197. PROFILE ON THEATRE AND CINEMA
SERVICE
197-2
TABLE OF CONTENTS
PAGE
I.
SUMMARY
197-3
II.
SERVICE DESCRIPTION & APPLICATION
197-3
III.
MARKET STUDY AND SERVICE CAPACITY
197-4
A. MARKET STUDY
197-4
B. CAPACITY & SERVICE PROGRAMME
197-7
MATERIALS AND INPUTS
197-8
A. RAW MATERIALS
197-8
B. UTILITIES
197-9
TECHNOLOGY & ENGINEERING
197-10
A. TECHNOLOGY
197-10
B. ENGINEERING
197-10
MANPOWER & TRAINING REQUIREMENT
197-15
A. MANPOWER REQUIREMENT
197-15
B. TRAINING REQUIREMENT
197-16
FINANCIAL ANLYSIS
197-17
A. TOTAL INITIAL INVESTMENT COST
197-17
B. OPERATION COST
197-18
C. FINANCIAL EVALUATION
197-19
D. ECONOMIC BENEFITS
197-21
IV.
V.
VI.
VII.
197-3
I.
SUMMARY
This profile envisages the establishment of a cinema/ theater house with a sitting capacity
of 1,500 persons.
The market study shows that in Addis Ababa currently an additional 7 theater/ cinemas
are required. Moreover, to satisfy the demand for theatre/ cinema hall one additional hall
has to be built every two years.
.
The total investment requirement is estimated at Birr 14.02 million, out of which Birr 2.2
million is required for equipment. The house will create employment opportunities for 24
persons.
The project is financially viable with an internal rate of return (IRR) of 27.14 % and a
net present value (NPV) of Birr 11.07 million discounted at 8.5 %.
II.
SERVICE DESCRIPTION & APPLICATION
Cinema is a series of images that are projected onto a screen to create the illusion of
motion. Cinema is one of the most popular forms of entertainment, enabling people to
immerse themselves in an imaginary world for a short period of time. But it can also
teach people about history, science, human behavior, and many other subjects. Some
films combine entertainment with instruction, to make the learning process more
enjoyable. In all its forms, cinema is an art as well as a business, and those who make
motion pictures take great pride in their creations
Theatre is one of the oldest and most popular forms of entertainment, in which actors
perform live for an audience on a stage or in another space designated for the
performance.
197-4
In addition, the Cinema / Theater House can also serve as a meeting place for work
shops, seminars and other public gatherings.
III.
MARKET STUDY AND SERVICE CAPACITY
A.
MARKET STUDY
1.
Supply and Demand
Quantitative data on the number of existing cinema/ theatre houses (other than those
owned by the public ), capacity of halls, films screened and theater presented, number of
audiences in each cinema halls, the facilities existing in each halls, specific locations and
the like could not be found. The available data obtained from CSA publication deals only
with those administered by the public. In the absence of any other source, the data
obtained from CSA is presented in Table 3.1.
Table 3.1
NUMBER OF THEATRE/CINEMA HALLS,FILMS SCREENED,
AND NUMBER OF AUDIENCES (2006)
Owner
Theatre/Cinema
Films
Number Of
Halls
Screened
Audiences
A.A City Administration
3
97
115,302
Cinema Houses Adm. Enterprise
3
172
1,502,285
Ethiopian National Theatre
1
49
10,069
Total
7
318
1,627,656
Source:- CSA, Statistical Abstract of Ethiopia.
197-5
As can be seen from the above Table as of the year 2006 there were 7 public owned
theatre/ cinema halls in Addis Ababa. During the same year the seven theatre/ cinema
halls in Addis Ababa has screened 318 films attracting 1,627,656 audiences.
Recently, three private theatre/ cinema halls has started operation in Addis Ababa, which
include Edamoll multi plax cinema hall with three cinema halls, Alem Cinema and
Sebestapol cinema.
