Help me evaluate this business idea

[WhoIam]

Warning, this post is pretty long. Also, for those that don’t know, Vientiane is the capital of Laos, a land-locked country in SE Asia.

This is just an idea I had, I’m not going to be heartbroken if it looks like it wouldn’t work out. Right now I’m just looking for some constructive criticism so I can decide if it is worth pursuing.

My idea is to start a small (capacity around 50) arthouse-type theater showing foreign and classic films. There is only one movie theater in Vientiane; it has two screens and shows Thai films with Lao subtitles. The target market for the theater would be foreigners, both residents and visitors. Most foreign residents of Vientiane are involved in embassies and relief organizations and would probably be more “cultured” than an average citizen of their country. Most visitors are backpacker types and again, if you’ve made it to Laos, you’re probably more interested in seeing Casablanca than Transformers. There are also many visitors who find the city boring and would welcome a cheap night at the movies.

The main problem I can see with this idea is that it is illegal. Specifically, it is illegal to exhibit movies in public for the purpose of making a profit. Bars in the US have gotten cease and desist letters for having movie nights, etc. This, however, is SE Asia and pirated software, music, and DVDs are sold openly. There’s even a store at the newly-opened modern shopping mall selling these. In all seriousness, I don’t think you could buy a legit copy of a movie if you wanted to. Whatever the international version of the RIAA is has no clout here. I couldn’t be personally sued because the business can’t be in my name due to Lao law. The worst that could happen is that a letter of protest could sent to the government and they could close the theater if they felt it was warranted. Fortunately I know people in the Ministry of Justice, and the laws are, ahem, very open to interpretation. Most problems go away if you’re willing to pay a small “fine.” I would obviously check with lawyers here to see what my exact legal situation would be. Just no make myself a bit less of a target, I wouldn’t show films made within the last few years.

I estimate the cost of buying all the equipment, renovating and renting space, and running the business for a year to be about $10k. So if the theater gets shut down or fails to be profitable, at worst I’m out $10k and have kick-ass home theater and DVD collection. The most expensive item would be the projector and screen at maybe $3-4k and sound system at maybe $1k. Other than that I would need to rent a place in an accessible area with a bathroom, small concession area and medium-sized room with an unobstructed view. This would cost maybe $200/month. I wouldn’t need proper theater seats, just some old sofas and chairs and ramp built so people in the back could see. The cost of both the labor and seating would be negligible. Hiring employees to manage and clean the place would be under $100/month. Just to put things in perspective, I know someone who manages one of the nicer Chinese restaurants in town, speaks excellent English, and was forced to drop out of college for financial reasons. He makes $40 a month.

Here’s how things would work: I would show a different film every night at 8pm. The schedule would be decided a month in advance and listed on a website. Every week I would have flyers printed up with a description of the current week’s movies as well as a list of the next week’s films. I would hire someone to put them up in the several locations that allow flyering as well as the hostels and guest houses. I would also take out ads in the local paper. Admission would be roughly $2 (this is pretty much what the market will bear) and I would also sell beer, wine, and snacks for an additional profit. If things went well I would add weekend matinees, and then possible 6pm shows. I would aim to show films that would actually draw a crowd (like Casablanca or The Shining) rather than something really obscure or noncommercial. Vientiane has a substantial French-speaking population, so I would show a lot of French films and show English-language films with French subtitles whenever possible.

Here’s the downside: the venture has minimal risk, but it also has minimal potential rewards. Even if business is booming, I wouldn’t be making nearly as much money as I could by playing poker. Not that I couldn’t still make money from poker, but the amount of time filling out paperwork, scouting locations, dealing with bureaucrats, and getting the theater physically set up would be substantial. At least for a while I would want to personally oversee things until I was confident my Lao manager could deal with unexpected things like power outages, DVDs screwing up, or even having a bottle of wine sent back. I’m also targeting a niche market and there’s not really room for growth.

I would consider the business a success if I averaged $25 or $30 profit a night. This is a lot for a Lao person, but for me it’s nothing. Once I got to the point where my only real involvement would be selecting the next month’s films, it would be nice to have the passive income, but again, it really isn’t that much. The main reason I would want to do this is to learn from the experience and use that knowledge when I start a “real” business. I don’t want to play poker for the rest of my life. At the very least I would have a private movie theater available to me 22 hours a day.

Obviously I would have to do market research, etc. before actually pursing this, but I’m looking for any advice or criticism you might have.

Cliff’s Notes: I want to start an art house theater in a third-world country.