Revenue Strategies HFT 3463 Review

Imagine we have 1,000 seats in our theatre. With $50,000 in fixed costs and $100 in variable costs per person, how much would we need to charge per ticket to break even assuming we will fill the entire theatre? Use the formula: Price per ticket = [total fixed costs + (variable costs * attendees)] / Attendees

$150

Imagine we'd like to make a profit of $10,000 for our event. We have 1,000 seats in our theatre, $50,000 in fixed costs, and $100 in variable costs per person, how much would we need to charge per ticket to make our target profit, assuming we will fill the entire theatre? Use the formula: Price per ticket + profit = [total fixed costs + target profit + (variable costs * attendees)] / Attendees

$160

Another theatre has net assets in the amount of $12,000 of which $10,000 are unrestricted, and fixed assets in the amount of $5,000. The theatre has long-term investments in the amount of $3,000 and they are all unrestricted. What is the working capital, or funds the theatre has to meet day-to-day operations? Use the formula: Working Capital = Total Unrestricted Net Assets - Fixed Assets - Unrestricted long-term investments

$2,000

A roulette game has a house advantage of 5.3%. Five players each bet $100, making the handle $500. Three players bought chips at the table, making the drop $300. Theoretically, how much should the house expect to win on average?

$26.50

Use the formula R = P * N * A * S where N = ƒ(T) and the below key to answer the following question. T: Ave. Playing Time P: Ave. Ticket Price N: Number of showing per day A: Number of seats per screen S: Number of screens Assuming an average ticket price of $10, how much is the maximum that a movie averaging 4 showings a day can make if the average number of seats in the theater is 200 and the number of screens is 400?

$3,200,000

Using a sliding scale for a Standard Distributor-Exhibitor Contract arrangement, answer the following: In the first week, how much does the distributor take in a 30/70 (exhibitor/distributor) split if the house nut is $1,000 and the film's take is $6,000?

$3,500

Using a Standard Distributor-Exhibitor Contract arrangement, how much does the exhibitor take in a 30/70 (exhibitor/distributor) split if the house nut is $2,000 and the film's take was $8,000?

$3,800

Your board member Dave has volunteered to work as an usher for one of your events. Minimum wage in the community is $10 per hour. He normally works as an accountant for $30 per hour. He will be working as a volunteer for 4 hours as an usher, before, during, and after the performance. How much should you report for his in-kind donation?

$40

If the casino's edge is 2% and 5 bettors each bet $100 on one roll of the dice in a one-roll decision dice game, what is the handle?

$500

A local contractor agrees to repair your roof at a discount. He normally charges $1,000 for the work, but agrees to do it for $300 instead. How much of his in-kind donation would you report?

$700

Still using the same sliding scale: In the fifth week, how much does the distributor take in a 60/40 (exhibitor/distributor) split if the house nut remains the same $1,000 but the film's take does down to $3,000?

$800

Average Persons = Population * (Rating / 100) Gross Rating Points (GRPs) = Rating * number of Spots Media Cost = Spots * Cost per spot Impressions = Average Persons * number of Spots Cost Per Thousand Impressions (CPM) = Media Cost / (Impressions / 1,000) You are planning to advertise your music festival in the home of the Rock n' Roll Hall of Fame, Cleveland, Ohio! You are going to purchase 10 spots at $600 per spot. Based on Cleveland's population of 385,525 and a Nielsen Rating of 1.6 for the station on which you plan to advertise, what is the CPM (cost per thousand impressions)? Hint: You will need to find the CPM by calculating at least some of the other values to use in the formula.

$97.27

A theater has an annual income of $12,000, of which $8,000 is unrestricted. Their total expenses for the year equal $9,500. What is the theatre's Change in Unrestricted Net Assets (CUNA) for the year? Use the formula: CUNA = Total Unrestricted Income - Total Expenses

-$1,500

Which of the following is acceptable for consideration as "ultimate revenue" in amortization of inventory?