Accordingly, the total number of theatre/cinema halls in the city is 10.
However,
discussion made with relevant experts reveals the fact that social service facilities such as
cinema/theater houses are concentrated in the center of the city. Contrary to this, the
facilities are lacking in the new expansion areas. In order to have a normal growth,
facilities should be well distributed all over the city. This on the one hand would help in
balancing the development of the city and meet the needs of the deprived areas on the
other hand.
Moreover, according to the same experts in order to efficiently serve one theatre/ cinema
hall is required for 200,000 persons. Accordingly, considering the present population size
of 3.4 million the city needs 17 theatre/cinema halls. Therefore, the present supply
demand gap is estimated at 7 theatre/cinema halls
2. Projected Demand
Assuming that the total population of the city grows at an average growth rate of 2.9%
and one theatre/ cinema hall serves for 200,000 persons the annual population increment
in the city and the theatre/ cinema halls required are shown in Table 3.2.
197-6
Table 3.2
PROJECTED POPULATION OF ADDIS ABABA AND NUMBER OF THEATRE/
CINEMA HALLS REQUIRED
Year
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Projected
Population
3,498,600
3,600,059
3,704,461
3,811,890
3,922,435
4,036,186
4,153,235
4,273,679
4,397,616
4,525,147
4,656,376
4,791,411
Annual
Increment
of Population
98,600
101,459
104,402
107,429
110,545
113,751
117,049
120,444
123,937
127,531
131,229
135,035
Number of Theatre/
Cinema Hall
Required
1
1
1
1
1
1
Accordingly, as can be seen from Table 3.2 to satisfy the demand for theatre/ cinema hall
one additional hall have to be built every two years.
3.
Pricing and Distribution
Current price of cinema per person in Addis Ababa varies from Birr 3 to Birr 15
according to the location and the facilities of the enterprises. For this project Birr 7 per
person is recommended. With regard to theater the price varies from enterprise to
enterprise as well as the type of the theater to be presented. An average price of Birr 20
per person is recommended for the envisaged project.
197-7
B.
CAPACITY AND SERVICE PROGRAMME
1.
Capacity
Based on the outcome of the forecasted demand of cinema/ theater house, the envisaged
hall will have a capacity of 1,500 seats. The hall will provide both cinema (week days)
and theater (especially on week ends and holidays). Assuming that the hall will be used
three times for cinema during week days and one times during week ends (in the
morning) the total amount of cinema to be shown per annum is 884 making the total
persons entering to the cinema show 1,326,000 per annum at full capacity operation.
Assuming theatre will be shown in the hall in the week ends and holidays, the total
annual theatre show is 104 making the total persons entered for the theatre show 156,000
per annum at full capacity operation. The hall will serve for two shift of 8 hours, each,
per day including weekends.
2.
Service Programme
The proposed service program is given in Table 3.3. The service starts with 50% of its
full capacity and progressively grows to 75%, 90% and 100% in the second third and
fourth year and then after respectively.
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Table 3.3
SERVICE PROGRAMME
Sr.
Description
years
No.
1
1
3
Cinema(no. of
persons)
2
2
4-10
1,326,000
663000
994500
1193400
Theater(no. of
156,000
persons)
78000
Capacity
50
117000
140400
75
90
100
utilizations (%)
IV.
MATERIALS AND INPUTS
A.
RAW MATERIALS
The main material required for the provision of cinema and theater services are film
cassettes, cleaning consumables and costumes and make up for the theatre performers.
Rental cost of film cassettes and other materials required for the cinema and theatre show
are given on Table 4.1.
197-9
Table 4.1
COST OF RENT FOR FILM CASSETTE AND CINEMA / THEATER HALL
Sr.
Description
Unit requirement
No.
1.
Cinema
500Birr/film/day
2
Theatre
10,000Birr/theatre/
Annual
Total
reqt.
cost(Birr)
884 films
442,000
104
1,040,000
show
3
Ticket
-
15,000
150,000
4.
