Planning by the Groningen Arts
Centre
M987Z234: Phi Thi Loan
M987Z247: Nguyen Mac To My
The Groningen Arts Centre (GAC)
• The GAC is placed in the city of Groningen which is an
important population in the north of the Netherlands and
be ranked as one of the ten top cities in the Netherlands
• The GAC is owned by the municipality of Groningen, which
is made up of a number of departments. One of the
operating entities within the Art & Culture Sub department
is the GAC
• GAC includes 4 venues:
• The large concert hall, which seats 1,200
• The small concert hall, which seats 450
• The city theatre, which seats 700
• The indoor plaza, which seats 100
Assignments
•
•
•
•
Assignment 1: Contracts
Assignment 2: Randy Newman at Groningen
Assignment 3: Latvian Company
Assignment 4: Disappointing results
Contracts
• The GAC draws up contracts for the performance & concert to
be given at its venues with 3 main types are described below:
• Variable-fee contract: The artist & the GAC receive fixed % of
box-office receipts
 Bram de Jong gets 75% for next performance in theatre & GAC 25%
• Fixed-fee contract: GAC pay a fixed amount to the artist
 GAC pays €6,500 for a performance by Bridget Masland in theatre
• Fixed-variable-fee contract: Double Dutch performs in large
concert hall & each ticket costs €17.50,
 Double Dutch receive: €12,500, and
 50% surplus box-office receipts, i.e. receipts from tickets sold after a
minimum of 800 tickets have been sold.
 Last season, the last 200 tickets had to be sold at a competitive price
of €6.25 after extra promotional activities amounting to €500
Assignment 1
• Fixed-fee contract: the performance by Bridget Masland
• The GAC could ask €15 for each best seat (60% of the total
number of seats) & €10 for each worst seat (40%)
• The GAC would expect to sell about 450 to 500 tickets.
• It could raise prices, e.g. from €15 to €17.50
• Variable-fee contract: by Bram de Jong
• The comedian doesn’t want the price of a best or worst
seat to exceed €17.50
• (?) Calculate the estimated financial results concerning the
next performances by: the comedian Bram de Jong, the
actress Bridget Masland & the brand Double Dutch
By the comedian Bram de Jong (Variable-fee contract)
Case 1
( based on last year)
Case 2
(based on last year)
Case 3
(based on latest season)
# of seats
(unit:
seat)
Best seats:
60%*700 seats=420
Worst seats:
40%*700 seats=280
Best seats: 500
Worst seats: 200
Best seats:
500
Worst seats:
25%*200=50
Price
Best seats: €17.50
Worst seats: €15
Best seats: €17.50
Worst seats: €15
Best seats: €17.50
Worst seats: €15
Revenue
Best seats:
420 seats*€17.50
=€7,350
Worst seats:
280 seats*€15=€4,200
Total: €11,550
Best seats:
500 seats*€17.50
=€8,750
Worst seats:
200 seats* €15=€3,000
Total: €11,750
Best seats:
500 seats*€17.50
=€8,750
Worst seats:€
50 seats*€15=€750
Total: €9,500
GAC get
25%*€11,500=€2,887.50 25%*€11,750=€2,937.50 25%*€9,500=€2,375
Comedian 75%*€11,500=€8,662.50 75%*€11,750=€8,812.50 75%*€9,500=€7,125
By the actress Bridget Masland (Fixed-fee contract)
Case 1
(based on last year)
Case 2
(based on last year)
Case 3
(based on latest season)
# of seats Best seats:
(unit:
60%*700 seats=420
seat)
Worst seats:
40%*700 seats=280
If 500 seats all are the
best seats:
500
If not, then:
Best seats:
60%*500 seats=300
Worst seats:
40%*500 seats=200
Price
Best seats: €15
Worst seats: €10
Best seats: €17.50
Best seats: €17.50
Worst seats: €15
Revenue
Best seats:
420 seats*€15
=€6,300
Worst seats:
280 seats*€10=€2,800
Total: €9,100
Best seats:
500 seats*€17.50