1. Merchandise, toys, products as long as there is a history of revenue from such products. 2. Evidence that a licensing agreement will produce revenue. 3. An acquired film library not more than 20 years from acquisition date. 4. Evidence that revenue will occur.

If a production company in Orlando can expect to sell 5,000 tickets to a show given the current population, what is the minimum number of Limited Run performances the theatre must give to just meet the operating expenses in a 1,000 seat theatre? Break Even Estimate = Total Number of Seats * .50 Number of Performances = Number of potential seats / Break Even Estimate

10

According to statistical analysis, in a given population, what percentage of the potential audience can be expected to support live theatre by purchasing tickets and attending shows?

2 %

In the United States, gambling winnings are typically taxed at a flat _______

25%

This age group spends the least time participating in leisure activities according to the American Time Use Study (2018).

25-44 year olds

What percentage of theme park revenues do admissions represent?

49-60%

Use the formula Total Revenue Produced / $ Spent on Marketing * 100 = ROAS % to assist you with the following question. In an advertising campaign for a music festival, promoters spent $10,000 on advertising. The festival brought in $50,000 in revenue. What is the ROAS?

500%

Demand is considered inelastic when increasing the product price also increases the revenue produced. When this happens, the elasticity equation equals

< 1

The Contribution Margin is the amount of money we will actually make off of each ticket after allowing for per person costs. What is the formula for calculating the contribution margin?

= Ticket Price - Variable Costs

Which of the following will not automatically result in Sponsor payments being taxed as advertising revenue?

A link to the Sponsor's homepage.

Which of the following Distributor-Exhibitor contracts requires that the "take" be split without taking out the house nut first?

Aggregate Booking Contract

These affluent investors provide business start-up capital in exchange for ownership equity or convertible debt.

All of the Above

Which of the following was a benefit of the American Institute of Certified Public Accountants (AICPA) "Accounting for Motion Picture Films" which was published in 1973?

Allowed studios to be compared with one another.

In Europe, what music is considered part of the public domain?

Any music 50-75 years after the composer's death

Which of the following is not considered a standard record deal between an artist and label?

Artists receive percentage points from the label with half due upon signing

Match the Fundraising step to the best description.

Assessment - Identify potential donors Cultivation - Establish relationships Solicitation - The "ask" Stewardship - Thank your donors

This nation leads the world in the average total loss per gambler.

Australia

Professional sports has increasingly adopted social media as a way to generate buzz. Which of the following is NOT one of the top three major sports using Social Media today?

Baseball

Which of the following is NOT a good practice when it comes to the "Ask," or asking donors for funds?

Begging for funds.

Master Rights

Belong to either the artist(s), record label, recording studio, or any other party that financed the recording

Publishing Rights

Belong to the owner of the actual notes, melodies, chords, rhythms, lyrics, and any other piece of original music

This pricing strategy means that items are sold for what they cost to produce.

Break even pricing

Price fences may be used to justify price discrimination strategies. Which is an example of a fence related to buyer characteristics?

Children's and Adult Tickets

Major League Baseball (MLB) has a luxury tax that is used to level the spending an individual team can spend on their roster. This is called the ___________

Competitive Balance Tax

Adjusting for inflation, movie ticket prices are showing a steady and significant increase in price. The index used to measure the effect of inflation on current pricing is called

Consumer Price Index

Which of the following lending sources is NOT typically used by large film studios to fund their productions?

Crowdfunding

Which of the following is NOT a potential outcome of Audience Development?

Decrease the number of first-time audiences

The percentage of total initial player wagers the casino expects to earn over the long run if all players use perfect strategy against the game is called the Casino's ________

Edge

As a price leader in Orlando, Walt Disney World sets their prices to match what other attractions are doing.

False

As supply of a product increases, demand for the product goes up.

False

Athlete driven media is immensely important to the sports media industry. Athlete driven media refers to sports related content that is created and posted by acclaimed news broadcasters about top athletes.