Janitor
Ls
Ls
100,000
consumables
Total
B.
1,732,000
UTILITIES
The major utilities requires by the hall are electricity, fuel oil and water. The estimated
annual requirement at full capacity and the corresponding cost is given in Table 4.2.
Table 4.2
ANNUAL UTILITIES REQUIREMENT AND ESTIMATED COST
Sr.
Description
No.
Unit of
Qty.
Meas.
1
Electricity
2
Fuel oil (stand by
Unit price
Cost ('000
(Birr)
Birr)
kWh
40,000
0.4736
18.944
lt
10,000
5.60
56.0
m3
50,000
3.25
162.5
diesel generator)
3
Water
Total
237.444
197-10
V.
TECHNOLOGY AND ENGINEERING
A.
TECHNOLOGY
1.
Service Process
Cinema and theater services are rendered to audiences at a specified time. The type and
time of show is posted on the main display board and audiences will come to the hall and
get the service at the specified time.
During the show and break time, both toilet and refreshment services are given to
customers in need.
There can be 15 to 20 minutes of gap between successive shows for entrance ticket
selling and cleaning and ventilating of hall. Entry and exit doors are separately arranged
in order to handle the flow of audiences in a convenient way.
The service does not have any adverse impact on environment.
B.
ENGINEERING
1.
Machinery and Equipment
The list of machinery and equipment required for provision of cinema / theater services is
given in Table 5.1.
197-11
Table 5.1
MACHINERY, EQUIPMENT& TOOLS REQUIREMENT
Sr.
Description
UOM
No.
1 Film projector machine & its
accessories
2 Adjustable film screen (supply and
installation)
3 Decorative light system (supply &
installation)
4 Public addressing system of
auditoria type (supply &
installation)
5 Fixed sofa with adjustable backrest
and seat (supply and installation)
6 Fire detection and protection system
(supply & installation)
7 Electric driven stage curtain (supply
and installation)
Cost (‘000 Birr)
Qty
F.C
L.C.
Total
set
1
150
-
150
pcs
1
50
-
50
lot
1
80
80
lot
1
20
100
seat
1500
1575
1575
lot
1
40
40
pair
1
-
20
lot
1
-
10
9 Stand by diesel generator (11 KVA)
with canopy attachment and control
system (supply and installation)
10 cafeteria facilities
set
1
-
110
set
1
50
50
11 CD player
pcs
1
6
6
12 Carpentry tool box
set
1
3
3
13 Electrician tool box
set
1
4
4
14 Retractable aluminum ladder (5 mt.)
pcs
1
2
2
1780
2,200
8 Security check equipment
Grand Total
-
80
-
20
10
110
420
197-12
2.
Land, Building and Civil Works
The cinema / theater house requires a total plot of land of 2,000 m2 area out of which
1,500 m2 area is the indoor built -up area which is the cinema / theater hall (seat area,
walk ways, reception, administration offices, stage, store, dressing rooms & lockers,
toilet and bath rooms, projection room, ticket room). The indoor civil work also includes
balconies, sound proof wall finishing, window curtain and AC system.
The remaining 500 m2 area is the out door built -up area which includes the public toilet
(80m2), cafeteria (100 m2), generator house (20m2), parking lot and walk ways (260m2)
& fast food shops(40m2).
Assuming an indoor construction rate of Birr 2300 per m2 for the Cinema hall and Birr
1000 per m2 for the outdoor building and civil works, the total cost of construction is
estimated Birr 4,508,000 and Birr 1,340,000, respectively.
According to the Federal Legislation on the Lease Holding of Urban Land (Proclamation
No 272/2002) in principle, urban land permit by lease is on auction or negotiation basis,
however, the time and condition of applying the proclamation shall be determined by the
concerned regional or city governments depending on the level of development.
