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Module 8 Cirque For over three decades, Cirque du Soleil, led…
Module 8 Cirque
For over three decades, Cirque du Soleil, led by the fireeater-turned-billionaire Guy Laliberte, has reinvented and revolutionized the circus. From its beginning in 1984, the world’s leading producer of high-quality live artistic entertainment has thrilled over 160 million spectators with a novel show concept that is an astonishing theatrical blend of circus acts and street entertainment, featuring spectacular costumes, fairyland sets, spellbinding music, and magical lighting. Cirque manages to run as many as 20 shows at a time and has played in 330 cities across 48 countries. Cirque du Soleil’s business triumphs have mirrored its high-flying aerial stunts, and it is a case study for business journal articles on carving out unique markets. But following a recent bleak outlook report from a consultant, a spate of poorly received shows over the last few years, and a decline in profits, executives at Cirque say they are now restructuring and refocusing their businessshifting some of the attention away from their string of successful shows toward several other potential business ventures. For the first time in its recent history, Cirque du Soleil failed to generate a profit in 2013. Its market dropped 20 percent from $2.7 billion in 2008. In interviews with The Wall Street Journal at Cirque du Soleil’s sleek headquarters in Montreal, top executives including founder and 90 percent owner Laliberte talked about the firm’s deteriorating finances and their desire to expand into new areas. In 2015, they announced an agreement under which TPG, a global private investment firm, would acquire a majority stake in Cirque du Soleil to fuel its future growth. Cirque has also sold a minority stake to a Chinese investment group that will help launch shows in China.
Starting a New Concept Cirque du Soleil developed out of early efforts of Guy Laliberte, who left his Montreal home at the age of 14 with little more than an accordion. He traveled around, trying out different acts such as fire-eating for spare change in front of Centre Pompidou in Paris. When he returned home, he hooked up with another visionary street performer from Quebec, a stilt-walker named Gilles Ste-Croix. In 1982, Laliberte and Ste-Croix organized a street performance festival in the sleepy town of Baie St. Paul along the St. Lawrence valley. In 1984, Cirque du Soleil was formed with financial support from the government of Quebec, as banks were reluctant to support the band of fire-eaters, stilt-walkers and clowns. Its breakthrough 1987 show We Reinvent the Circus burst on the art scene in Montreal as an entirely new art form. No one had seen anything like it before. Laliberte and Ste-Croix had turned the whole concept of circus on its head. Using story lines, identifiable characters, and an emotional trajectory in the show, Cirque du Soleil embodied far more than a mere collection of disparate acts and feats. Despite its early success, Cirque du Soleil struggled financially. They took a gamble on making their debut in the U.S. as the opening act of the 1987 Los Angeles Festival. They managed to sell out all of their performances, which were run in a tent on a lot adjacent to downtown’s Little Tokyo. Its success in Los Angeles led to the troupe to open shows across the U.S. in cities such as Washington, DC, San Francisco, Miami, and Chicago. Soon after, Cirque du Soleil performed in Japan and Switzerland, introducing their concept to audiences outside North America. By the end of 2011, Cirque du Soleil had 22 showsseven of them in Las Vegas. It had become an international entertainment conglomerate with 4,000 employees in offices all around the world. It had established its headquarters in a $40 million building in Montreal, where all of Cirque’s shows are created and produced. Much of the building is devoted to practice studios for various types of performers and a costume department that outfits performers in fantastical hand-painted clothing. Cirque du Soleil recruits many types of talent, among them acrobats, athletes, dances, musicians, clowns, actors, and singers.
Growing with the Concept Cirque du Soleil hired key people from the National Circus School in its formative years in order to develop its concept of the contemporary circus. Its first recruit was Guy Caron, the head of this school, to be the Cirque’s artistic director. Shortly after, the troupe recruited Franco Dragone, another instructor from the National Circus School, who had been working in Belgium. Dragone brought with him his experience in commedia dell’arte techniques, which he imparted to the Cirque performers. Together, Caron and Dragone were behind the creation of all of the Cirque du Soleil shows during their formative years, including Saltimbanco, Mystere, Algeria, Quidam and the extravagant O. Under the watchful eye of Laliberte, Cirque developed its unique formula that defined their shows. From the beginning, they promoted the whole show, rather than specific acts or performers. They eliminated spoken dialogue so that their show would not be culture bound, replacing this with a strong emotional sound track that was played from the beginning to the end by live musicians. Performers, rather than a technical crew, moved equipment and props on and off stage so that it did not disrupt the momentum as the show transitioned from one act to the next. Most important, the idea was a circus without a ring or animals, as Laliberte believed that the lack of these two elements would draw the audience more into the performance. Even though Laliberte and his creative team were clearly innovative in their approach, they were not reluctant to obtain inspiration from outside sources. They drew on the tradition of pantomime and masks from circuses in Europe. They learned about blending presentational, musical, and choreographic elements from the Chinese. Caron readily admitted that Cirque took everything that had existed in the past and pulled it into the present, so that it would strike a chord with present day audiences.
