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Cirque Du Soleil's Next Act: Rebalancing the Business Cirque du Soleil ’s Next Act: Rebalancing the Business - WSJ Page 1 of 8 This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com. http://www.wsj.com/articles/cirque-du-soleils-next-act-rebalancing-the-business-1417474778 BUSINESS Cirque du Soleil’s Next Act: Rebalancing the Business As Growth Prospects Slow, Company Seeks to Beef Up Non-Circus Business; ‘The Rarity Was Gone’ Executives at Cirque du Soleil say they are restructuring their business—shifting some of the attention away from clowns and acrobats—after a spate of poorly received shows and a decline in profits. EUROPEAN PRESSPHOTO AGENCY By ALEXANDRA BERZON Dec. 1, 2014 5:59 p.m. ET MONTREAL—The owner and managers of Cirque du Soleil, after seeing their growth prospects wane in recent years, think they have the key to renewed success: less Cirque. http://www.wsj.com/articles/cirque -du -soleils -next -act -rebalancing -the -business -14174747 ... 4/ 16/ 2015 Cirque du Soleil ’s Next Act: Rebalancing the Business - WSJ Page 2 of 8 For three decades, the circus giant’s business triumphs mirrored its high-flying aerial stunts, and it became a case study for business school journal articles on carving out unique markets. But following a bleak outlook report from a consultant, a spate of poorly received shows and a decline in profits, executives at Cirque say they are now restructuring and refocusing their business—shifting some of the attention away from clowns and acrobats, towards other business ventures. Cirque also recently suffered its first death during a performance, when an acrobat tumbled 94 feet during a stunt in Las Vegas performance of the show Ka in 2013. After a hiatus of more than a year, Cirque is soon bringing a revamped version of the stunt back to the show. The recent struggles, said Chief Executive Daniel Lamarre, “certainly brought a lot of humility to the organization.” A 2008 investment valued Cirque du Soleil at $2.7 billion. Five years later, the company’s value had dropped about 20%. EUROPEAN PRESSPHOTO AGENCY In recent interviews with The Wall Street Journal at Cirque du Soleil’s sleek headquarters here, top executives including founder and 90% owner Guy Laliberté revealed rare details of their financial status and new business plans. The company is seeking to position itself as an attractive bet as Mr. Laliberté began last month looking for investors to buy a significant portion. He plans to review proposals before the end of the year, according to officials. http://www.wsj.com/articles/cirque -du -soleils -next -act -rebalancing -the -business -14174747 ... 4/ 16/ 2015 Cirque du Soleil ’s Next Act: Rebalancing the Business - WSJ Page 3 of 8 Cirque du Soleil grew out of Montreal’s street performer scene in the 1980s, helped by early government funding as banks were reluctant to support the band of fire eaters, stilt walkers and clowns. The company’s reinvention of the traditional North American circus—creating theatrical spectacles drawing on Russian and Chinese influences and commedia dell’arte —proved popular on foreign tours. Revenues skyrocketed after a particularly favorable Las Vegas casino deal. By the end of 2011, Cirque had 22 shows—seven of them in Las Vegas. It had built a 388,000 square foot headquarters in Montreal, much of the building taken up by the costume department that outfits performers in fantastical hand-painted clothes. Near the peak of the company’s revenues, in August 2008, Mr. Laliberté agreed to sell 20% of the company to Dubai government-owned real estate companies for $545 million, pocketing around $275 million at the time, according to a person familiar with the matter. But the rapid expansion masked deeper troubles at Cirque. The 2008 transaction valued Cirque at $2.7 billion; five years later, Mr. Laliberté took back a portion of Dubai’s stake at a price that suggested Cirque’s value had declined around 20% to $2.2 billion. Cirque continued to expand even as the recession cut into demand. Cirque premiered 20 shows in the 23 years from 1984 through 2006, none of which closed during that time other than its first few. Over the next six years it 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, a seedy neighborhood that despite heavy tourist traffic is 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. http://www.wsj.com/articles/cirque -du -soleils -next -act -rebalancing -the -business -14174747 ... 4/ 16/ 2015 Cirque du Soleil ’s Next Act: Rebalancing the Business - WSJ Page 4 of 8 OLD CIRQUE WAY: Open two to three major new circus shows a year. NEW CIRQUE WAY: Open one major show a year. Expand into children’s TV and ticketing services. REUTERS http://www.wsj.com/articles/cirque -du -soleils -next -act -rebalancing -the -business -14174747 ... 4/ 16/ 2015 Cirque du Soleil ’s Next Act: Rebalancing the Business - WSJ Page 5 of 8 Daniel Lamarre, chief executive of Cirque du Soleil, said the company is aiming to derive 60% of its revenue from Cirque-branded shows in five to 10 years, down from 85% now. BLOOMBERG One problem, say Cirque executives, is 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. Another problem was that some newer shows weren’t focused on the acrobatic feats that fans had come to expect from Cirque. Debate swirled over whether Cirque should return to its roots or aim for constant reinvention. At the end of 2011, Bain & Co., contracted by Cirque, reported that its market had hit saturation and the company needed to be careful with how many new Cirque shows it added. Bain suggested Cirque seek growth through new products, such as movies, according to a person familiar with the matter. “Guy [Laliberté] always said we are a rarity—but the rarity was gone,” said Marc Gagnon, a former top executive in charge of operations for Cirque du Soleil who left in 2012. For the first time in its recent history, Cirque didn’t turn a profit in 2012. ‘Guy [Laliberté] always said we are a rarity—but the rarity was gone ’ —Marc Gagnon, a former top executive at Cirque du Soleil http://www.wsj.com/articles/cirque -du -soleils -next -act -rebalancing -the -business -14174747 ... 4/ 16/ 2015 Cirque du Soleil ’s Next Act: Rebalancing the Business - WSJ Page 6 of 8 By August 2012, Mr. Laliberté 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 Mr. Laliberté. They included everything from giving out fewer suede anniversary jackets for employees to cutting out child performers and tutors. Mr. Laliberté 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?’” Mr. Laliberté, 55, recalled while chain smoking inside his office. In addition to the layoffs, Cirque also suffered a blow to morale when acrobat Sarah Guyard-Guillot was killed last year 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. Artists performing during a dress rehearsal for Quidam, a show by Cirque du Soleil, at the Royal Albert Hall in London in January. REUTERS The new version, set to debut soon at the MGM Grand casino, will involve fewer performers and additional safety measures including a system to automatically slow performers as they rise toward an overhead catwalk, which Ms. Guyard-Guillot is believed to have slammed into before falling to her death. http://www.wsj.com/articles/cirque -du -soleils -next -act -rebalancing -the -business -14174747 ... 4/ 16/ 2015 Cirque du Soleil ’s Next Act: Rebalancing the Business - WSJ Page 7 of 8 “That was a sad moment,” Mr. Laliberté said of the accident. Mr. Laliberté’s executive team also came up with a business restructuring plan to address the shortfalls that included the creation of discrete business units under a central corporate entity to try to beef up the non-circus side of the business. New Cirque subsidiaries include a musical-theater production arm based in New York City and a special-events producer that is beginning to operate under the name 45Degrees Events. Executives say that currently the company’s biggest growth area isn’t a show at all—it’s an expanding deal to provide ticketing services to the arena company AEG.
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