In Addis Ababa the city’s Land Administration And Development Authority is directly
responsible in dealing with matters concerning land. Accordingly, the initial land lease
rate in Addis Ababa set by the Authority based on the location of land is as shown in
Table 5.1.
197-13
Table 5.1
INITIAL LAND LEASE RATE IN ADDIS ABABA
Sr.
No
1
Location of the land
Central Business zones
2
Places That
Transit
3
Expansion Zones
are
Land
Grade
1
2
3
4
5
Initial Price in
m2
1167.3
1062.9
916.2
751.5
619.2
1
2
3
4
5
1
2
3
4
716.4
647.1
559.8
472.5
384.3
245.7
207
150.3
132.3
Under
Source; Addis Ababa City Land Administration Authority
As can be seen from Table 5.2 the initial land lease rate ranges from Birr 1,167.3 to
132.3 per m2 .
Currently, most of the theater and cinemas in Addis Ababa are located on the central
business zones of the city. Therefore, places under transit and expansion zones are
recommended as the best locations for the project. Accordingly, the average of the
highest land lease rates in places under transit and expansion zones which is Birr 481.05
m2 is adopted.
The Federal Legislation on the Lease Holding of Urban Land legislation has also set the
maximum on lease period and the payment of lease prices ( See Table 5.2 and Table
5.3.)
197-14
Table 5.2
LEASE PERIOD
Lease Period
( Years)
Type of Service
Residential area
Industry
Education, cultural research
NGO and religious
Trade
Urban Agriculture
Other service
99
80
health, sport,
99
70
15
70
Table 5.3
LEASE PAYMENT PERIOD
Sr.
No.
1
2
3
4
5
6
7
Service Type
Private residential are obtained
through tender or negotiation
Trade
Industry
Real estate
Urban Agriculture
Trade and social service
Others
Period
of
Payment
According to the Grade of
Towns
50 - 60 years
40 - 50 years
40 - 50 years
40 years
8 - 10 years
40 - 50 years
40 years
Moreover, advance payment of lease based on the type of investment ranges from 5% to
10%. For those that pay the entire amount of the lease will receive 0.5% discount from
the total lease value and those that pay in installments will be charged interest based on
the prevailing interest rate of banks. Moreover, based on the type of investment, two to
seven years grace period shall also be provided. The lease price is payable after the grace
period annually.
197-15
Regarding, the terms and conditions of land lease the Addis Ababa City Government
have adopted Article 6 of the Federal Legislation with very minimal changes. Therefore,
for the purpose of this project profile since the project is engaged in social service , 99
years lease period, 50 years lease payment completion period, 5% down payment and
seven years grace period is used.
Accordingly, the land lease cost of the project, at rate of Birr 481.05 per m2 for 99 years
of holding is estimated at Birr 95.25 million. Assuming 5% of the total cost ( Birr 4.76 )
will be paid in advance as down payment and the remaining Birr 90.49 million will be
paid in equal installments with in 50 years, the annual lease payment is estimated at Birr
1,809,710.
VI.
MANPOWER AND TRAINING REQUIREMENT
A.
MANPOWER REQUIREMENT
The total manpower requirement, including skilled and unskilled labour is 24 person and
corresponding total labour cost, including fringe benefits, is estimate at Birr 347,250
Table 6.1 show the list of manpower required and the estimated annual labour costs.
197-16
Table 6.1
MANPOWER REQUIREMENT & LABROUR COST
Sr.
Job Position
Req.
No.
B.
No.
Salary (Birr)
Monthly
Annual
1.
General manager
1
5,000
60,000
2.
Secretary
1
1,000
12,000
3.
Head, finance & administration
1
3,500
42,000
4.
Sin. electrician
1
1,500
18,000
5.
Finicial clerk
1
650
7,800
6.
Electrician
1
1,000
12,000
7.
Technician
1
1,000
12,000
8.
Driver
1
600
7,200
9.