Losing its Touch Cirque du Soleil continued to expand even as the recent recession cut into demand. It had launched 20 shows in the 23 years from 1984 through 2006, none of which closed during that time, other than a couple of early failures. Over the next six years, however, Cirque opened 14 more shows, five of which flopped and closed early. The reasons for the failures differed. One show, Zarkana, couldn’t make enough money to cover its production costs playing in New York City’s 6,000-seat Radio City Music Hall. Iris, in Los Angeles, played in Hollywood, in a seedy neighborhood that despite heavy tourist traffic was commercially marginal. Zaia, in Macau, simply didn’t appeal to local audiences. Perhaps more troubling, the company’s nearly perfect record of producing artistic successes began to waver. Viva Elvis and Banana Shpeel were among several Cirque shows that garnered terrible reviews. Both shows closed quickly. “Shows like that diluted the brand,” said Patrick Leroux, a professor at Montreal’s Concordia University who has closely studied Cirque du Soleil. One problem, say Cirque du Soleil executives, was that audiences didn’t understand the differences among various shows carrying the Cirque brand. As a result many people would dismiss the opportunity to see, for instance, the show Totem thinking they had already seen something similar in the older Varekai. On the other hand, Cirque tried to move in different directions with each of the new shows that it developed. “We’re constantly challenging ourselves,” Laliberte said.3 Audiences, however, complained that some newer shows were not as focused on the acrobatic feats that they had come to expect and enjoy from Cirque. By August 2012, Laliberte had become concerned and convened a five-day summit for executives at his estate outside Montreal. There, he and others drew up plans to lay off hundreds of executives and performers and pare the number of big new touring circus shows Cirque produced. The cuts began soon after and continued through 2013 and amounted to around $100 million of savings, according to Laliberte. The savings included everything from giving out fewer suede anniversary jackets to employees to cutting out child performers and tutors. Laliberte also reexamined core production costs. The payroll for Cirque’s show O, in Las Vegas, for instance, had ballooned thanks to a surge in contortionists. “I said, ‘Why do we need six contortionists?'” Laliberté, 55, recalled while chain smoking inside his office.4 In addition to the layoffs, Cirque also suffered a blow to morale when acrobat Sarah Guyard-Guillot was killed during a performance. The company overhauled the show’s finale, a “battle” staged on a vertical wall, with performers suspended from motorized wire harnesses. Since the performer’s death, Cirque has continued to stage the show, replacing the live finale with a videotape of the scene from a past performance.
A New Direction? Cirque du Soleil has managed to generate profits out of a business model that is quite challenging. Kenneth Feld, of Ringling Bros. and Barnum and Bailey circus, commented: “If you think about spending $165 million on a show that seats 1,900 people, the economics are just staggering.”5 But Laliberte’s stroke of genius was to realize that no Cirque show ever had to close. They could either keep touring or play in locations such as Las Vegas and Orlando that draw a lot of tourists. The troupe managed to build a repertory of shows that could all be running at the same time.
However, the rising costs of new shows and the increase in the number of early flops had cut into the firm’s revenues and profits. Yet although revenues dropped to around $850 million in 2015 from $1 billion in 2012, Cirque still managed to return to profitability because of stringent cost controls. Laliberte has been working with his executive team to come up with a business restructuring plan to manage diversification through the creation of discrete business units under a central corporate entity to try to beef up the noncircus side of the business. Paramour was the first show to be launched by a new subsidiary for musical-theater production that is based in New York City. Another subsidiary of the firm that is operating under the name of 45Degrees is starting work on producing special events. Other new areas that Cirque is venturing into include small cabaret shows at hotels, children’s television programs, and theme parks. Executives say that currently the company’s biggest growth area isn’t a show at all. It is an expanding deal to provide ticketing services to the arena company AEG. Circus experts say Cirque du Soleil is walking a fine line as it seeks to expand into new ventures without damaging its central brand as a creative entity. But Laliberte is convinced that Cirque can apply its unique talents to other businesses. “We’ll be more about intelligent analysis of each project,” he remarked to critics who have questioned the new directions.6 For Laliberte, the stakes are high. He now has new investors that he must satisfy with the future success of his endeavors.
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Case Study Template
Issues: Identify at least seven issues you see in the case
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What is the Key issue you see in the case: __________________________
What facts pertain to the case: Identify at least three important facts that pertain to the case
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What assumptions do you plan to make in your analysis: None is an acceptable answer
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You are writing the case from the perspective of which person or organization: ______________
What tools of Analysis would you use in this case: You only need to identify them and explain what information each will give you that you feel is important.
Based upon the above information – provide three alternatives.
Alternative 1 is the Status Quo or to do nothing different that the current situation.
Identify at least three arguments in favor and three against this approach.
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Alternative 2 ____________________________________________________
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Alternative 3 ______________________________________________
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Recommended Alternative
Given the information above select your recommended alternative and explain why you feel it is the best alternative: This should take five to seven paragraphs and be based upon the information presented in your case. The recommendation is made to the decision maker you identified. You need to justify why this is the best alternative. (I have no preselected alternative and what I am looking for is your ability to support a given recommendation.)