False

Audience characteristics for advertising may be based on attitudes, opinions, and preferences. These are measures of audience demographic characteristics.

False

Generally speaking, theme parks sell space explicitly, while they sell time implicitly.

False

In Florida, running an illegal bingo operation or offering a jackpot that exceeds the $250 maximum is a felony.

False

In wholesale music pricing, products in the highest demand may actually be priced lower to attract impulse buyers while products in lesser demand may have larger price tags.

False

Lions Gate is one of the larger film exhibitors in the United States.

False

Sequencing refers to the order in which films are released, with larger budget films coming out before small budget films are released.

False

Sponsorships will often result in taxable and non-taxable line items. Non-taxable sponsor funds are reported to the IRS as "unrelated business income" (UBI).

False

When asking for funds, it is better to write a letter or send an email instead of asking in person, so the person you are requesting donations from doesn't feel cornered.

False

According to the TEA report, which of the following is one of the top 5 theme park companies in the world in terms of attendance?

Fantawild

Match the Pricing Strategy term to the best description of that strategy. There is only one match for each item. There may be descriptions left over.

For Profit: Tickets or services are sold in order to generate profit (revenue > cost) Loss-Leader: Tickets or services are sold at a lower price to stimulate sales Break-Even: Tickets or service are sold at "cost" simply to recoup what was spent to produce

Mechanical Royalties

For recordings or sheet music reproduction

What was one of the negative effects of having a mega-event like the Olympics in cities like Barcelona Spain?

Gentrification of parts of the city

Which of the following is NOT one of the five phases of strategic entertainment management planning?

Implementation

Which of the following is NOT a type of Earned Income?

In-Kind

Which of the following was a benefit of the Sports Broadcasting Act of 1961?

It allowed sports leagues to act as a cartel. It allowed sports leagues to be free of antitrust sanctions. It increased interest in sports through TV licensing.

Gambling laws in the United States tend to be quite liberal. Which of the following does NOT indicate a liberal view of legal gambling in the US?

It is illegal to place online bets in most states.

This park is considered to be the first amusement park in the United States.

Knott's Berry Farm

The 1890 Sherman Antitrust Act stated, in brief, that business combinations formed with the intention of restricting trade are illegal. What sports franchise has been exempt from this law since the Supreme Court ruling in 1922?

Major League Baseball

Theme park pricing characteristics are unique for a variety of reasons. Which of the following is NOT a characteristic of theme parks?

Marginal sales are high compared to marginal revenues

Audience Development is undertaken specifically to meet the needs of existing and potential audiences. One way of doing this is by collecting data from audiences to monitor their attendance at events, and to discover their preferences and opinions. Which component of Audience Development includes data collection?

Marketing

This is the biggest difference between Local and National Corporations when it comes to corporate giving.

Motivation - how the organizations are vested in the community

To get Tax Exempt Status, or be classified as 501(c), an organization must file for an exemption. Which of the following is an IRS requirement for this status?

Must further a specific scientific, educational or religious purpose.

Which of the following is NOT a type of Contingent Talent Participation?

Normal salary or set payments

Sponsorships are usually sold based on audience size. For this reason, what cost strategy is typically used?

Opportunities to See (OTS)

Synchronization Fees

Paid anytime music is matched with visual media

Public Performance Royalties

Paid for live performances

The State of Indiana as more hardcore gambling laws than more liberal states like Massachusetts. Which of the following is outlawed in Indiana but not in Massachusetts?

Private gambling

According to the Ansoff Matrix, this strategy involves introducing a new program to an existing audience.

Product Development

Mass media is a group that constructs messages with embedded values, and that disseminates those messages to a specific portion of the public in order to achieve a specific goal. When an extremely biased media source oversteps their place and tries to sell you a political ideology, it is considered ________.

Propaganda

When planning the number of performances for a venue, which type would indicate that you have a variety of different shows available to perform so you can rotate through them throughout your season?