=€8,750
Total: €8,750
Best seats:
300 seats*€17.50
=€5,250
Worst seats:
200 seats*€15=€3,000
Total: €8,250
Cost
€6,500
€6,500
€6,500
GAC get
Actress
€9,100-6,500=€2,600
€6,500
€8,750-6,500=€2,250
€6,500
€8,250-6,500=€1,750
€6,500
By the band Double Dutch (Variable-fixed-fee contract)
Case 1 (based on last year)
Case 2 (based on latest season)
# of seats Best seats: 1,200
(unit: seat)
Best seats: 1,000
Worst seats: 200
Price
Best seats: €17.5
Best seats: €17.50
Worst seats: €6.50
Revenue
Best seats:
1,200 seats*€17.5
=€21,000
Total: €21,000
Best seats:
1,000 seats*€17.50=€17,500
Worst seats:
200 seats*€6.50=€1,300
Total: €18,800
Cost
Double Dutch gets: €12,500
Surplus (from 801th to 1,200th
ticket):
400 seats*50%*€17.50=€3,500
Double Dutch gets: €12,500
Surplus (from 801th to 1,000th ticket):
200 seats*50%*€17.50=€1,750
Surplus (from 1001th to 1,200th ticket):
200 seats*50%*€6.50=€650
Extra promotional: €500
Profit
€21,100-12,500-3,500=€5,000
€18,800-12,500-1,750-650-500=€3,400
Assignment 2: Randy Newman at
Groningen
• In Feb. 1999: Randy performed in large concert hall
• Ticket: were priced at €17.50 & €18.75 respectively
• Specified 3 following terms:
a. Randy receives 50% of the box-office receipts & GAC receives the
remaining 50%
b. GAC pays a fixed amount to Randy if it were the highest bidder &
its bid was therefore accepted
c. GAC sets a ticket price, without prejudice to the provisions under
(a)
(?) - Specify at least 3 different bids by GAC by Randy
- Specify con tract term which are in accordance with the terms a,
b, and c mentioned above
- Do a financial analysis of each contract’s advantages &
disadvantages to GAC: indicate which bid is best, give arguments
• Three different bids by the GAC for a single performance by
Randy: Variable –fee contract, Fixed-fee contract, and
Variable-fixed-fee contract
• In which:
• Variable –fee contract is in accordance with term a: Randy
Newman (& his impresario) would receive 50% of the boxoffice receipts & the GAC would receive the remaining 50%
• Fixed-fee contract is in accordance with term b: the GAC
would pay a fixed amount to Randy (& his impresario) if it
were the highest bidder & its bid was therefore accepted
• Fixed-variable-fee contract is in accordance with term b:
the GAC would be allowed to set a ticket price, without
prejudice to the provisions under (a)
Advantages & Disadvantages
• Variable-fee contract: if all the best seats are
full, then the sales will be very high
• Fixed-fee contract: although all the best seats
and worst seats are full or not full, the GAC
still has to pay a fixed amount for the
performance
• If GAC gets this contract, it will has to pay
other opportunity cost
• Term a: The GAC will get more profit in this case. Recall in the last
variable-fee contract, the actress is going to get 75% for his next
performance in the theatre and the GAC 25%. But in term a, the
GAC is going to get 50%.
• Term b: The GAC always has to pay a fixed amount of €6,500 to the
actress at any price as well as any # of prices sold out. Therefore, if
the sales is less than the expectation, the GAC will get loss.
• Term c: Recall in the last fixed-variable-fee contract, the GAC has to
pay a fixed amount of €12,500 to the actress and 50% of surplus
box-office receipts. If the # of tickets sold out doesn’t reach to 800,
the GAC doesn’t have to pay that 50%. Therefore, if the sales is less
than the expectation, the GAC will get lose.
• After considering the three terms, the variable-fee contract seems
to be the best.
