activity must be
proving the cultural benefits brought by Company
Inverses existence. Stakeholders willing to
exit could be - THE FOUNDING PARTNERS who have
been the skill base and in this case there would
be an attempt to replace them CITY OF
STONNINGTON not wanting to continue to support
the company and in this case the company would be
moved and housed elsewhere - Im assuming that if
the business is sustainable sponsors dont want
to exit. If the business proves to be
unsustainable but has had a positive cultural
impact then it would be perceived that the City
of Stonnington has had a successful return on
their investment. We are assuming fixed costs
are manageable, then the company has the ability
to liquify its intellectual property assets, such
as the publishing rights to the musicals that it
has originated.
63
  • Are our financial objectives being met? Yes,
    given the commitment of Kris and Sam to tailor
    expenditure to suit the income stream,
    particularly income from major sponsors.
  • Is cashflow a problem? Cashflow may be a problem
    if the sponsorship funding targets move out
    beyond the milestone dates, therefore close
    attention will be made by the General Manager to
    ensure sponsorship targets are met.

CHECKPOINT!
?
64
Major Assumptions Risks
  • Assumptions about Sponsors
  • Sponsors form an integral element of the success
    of Company Inverse
  • Sponsors approached to date - Millmaine
    Entertainment, Ticketmaster, QANTAS, Holden,
    State Government of Victoria, Federal Government,
    McPherson Promotions, Marriner Theatres David
    Marriner, Telstra, Optus, and Vodafone. Second
    stage meetings are being currently held with
    Ticketmaster, Millmaine Entertainment, QANTAS
    McPherson Promotions.
  • Expect a three month period of negotiations to
    gain initial sponsorship commitment from seven
    companies, each to the value of 50,000. An
    eventual list of more than thirty companies will
    be approached during this time. Based on current
    feedback, there is a positive expectation Company
    Inverse initial sponsorship goals will be met.
  • Letters of support can be provided by
    Ticketmaster, McPherson Promotions, Millmaine
    Entertainment, John Frost (GFO) and Sue Nattrass.
  • Value to be gained via sponsorship - The big
    ticket item is product. Ultimately all companies
    listed above stand to gain form increased product
    in the market, from more entertainment
    advertising (Millmaine Entertainment), to ticket
    sales and support for new Australian musicals is
    highly desirable to a company such as
    Ticketmaster. All companies - apart from
    government - stand to gain in both the direct,
    and indirect (tourism) aspect of Company Inverse.
    Government agencies are waiting to be associated
    with new home grown product in the musical
    theatre genre, something that has been very rare
    to date.

65
Major Assumptions Risks (cont)
Assumptions Risks
Associated Strategies
  • Carry out a structured survey to identify sponsor
    needs and how Company Inverse can provide ongoing
    value
  • One of the main risks relates to the following
    assumptions about sponsors
  • attract appropriate and timing
  • meet sponsorship needs
  • provide ongoing value to sponsors
  • Expenditure of company to be tailored to suit
    level of sponsorship contributions
  • remuneration of the management team to be
    benchmarked against the sponsorship target
    being achieved
  • prior to formal start up, formal commitments from
    sponsors are to be obtained
  • Another risk relating to the following
    assumptions about the market
  • strong advocacy will help overcome fickleness,
    public and government apathy and strong
    competition from alternative forms of
    entertainment
  • creative industry professionals, producers and
    promoters will accept the product offer and want
    to use the resources of Company Inverse
  • Grab the high ground and vigorously promote the
    cultural necessity of Australian Product
  • Identify and target key user groups to ensure
    product / offer is tailored to suit needs

66
Fatal Flaws / Issues
The major assumptions and risks associated with
the ongoing success of Company Inverse, and
associated strategies to manage these risks are
clearly identified in the previous sections.
The highest risk associated with this venture is
its high reliance on gaining adequate sponsorship
and government funding. Although strategies are
in place to identify sponsor needs, the bottom
line is that full commitment to this project
cannot be made until substantial ongoing major
sponsor commitment is formally obtained the
target here should be 265,000, being 80 of the
first years sponsorship requirement of 330,000.
67
Conclusions
  • The Positives associated with Company Inverse
    are
  • The business opportunity can be clearly defined
    in terms of the products and services that can be
    provided to the Australian musical theatre
    industry
  • The potential customer base is large (3.3m
    attendees in 1996, surpassing pop-music)
  • There are clearly identifiable gaps in the
    Australian musical theatre market which can be
    filled by the products and services offered
  • The company will have sufficient competitive
    advantage through use of the one-stop-shop
    approach, its people and its networks
  • Kris Stewart is able to assemble a strong
    management team, with high respect in the musical
    theatre industry, as well as a strong Board to
    give it strong credibility
  • Low ratio of fixed to variable costs means that
    expenditure is more easily tailored to suit
    actual income streams achieved
  • Association with the establishment of the new
    musical theatre company will bring social and
    cultural benefit to the Stonnington City Council
    and its community