Repertory

Considering Segmentation, Targeting, and Positioning (STP) of an entertainment product or service, match each term to the description that best fits that term.

Segmentation: Selecting the most meaningful groups of people Targeting: Selecting the most efficient market Positioning: Creating an image which should lead to a brand

In a plan for Segmentation, Targeting, and Positioning of an entertainment venture, targeting refers to

Selecting the most efficient market segments

When considering how time is sold in theme parks, it is important to consider duration and seasonality. Which of the following is an example of tickets sold using a duration strategy?

Selling annual or seasonal passes

Theme park shutdowns due to the Coronavirus pandemic have caused huge losses. Which of the following is NOT a strategy being used to alleviate the losses?

Selling off unprofitable properties

The "Bradley Act" or PROFESSIONAL & AMATEUR SPORTS PROTECTION ACT (PASPA), made it illegal to engage in this type of betting in the US, no matter the method used.

Sports betting

This type of earned income comes from people who purchase a membership in the theatre, or who purchase a package of more than one performance at a time.

Subscription Revenue

Grant writing can be difficult for new organizations because

The application process can be difficult

Per the AICPA, which of the following is NOT a condition for recognizing licenses for ancillary release of films on financial statements?

The film has entered pre-production

According to the Backward-Bending Labor-Supply Curve, people begin to work less and enjoy more leisure time when their salaries move from W2 to W3. This is because

The income effect is greater than the substitution effect

Advertising

The most common of all revenue models in traditional media and online.

In the previous question, does the CUNA tell us about the theatre in question?

Their income did not cover their expenses.

Which of the following is NOT an economic principle of professional sports?

There is a correlation between economic growth and the addition of new sports facilities.

Subscription

These provide steady revenues over time, and work well with media types that are constantly updated

Which of the following is NOT an operating characteristic of professional sports leagues?

They generate revenue exclusively through broadcast rights

In the previous question, what does the Working Capital tell us about the theatre organization?

They have enough capital to cover day to day needs.

An emerging theme park ticket pricing strategy is dynamic pricing, where different prices are charged based on the day of the week.

True

Backlogs, which allow studios to contract for future license fees before the film is even produced, are included as current liabilities (as advance payments).

True

Cable television originated in the United States almost simultaneously in Arkansas, Oregon and Pennsylvania in 1948 to enhance poor reception of over-the-air television signals in mountainous or geographically remote areas.

True

Every member of the board of directors should be involved in fundraising in some fashion.

True

High salaries for valued team members or players is one of the largest expenditures for professional sports.

True

Individual donors are immensely important to your fundraising efforts since these donors are the consumers of your services.

True

Player contracts for players like Aaron Rodgers, quarterback for the Packers, include both fixed salaries and bonuses for things like showing up for practice or playing in a championship game.

True

Settlements may occur to adjust profits if either the distributor or exhibitor comes out of a contractual arrangement with a bad deal, such as when a film bombs.

True

The ROAS percentage in the previous answer means that for every $1 spent on advertising, we made more back in revenue. This is considered a good return on our advertising spend.

True

Theatrical release of films is often the largest driver of income, although it is not always the most profitable.

True

When we say that demand for a service is elastic, we are saying that it is sensitive to other factors, such as price.

True

Which of the following parks is NOT on the TEA list of top 10 parks in terms of attendance?

Universal Studios Hollywood

Merchandising

Used as a secondary, or ancillary income.

Pay-Per-Item

Used for media types that come in an individual package, offer no ongoing value, and are sustained through sales alone.

The original sunk costs of producing a movie on DVD are very low, but the price to purchase a DVD of a popular movie title may be quite expensive. This is an example of what type of pricing strategy?

Value-Based Pricing

Betting limits help casinos increase their revenue by increasing the odds that the house will win. Setting minimum or maximum table limits is a form of ____________, since it influences gambler behavior to maximize revenues.

Yield Management

As the music industry moved into a business model of selling vinyl, cassettes, or CDs, they entered a _______________ model.

product service