A financial analysis of each contract
Variable-fee contract
Fixed-fee contract
# of seats
(unit: seat)
Best seats: 60%*1,200 seats=720
Worst seats: 40%*1,200 seats=480
Price
Best seats: €18.75
Worst seats: €17.50
Sales
Best seats:
720 seats*€18.75=€13,500
Worst seats:
480 seats*€17.50=€8,400
Total: €21,900
Total: €21,900
Cost
Best seats:
50%*€13,500=€6,750
Worst seats:
50%*€8,400=€4,200
Total: €10,950
From €6,500
to €12,500
GAC get
€21,900-10,950=€10,950
From €21,900-12,500= €9,400
to €21,900-6,500= €15,400
Assignment 3: Latvian company
• Average capacity usage rate: 70%
• Average ticket price: €22.50
• Fir capacity usage rates on Fridays & Saturdays, i.e.
80% on average; poor capacity usage rates on
Mondays, i.e. 50% on average; on the other days 70%
on average
• (?) calculate the estimated financial result of a
performance by the Latvian
• Do a financial & policy-specific analysis of the opinions
held by the 3 GAC executives mentioned above
• Advice to the director of the GAC
The estimated financial result of a
performance by the Latvian
•
•
•
•
•
•
•
# of seats: 700 seats
Average ticket price: €22.50
Average sales: 700 seats* €22.50= €15,750
Average sales on Sat.: 80%*€15,750= €12,600
Average sales on Sun.: 70%*€15,750= €11,025
Total average sales on Sat. & Sun.: €23,625
€23,625 is greater than €22,500 (compared to the
expected average sales of Karin), therefore, the
estimated financial result of a performance by the
Latvian company is better than that of the three GAC
executives.
Disappointing result – variance analysis
• For the first two weeks of March 1999, the
business results of the theatre were
disappointing.
• Of this, I will base on the report of the two
week to calculate the variance analysis for
individual performance as well as for each
categorization. And show that why theatre got
unexpected result.
type
estimated price
estimated number of
visitors
actual price
actual number of
visitors
cabaret
15.0
470.0
15.0 *
390.0
cabaret
18.0
700.0
18.0
675.0
cabaret
16.0
620.0
16.0
400.0
cabaret
14.0
510.0
14.0
590.0
theatre
9.0
580.0
9.0
560.0
theatre
10.0
540.0
10.0
650.0
theatre
13.0
500.0
13.0
350.0
theatre
10.0
450.0
10.0
570.0
opera
30.0
480.0
30.0 **
520.0
opera
26.0
450.0
26.0
560.0
congress
20.0
550.0
20.0
430.0
anniversary
30.0
600.0
30.0
525.0
* 20% of the tickets were sold at a discount of 25%
** Half of the tickets sold were at a discount of 10%
• Estimated
revenue =
estimated
number of
visitors *
estimated
ticket price.
• Actual
revenue =
actual
number of
visitors *
actual ticket
price.
type
cabaret
estimated
actual revenue Revenue variance
revenue
7,050.0
5,557.5
(1,492.5)
cabaret
12,600.0
12,150.0
(450.0)
cabaret
9,920.0
6,400.0
(3,520.0)
cabaret
Total
cabaret
7,140.0
8,260.0
1,120.0
36,710.0
32,367.5
(4,342.5)
theatre
5,220.0
5,040.0
(180.0)
theatre
5,400.0
6,500.0
1,100.0
theatre
6,500.0
4,550.0
(1,950.0)
theatre
Total
theatre
4,500.0
5,700.0
1,200.0
21,620.0
21,790.0
170.0
opera
14,400.0
14,820.0
420.0
opera
11,700.0
14,560.0
2,860.0
26,100.0
29,380.0
3,280.0
congress
11,000.0
8,600.0
(2,400.0)
anniversary
18,000.0
15,750.0
(2,250.0)
total opera
Price variance = (actual price – estimated price) * actual number of visitors
Quantity variance = (actual number of visitors – estimated number of visitors) * estimated price
of ticket
type
cabaret
revenue variance price variance (revenue)
(1,492.5)
unfavorable
(292.5)
- favorable