68
Conclusions (cont)
  • The main risks to success for Company Inverse
    are
  • High reliance on sponsorship and government
    funding
  • Low commercial returns due to low growth rates
    and low gross margins
  • High reliance on the skills, contacts and ongoing
    commitment of Kris Stewart and Sam Schwarz
  • For Stonnington City Council, if Company Inverse
    is not a success
  • Social and cultural benefits will not be
    delivered as expected
  • Negative coverage can result from association
    with failure
  • Stonnington City Council may feel compelled to
    take care of any outstanding financial matters

69
Recommendations
Although the Opportunity Evaluation supports the
view that there are very many good indicators for
success for the establishment of Company Inverse,
there are correspondingly a couple of risks that
need to be mitigated before Stonnington City
Council should provide full commitment to this
project. We therefore recommend that a two stage
approval process be adopted
  • Stage 1 Stonnington City Council commits now to
    provide
  • Stage 1 seeding grant of 30,000 to commence
    company operations and prepare a Business Plan
  • Fitted-out office space for three workers at
    Prahran Town Hall for a 6 month probationary
    period
  • Kris Stewart and Sam Schwarz provide Stonnington
    City Council with personal guarantees that
    should Stonnington City Council decide to provide
    full commitment to supporting Company Inverse
    that they will remain committed to the project
    for at least 3 years, and will leave the Council
    with no financial liabilities

70
Recommendations (cont)
  • Stage 2 On the basis that within 6 months
  • a detailed Business Plan has been prepared and
    the outcome supports the sustainability of
    Company Inverse, and
  • Company Inverse has obtained formal commitment
    from major sponsors to at least 265,000 for the
    first year of operations, plus 175,000 for each
    of the next 2 years, then

Stonnington City Council would commit to provide
  • Stage 2 seeding grant of 70,000 to continue
    company operations for the balance of the first
    year
  • Fitted-out office space for three workers at
    Prahran Town Hall for a guaranteed period of 3
    years
  • Provide strong public support for the
    establishment of Company Inverse at the time of
    the public launch

71
  • ATTACHMENT A
  • OPPORTUNITY SCREENING BENEFITS

72
Why Screen?
  • Makes you ask the hard questions
  • Quickly shows whether theres an opportunity
  • Technique is not new
  • Approach used by Venture Capitalists
  • A practical technique THAT WORKS
  • Takes a fraction of time cost of a business
    plan
  • If screening is positive, you can proceed to
    business planning with confidence
  • Work isnt wasted business plan is half written
    (if decision is made as a result of the screen to
    prepare a detailed Business Plan).

73
  • ATTACHMENT B
  • FIRST CUT OPPORTUNITY SCREEN

74
The First Cut THE MARKET
  • High Potential
  • Need Identified
  • Customers
  • - Reachable,
  • Receptive
  • Value Added
  • - High
  • Product Life
  • - Durable

Low Potential Unidentified - Unreachable,
Loyal to Others - Low
X
X
X
X
- Perishable
75
The First Cut THE MARKET (cont)
  • High Potential
  • Mkt Structure
  • - Emerging
  • Mkt Size
  • - 100m
  • Mkt Growth Rate
  • 30-50 p.a.
  • Gross Margins
  • 40 - 50 durable
  • Low Potential
  • - Mature
  • - lt10m
  • - Contracting
  • or lt10 p.a.

X
X
X
X
lt20 fragile
76
The First Cut THE MARKET (cont) ECONOMICS
  • High Potential
  • Market Share
  • 20 (leader)
  • Cost Structure
  • - Low
  • ECONOMICS
  • Profits After Tax
  • 10 - 15 (durable)
  • Breakeven/
  • Sustainability
  • lt2yrs

Low Potential lt5 - High lt5 (fragile)
X
X
X
X
gt2yrs
77
The First Cut ECONOMICS (cont)
  • High Potential
  • ROI 25 p.a.
  • (including noneconomic)
  • Strategic value
  • - High
  • Capital
  • - Low
  • Exit
  • - Harvest options

Low Potential lt15 - 20 p.a. - Low -High
X
X
X
X
- Not Defined
78
The First Cut COMPETITIVE ADVANTAGE
  • High Potential
  • Production costs
  • - Lowest
  • Marketing costs
  • - Lowest
  • Distribution costs
  • - Lowest
  • Control of Prices - Strong

Low Potential - Highest - Highest - Highest
X
X
X
X
- Weak
79
The First Cut COMPETITIVE ADVANTAGE (cont..)
  • High Potential
  • Control of Costs
  • - Strong
  • Control of Distribn
  • - Strong
  • BARRIERS TO ENTRY
  • Lead time advantages
  • - Have
  • Legal, contractual
  • - Have advantage

Low Potential - Weak - Weak - None
X
X
X
X
- None
80
The First Cut COMPETITIVE ADVANTAGE TEAM
  • High Potential
  • BARRIERS TO ENTRY
  • Contacts / Networks
  • - Well developed
  • Resources
  • - Adequate
  • MANAGEMENT TEAM
  • Entrepreneurial team
  • - Existing
  • Competitors - Unfocused

Low Potential - Limited - Inadequate - Weak
X
X
X
X
- Focused
81
The First Cut FATAL FLAWS RISKS
  • High Potential
  • Existence of Fatal Flaws
  • - None
  • Risks
  • - Low

Low Potential - One to many - High
X
X
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