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.

[Abones]

I think a sound system at $1k might be a bit off.

I do like the overall idea.

[adsman]

I really don't understand why you'd want to go through all that trouble and expense to make $30 a night. A few of my friends opened businesses in third world countries, but they identified situations where they could make a lot of money, and most of them did. The risk/reward ratio here is not attractive. Also, don't underestimate how attractive you will be to petty government officials who want to supplement their income. Those small fines could start to increase in a dramatic way. After you've opened of course.

[garcia1000]

Two things:

Risk/reward looks out of whack because you'll need a lot of sweat equity.

I think you are severely underestimating the cost of equipment and the time you'll need to spend on this.

[Slap My Jack]

On top of what others already mentioned, censorship concerns that could come into play. Overall I agree that it seems like a lot of risk for not so much reward. Expatriates also probably have no pressing need to go to a theater to see films that they can acquire through other means. If you were to do this project I would view it more as a hobby than a business venture.

If you want to learn from experience, then try to figure out some sort of service you could provide that would be worthwhile financially the first time around. Think about what advantages you have in starting/running a business, and what competitive advantages exist in your current location. Something export-related is the obvious thing to consider.

If you don't want to invest much but still want to feel that you're doing something socially beneficial with a small financial investment required there's also the area of microfinance that you could look into. There might be some sort of foundation already active there that you could become involved with. It's also business related and looks good to people when you want to do something outside of poker.

[cianosheehan]

I agree with a lot of whats already posted, but another thing that you would want to consider... Do you think that you'd have the long term interest in this to deal with all the headaches that will inevitabely come with it? If the financial rewards aren't there, then when it comes down to the hard work you may regret ever getting involved. So...be honest with yourself about how into this you are.

On a more positive note, running an arthouse cinema would be really cool. If I were you, I'd probably think more about running it primarily as a bar, or a kind of club where people you are targetting can come to socialise and meet their peers as opposed to just coming to the cinema.

Good luck

[NewTeaBag]

Ummmmm......?


WHy not just open a bargirl bar for guaranteed custom and profit?

[WhoIam]

[ QUOTE ]

I think a sound system at $1k might be a bit off.

[/ QUOTE ] I'm not going to be showing Hollywood action blockbusters, so I don't need anything too advanced--it just needs to sound better than what someone would have at home. This would also be smaller than a regular movie theater so I wouldn't need lots of speakers or power.
[ QUOTE ]
If you were to do this project I would view it more as a hobby than a business venture.

[/ QUOTE ]
This is sort of the idea. I have a degree in film studies and love watching good movies in the best quality possible. This would also serve sort of as entrepreneurial training wheels. Most of my other ideas involve substantially more risk and a lot more capital. It would be nice to have some real-world experience before jumping into this. I made a half-assed attempt at starting a business in college and learned a lot from the experience despite it being a total failure.
[ QUOTE ]
I'll be you could get permission to show the films for a very small royalty and maybe get some nice fringe benefits from the studio's. If you tell them you are charging $1.00 per person, I can't see them wanting more than $0.15 of that money.

[/ QUOTE ] Unfortunately this just isn't the way things work. I have a friend who has done quite a lot of work in the industry in India, including distributing foreign films and he assures me there would be no way to do this legally without losing thousands of dollars every month. If I could pay 15% or something I would.
[ QUOTE ]
Do you think that you'd have the long term interest in this to deal with all the headaches that will inevitabely come with it? If the financial rewards aren't there, then when it comes down to the hard work you may regret ever getting involved.

[/ QUOTE ]
Because it's such a small investment, if I get sick of it or can't take the stress, I can pull the plug without losing a substantial amount of money. And I'd still be left with with a great home theater system and some valuable knowledge. In truth, I can never see it realy, really sucking the way owning a factory could.

[ QUOTE ]
If I were you, I'd probably think more about running it primarily as a bar, or a kind of club where people you are targetting can come to socialise and meet their peers as opposed to just coming to the cinema.

