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Case Study Cineplex
In 1979 Garth Drabinsky and Nathan Taylor formed Cineplex. From early on Cineplex saw itself as a niche player. They used small screens to show specialty movies and they employed this strategy not to challenge major chains, but to compliment them. Cineplex did well primarily because of their concept for carefully planned use of shared facilities.

With this success they began to expand across Canada with a very rapid rate of expansion. During this expansion however they amassed a 21 million-dollar debt. Also, distributors became reluctant to supply Cineplex for fear of alienating the two largest Canadian chains. In 1983 to avoid bankruptcy, Cineplex reduced its debt by selling off some of its recently purchased assets. Darbinsky also took legal action to win back access to major releases. Son after this time he also purchased the Odeon chain so that he would be able to bid for early runs of movies. This gave Cineplex a major position in the industry.

Through Darthbinsky’s relentless tactics Cineplex Odeon was the second largest motion picture chain with 1,800 screens in over 500 locations. Now that Darthinsky owned one of North America’s major theater chains he sought to change the movie going experience by changing the layout and atmosphere of the theaters to attract even more moviegoers. Drabinsky endeavored to use the size of his chain to obtain added clout with film studious and distributors.

Drabinsky had no plans to slow his companies’ rapid pace of expansion and he extended Cineplex Odeon’s production activities through other branches of the entertainment industry. His unrelenting drive for growth placed tremendous pressure on the company’s finances. As doubt grew about the financial health of Cineplex Odeon, Drabinsky reputation as a brilliant strategist was gradually subject to increased scrutiny. He realized his weaning support and ho sought to gain control by buying a large stake in the company. MCA, one of the controlling stockholders, blocked this successfully and forced Darbinsky from his leadership position with the company. When Darbinsky left he left a company carrying a massive $655 million dollar debt.

Alan Karp assumed the leadership role and immediately began to cut costs and divest some of Cineplex Odeon’s assets. He also took steps to increased concession revenues. In a short amount of time Karp was successful in cutting the debt by ½ and was able to switch back to more of a strategic focus. He began to show interest in further growth. As of 1995 Cineplex Odeon reported a loss of $30 million for the 1st 6 months of the year. These numbers started to raise concerns about Karp’s ability to turn things around. His attempt to merge with a major chain failed a few months earlier. Although the merger was called off Karp remained enthusiastic about the potential of the company.



I would rate their current financial condition as fair to poor.

Return on Total Assets – not significant

Current Ratio – .22891 (very poor)

Long-term debt to equity ratio – 81.85

Many of their financial ratios are significantly insignificant with profits being negative.


Potential Resource Strengths

1. 85% percent of the company’s U.S screens were in the top 15 U.S. markets, while 75% of its Canadian screens were in the...
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Case Study Cineplex. EssayMania.com. Retrieved on 12 Oct, 2010 from