Favorite Discovery: While researching a potential competitor, an indoor skydiving company where participants are suspended by a powerful fan in the floor, I realized they required the exact same safety waiver used when skydiving from a plane.
Biggest Obstacle: Creating an operational model to guide game development when I had no way to estimate game construction costs.
How can we learn from the success of obstacle-course game shows and synthesize a new business model for participative entertainment? Realizing that no existing entertainment model would do, I set out to develop operational, financial, and marketing frameworks to shape the growth of a new kind of entertainment. Every element of the start up structure is connected to an underlying conceptual goal: to connect creative movement experiences with as many people as possible.
I began by researching existing physical experience businesses, which I grouped into three loose categories: sports, entertainment (e.g. roller coasters), and extreme pursuits (e.g. skydiving). Ideally, this business will have the clear and motivating goal of sports, the effortless thrill of entertainment, and some degree of the mental and physical challenge of extreme pursuits. I then identified local and national sports, entertainment, and extreme pursuit firms that met two or more of these criteria.
By researching, interviewing, and documenting the operations of businesses in this field (which I have termed “participative entertainment”), I outlined two starkly different business models.
A perfect example of this model is Las Vegas Indoor Skydiving, where customers are levitated by a powerful fan in the floor of a wind tunnel. Since customers are almost always tourists, the “event” is doing something adventurous on vacation. These activities must be arranged ahead of time. Other, similar activities include white water rafting tours and bobsledding at Utah’s Olympic park. All of these activities require speciality equipment, have a significant cost, and take significant time to complete.
Bowling alleys, mini-golf courses, and arcades all use this model. These companies are open almost every day, available whenever customers want them. The experience is considered mediocre, does not require specialty equipment, costs an insignificant amount, and continues for as long as participants are willing to stay.
Realizing that neither of these models was ideal for the experience that I wanted to create, I established operational, financial, and marketing frameworks that could facilitate the gradual development of a business between these two established models. The ideal transitional model rewards both loyal participants, who come back to try out every new activity, as well as single-visit customers, who only try it once.
My conversations with entertainment companies made one point very clear: crowds make everything much easier. If you can concentrate an entire week, month, or year of volume into a single event, your costs will decrease exponentially. Marathon-like events have the fewest barriers to entry and, with pre-purchase tickets, profitability can be insured before the event begins. Additionally, the threat of rivalry is low, since it is a planned event not a spontaneous decision. Over time, the frequency of the events can be increased, until, potentially, a permanent location can be established and opened daily. This transitional model limits start up costs and allows for more flexible game development, since the durability of the games is not an immediate concern.
All financial considerations for this model can be distilled to a single question: How many elaborate games can I afford to build before the price of admission is too high to maintain minimum crowd levels?
There is a minimum number of participants where the total cost of operations and total ticket revenue are equal. There is also a certain crowd level necessary to create the feel of a “marathon event” and the appearance of a valuable experience. This concept is illustrated by the below demand graph:
M = the price level at which the minimum number of participants is reached.
I have simplified the wide range of possible games into two basic cost categories: those which are elaborate and expensive, and those which are simple and inexpensive. The percentage of total activities that are elaborate (x) is the independent variable in this equation.
C = the average cost of elaborate activities
S = the average cost of simple activities
x = number of elaborate activities/ number of total activities
C(x) + S(x-1) = break-even price point
The central financial question can be restated: What is the greatest x, such that the break-even price point is equal to or less than the price required to attain crowd level M?
Many existing entertainment companies closely target specific customers to drive sales. “Levitation by a giant fan” sounds ridiculous, but “indoor skydiving” sounds exotic and dangerous, perfect for the adventurous Las Vegas tourist. To create the appropriate brand for this business, the conceptual goal must drive the marketing. Since the business will begin as event-based, advertising for the events is essential. However, advertising the experience as “family fun” or “extreme adventure” will appeal to certain customers and exclude others. Targeted positioning is usually considered essential for start-up firms. However, since conceptual execution takes precedence, and the conceptual goal is to appeal to as many people as possible, promotions for this business cannot exclude any particular demographic. Instead, early advertising will focus on a consistent attitude, not a customer profile.
Penn and Teller, a Las Vegas magic show, ran a campaign featuring excellent attitude advertising. Their slogan, “Fewer audience injuries than last year,” speaks only of the tone of the show while revealing nothing about the intended audience.
What it Means to Me
Conducting this research allowed me to take a more theoretical look at what creative businesses could look like. Instead of trying to draft a business plan, I focused on determining how my idea would fit into the existing landscape, how it could be marketed, and how it could grow over time. The result was a lean start-up map that I could follow to market test my idea, get pilot customers through the door, and keep costs as low as possible. This experience fueled and informed my current interest in lean innovation strategy: how new ideas can be introduced to the market as efficiently as possible.