(1,200) unfavorable
(292.5)
-
favorable
favorable
(3,520) unfavorable
1,120 favorable
(4,050)
(180) unfavorable
1,100 favorable
(1,950) unfavorable
cabaret
(450.0)
cabaret
cabaret
theatre
(3,520.0)
1,120.0
(4,342.5)
(180.0)
1,100.0
theatre
(1,950.0)
- favorable
theatre
1,200.0
- favorable
total cabaret
theatre
total theatre
opera
170.0
420.0
congress
2,860.0
3,280.0
(2,400.0)
anniversary
(2,250.0)
opera
total opera
quantity variance (revenue)
favorable
favorable
0.00
unfavorable
(780.0)
- favorable
(780.0)
- favorable
- favorable
(450) unfavorable
1,200
favorable
170
1,200
favorable
2,860 favorable
4,060
(2,400) unfavorable
(2,250) unfavorable
type
Contractual cost
Fixed cost
Type of contract
cabaret
cabaret
cabaret
cabaret
theatre
theatre
theatre
theatre
opera
opera
congress
anniversary
lump sum
Catering cost
600
-
-
16
600
-
-
5000 + 6 ppv
600
-
-
6000
600
-
-
4500
600
-
-
8
600
-
-
10
600
-
-
1000 + 6 ppv
600
-
-
12000
600
-
-
23
600
-
-
lump sum
lump sum
Price ppv
price ppv
mix
Staff cost
6000
price ppv
mix
extra cost types
Lump sum
price ppv
-
-
600
8,000
15 per possible visitor
-
-
600
15,000
20 per possible visitor
Lump sum: cost was unchanged for estimated and actual
Price ppv = contractual cost * number of visitors
Mix = lump sum + (price ppv * number of visitors)
contractual cost
type
estimated cost
cost variance (from
quantity)
actual cost
cabaret
6,000
6,000
-
cabaret
11,200
10,800
(400)
cabaret
8,720
7,400
(1,320)
cabaret
6,000
31,920
6,000
30,200
-
(1,720)
theatre
4,500
4,500
-
theatre
4,320
5,200
880
theatre
5,000
3,500
(1,500)
theatre
4,420
17,620
720
total theatre
3,700
17,520
100
opera
12,000
12,000
-
opera
total opera
10,350
22,350
12,880
24,880
2,530
total cabaret
2,530
type
Contractual cost
Fixed cost
Type of contract
cabaret
cabaret
cabaret
cabaret
theatre
theatre
theatre
theatre
opera
opera
congress
anniversary
lump sum
Catering cost
600
-
-
16
600
-
-
5000 + 6 ppv
600
-
-
6000
600
-
-
4500
600
-
-
8
600
-
-
10
600
-
-
1000 + 6 ppv
600
-
-
12000
600
-
-
23
600
-
-
lump sum
lump sum
Price ppv
price ppv
mix
Staff cost
6000
price ppv
mix
extra cost types
Lump sum
price ppv
-
-
600
8,000
15 per possible visitor
-
-
600
15,000
20 per possible visitor
Estimated extra cost = staff cost + (catering cost * estimated number of visitors)
Actual cost = staff cost + (catering cost * actual number of visitors)
we can see that the difference between estimated and actual extra cost was just
due to the quantity of visitors
extra cost
type
estimated
extra cost
actual cost
congress
16,250
14,450
anniversary
24,000
25,500
40,250.0
39,950.0
Total
extra cost variance
(1,800)
favorable
1,500 unfavorable
(300.0)
type
TOTAL
estimated
revenue
actual
revenue
revenue
variance
113,430.0
107,887.5
(5,542.5)
price variance quantity variance
(revenue)
(revenue)
(1,072.5)
contractual cost
type
TOTAL
extra cost
cost
estimated
variance
actual cost
cost
(from
quantity)
71,790.0 72,700.0
(4,470.0)
910.0
fixed
cost
7,200.0
estimated
extra cost
actual
cost
40,250.0 39,950.0
extra cost
variance
(300.0)
Implication
• In general, the total cost was not changed too
much (cost increased by about $600), but the
revenue decreased more than 5,500 => as the
result, an unexpected result was unavoidable.
• Base on the variance analysis, the decrease of
revenue was because of the decrease of quantity
of visitors. Therefore, the theatre should build a
policy which would attract more customers.