[/ QUOTE ]
Wow, this is a good idea. Having a bar with a back room that showed a movie (or two) every night would have all the advantages of a bar without many of the disadvantages the standalone theater would have. It would certainly be a lot more profitable. I would probably operate it like a club with a cover charge that included a drink or two. The back room could also be potentially used for live music. Wow, this is giving me a lot to think about. Free beer for life if I get this thing off the ground and you make it to Laos.
[ QUOTE ]
WHy not just open a bargirl bar for guaranteed custom and profit?

[/ QUOTE ] Because I would go to jail. There are plenty of bars like this already.

[WhoIam]

Here’s my revised idea. I think it’s better than the original and has the potential to earn actual money. I haven’t put nearly as much thought into this, so please criticize. Instead of starting a theater that sells booze, it would be a bar that happens to show movies. And have some live music, but I’ll get to that in a minute. It would be set up something like this with a wall in the middle:

I would open at 5, and Sunday-Thursday show a movie at 6 and another at 8. If people wanted to watch it they could go into the theater area but could also just hang out in the bar area if they wanted to. This would also head off a lot of legal problems since I’m not charging for the movies. Because it would be free, I wouldn’t feel obligated to invest in top-quality A/V equipment. Anyone coming before 7 would get in free, but after that there would be a small cover charge including 1 drink. This is mainly to prevent people from showing up and watching a movie for free. I would probably have an employee stationed in the theater room to get drinks and snacks for people so they wouldn’t need to interrupt the movie. After the second movie ended the lights would come on and it would turn into kind of a lounge area.

Officially all bars and clubs in Vientiane have to close at 11:30. This is where things get tricky. Some places close promptly and kick everyone out, some drag their feet and stay open another hour or so while making token gestures like turning some lights off, and a few openly operate until as late as 4 am. Obviously there is some money changing hands in the last case. Even then, the police occasionally make them shut down early. On top of this there are various illegal speakeasies and after-hours bars. This can be anything from a bar shutting down at 11:30 and reopening at 1:00 to the back door of small restaurant leading to a courtyard with 100 people drinking in it. I think the setup above is perfect for bending the rules. At 11:30 I shut off the lights in the bar section and lock the door. Anyone who wants to stay can hang out in the theater/lounge area for another hour or two. If I get caught it’s more a matter of paying some cash and maybe a bottle of Johnnie Walker rather than a serious offense. There might be problems if this happens repeatedly, but I wouldn’t be facing jail or a loss of my liquor license (if they exist here) or anything serious.

On Friday and Saturday nights I would like to have live bands perform in the theater area. Specifically rock bands. This is a niche I don’t see being filled. There was a club called Chess Café that had live rock music but it closed down sometime in the past two years. I want to find out why, because if the government found it subversive and closed it, or if the there were problems with the punters going nuts, I would have to abort this idea. The Lao people love live music and would rather see a terrible cover band perform “Hotel California” than listen to the original recording. They would rather hear a karaoke version of a song than the original. For some reason they just want a live human involved in their music, even if it sucks. This is a city of 300,000 people and there have to be some bands playing original music. If not, they could be easily imported from Thailand (the border is 30km away). I just want to avoid the standard cover band crap you hear at every other place here. Even a band that did competent Led Zeppelin and White Stripes covers would be nice.

I think live music would be a key to drawing a large domestic crowd on the weekend. I think you could also get a decent amount of tourists and locals because this would be only venue in town for actual rock. Unfortunately, this also complicates things a bit from a business perspective. Noise is an issue. Everything would end by 11:30, but I’d have to make sure that the music isn’t shaking the walls of whoever is next door. I also have no clue about the sound system. Will the bands bring all their amps and stuff? Do I need a sound guy? I’ve seen lots of local live music in the US but never really paid attention to all of this. Remember, this is the third world, so I really only need “band playing at your local bar” quality.

Having movies and bands would give me flexibility. If lots of people came to watch movies, but no one came for the music, I could switch the format to movies every day. The reverse would also be true. If both ended up being successful, I could potentially spin off a separate music club.

Sorry for this being kind of long and unorganized. The costs and risks involved with this idea would be higher, but there’s a substantially better chance of getting paid off.

Cliff's Notes: I think I found a way to get paid to drink beer and watch movies.