Ufo Moviez Strategy Analysis
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MGMT 612: Strategy Write-Up: UFO Moviez Word Count: (994) UFO Moviez (“UFO”) revolutionized Indian cinema by enabling more seamless distribution of films via satellite through a technology-enabled movie distribution platform. The following analysis examines several components of UFO’s entry strategy into the Indian cinema market, namely: identification of key challenges UFO had to overcome, how UFO overcame those challenges, key trade-offs UFO considered, and finally, the basic characterization of UFO’s entry strategy.  A key challenge UFO had to overcome was convincing exhibitors in smaller, more remote cities (non-release centers) to invest in expensive digital projection systems, and simultaneously convincing the various stakeholders, namely the distributors, across the Indian cinema value-chain to provide content through the UFO platform.  These challenges can be described through the lens of two of Porter’s Five Forces: UFO had to overcome the power of customers, in this case cinema owners and distributors who would eventually need UFO’s services, and the power of substitutes, namely the incumbent analog prints. Numerous digital cinema companies similar to UFO had failed in India because they had attempted to sell digital cinema equipment to cinema owners when little content was available in the digital format. Despite the obvious potential financial benefit, UFO had to overcome the impasse between “content first” or “theaters first”, which obscured UFO’s value proposition.  In an analogous case, Performance Indicator (“PI”) aimed to increase golf ball manufacturers’ value by increasing revenue from new ball sales by eliminating used balls through its color change coating technology. Although possible financial benefit was apparent, as with UFO, PI’s new technology did not immediately communicate value and benefit for the end consumer. The consumer believed he could visually identify used balls, and therefore was not incentivized to switch products. Similarly, cinema owners were deterred by the high upfront cost of digitization. Additionally, PI also faced the threat of established
substitutes, namely other used or new balls. For UFO, the established system was wholly designed to facilitate print films. Both customer reluctant and available substitutes required PI and UFO to work doubly hard to enter and penetrate the market. To address these challenges, UFO directly invested in the digital projectors and offered to install the system at a negligible cost. In engaging in “loss leadership”, UFO neutralized the threat of substitutes’ power by offering value through wider product accessibility. To incentivize the distributors to provide content through its platform, UFO charged distributors a per-show fee versus the prevailing lump-sum fee up front.  In addition, UFO charged exhibitors a per-show fee and used this fee to subsidize the cost of the digital projection system. Finally, UFO created a smart-card-based mechanism on its servers to track the number of shows for which the distributor was licensing the movie to the exhibitor. By expanding the services offered to distributors, UFO countered customer power by making it less attractive for distributors to maintain the status quo, namely using rival analog film prints, and thus provide content in a format that UFO could then sell down to exhibitors, solving the “content-theatre” problem. Furthermore, UFO’s solutions underscore the principals of strategic positioning, or the attempt to achieve sustainable competitive advantage by performing different activities from rivals. First, UFO was serving broad needs of many customers in a narrow market by vastly expanding the number of