0MANAGEMENTCONSULTINGPREP©2013MConsultingPrep,Inc.1GalaxyMovieGalaxyCineisamajorholdingscompanyinthemovieindustryinIndonesia.Galaxyoperatesthreemajorbusinesslines,eachbeinganindependentsubsidiary:MovieProduction,MovieDistribution,andMovieTheaters.GalaxyProduction:Asafilmproducer,Galaxyreceiveshundredsofproposalsfrommoviedirectorsandscriptwriterseachyear.Galaxyevaluatesandonlyapprovesalimitednumberofproposals,ormovieprojects.Theproducerthenworkstogetherwiththedirectororthescriptwritertoimplementtheprojects:recruitingactors,shooting,doingpost-production,etc.Thefinalizedmovieisthenoftensoldtooneormoredistributorsforalump-sumamount.Eachdistributorhastheexclusiverightstodistributethemovieintheagreedparticulargeographiclocations.GalaxyDistribution:Asafilmdistributor,Galaxypurchasesmoviedistributionrightsfromvariousproducers.Thedistributorisresponsibleforcomingupwiththemarketingplanandnegotiatingwiththeaters.Themainsourceofincomefordistributorsistheshareoftheaterticketsrevenue.GalaxyTheaters:Asamovietheaterchain,Galaxyisresponsibleforbuildingorleasingtheaters,showingmovies,andsellingtickets.Theatersoftenkeepapproximately50percentofticketrevenuewhiletheotherpartisthedistributor’sshareofincome.Theexactshareratebetweentheatersanddistributorsisnegotiatedforindividualmovieprojects.Aspiredtobecomethemarketleaderinmovietheaters,GalaxyhasrecentlybeeninvestingheavilytoensureGalaxyTheater’sannualgrowth.2Table1showstheaveragerevenueandprofitmarginofeachGalaxy’sbusinesslinesoverthepastthreeyears.TheCEOofGalaxyCineexpressesherconcernonthefutureoutlookofthecompany.“MostofGalaxy’sinvestmentonmovieproductionisveryriskyduetothelimitedqualityofdomesticmovies.Ontheotherhand,Galaxy’smajorbusinessline,Theaters,strugglesinmanagingcost.UnlikeinregionalcountriessuchasMalaysiaorSingaporewhereshoppingcenters’ownersstronglysupporthavingmovietheatersattachedtodrivefoottraffic,ithasnotbeencommonpracticeinIndonesiaformovietheaterstogetfavorableleasingdeals.Theonlybrightspotleftisthedis...