Cashers
2
1,400
16,800
10.
Cleaners
6
2,400
28,800
11.
Store keeper
1
600
7,200
12.
Guard
4
2,000
24,000
13.
Labourer
2
700
8,400
14.
Film project operator
2
1,800
21,600
Total
24
277,800
Workers benefit (25% of BS)
-
69,450
Grand total
24
347,250
TRAINING REQUIREMENT
Film operators, electricians and technician need to get local tailor made training and
attachment training at similar centers. The cost of training is estimated at Birr 20,000.
197-17
VII.
FINANCIAL ANALYSIS
The financial analysis of the cinema/ theater project is based on the data presented in the
previous chapters and the following assumptions:-
Construction period
1 year
Source of finance
30 % equity
70 % loan
Bank interest
8.5%
Discount cash flow
8.5%
Accounts receivable
30 days
Raw material local
30 days
Cash in hand
5 days
Accounts payable
30 days
Repair and maintenance
5% of machinery cost
A.
TOTAL INITIAL INVESTMENT COST
The total investment cost of the project including working capital is estimated at Birr
14.02 million of which 13% is required in foreign currency. The major breakdown of the
total initial investment cost is shown in Table 7.1.
197-18
Table 7.1
INITIAL INVESTMENT COST
Sr.
Cost Items
No.
1 Land lease value
Local
Cost
Foreign
Cost
-
Total
Cost
4,762.40
-
5,848.00
420
100.00
1,780
-
2,200.00
100.00
450.00
-
450.00
-
456.34
-
205.26
1,780.0
14,022.00
4,762.40
2
Building and Civil Work
5,848.00
3
Plant Machinery and Equipment
4
Office Furniture and Equipment
5
Vehicle
6
Pre-production Expenditure*
7
Working Capital
456.34
Total Investment cost
*
205.26
12,242.00
N.B Pre-production expenditure includes interest during construction ( Birr 336.34
thousand ), training ( Birr 20 thousand)
and Birr 100
thousand
costs of
registration, licensing and formation of the company including legal fees,
commissioning expenses, etc.
B.
OPERATING COST
The annual operating cost at full capacity operation is estimated at Birr 3.01 million
(see Table 7.2). The major components of the operation cost are material and input,
depreciation and cost of finance which account for
57.40 %, 9.98% and 9.59%
respectively. The remaining 23.03 % is the share of utility, labour direct, repair and
maintenance, labour over head and administration cost.
197-19
Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items
Material and Inputs
Utilities
Maintenance and repair
Labour direct
Labour overheads
Administration Costs
Land lease cost
Total Operating Costs
Depreciation
Cost of Finance
Cost
%
1,732.00
237.44
57.40
7.87
110.0
166.7
3.65
5.52
69.5
111.1
2.30
3.68
2,426.7
301.3
80.43
289.2
9.59
3,017.19
100
9.98
Total Production Cost
C.
FINANCIAL EVALUATION
1.
Profitability
Based on the projected profit and loss statement, the project will generate a profit through
out its operation life. Annual net profit after tax will grow from Birr 376.95 thousand to
Birr 4.08 million during the life of the project. Moreover, at the end of the project life the
accumulated cash flow amounts to Birr 32.39 million.
2.
Ratios
In financial analysis financial ratios and efficiency ratios are used as an index or yard
stick for evaluating the financial position of a firm. It is also an indicator for the strength
and weakness of the firm or a project. Using the year-end balance sheet figures and other
relevant data, the most important ratios such as return on sales which is computed by
197-20
dividing net income by revenue, return on assets ( operating income divided by assets),
return on equity ( net profit divided by equity) and return on total investment ( net profit
plus interest divided by total investment) has been carried out over the period of the
project life and all the results are found to be satisfactory.
2.
Break-even Analysis
The break-even analysis establishes a relationship between operation costs and revenues.
It indicates the level at which costs and revenue are in equilibrium. To this end, the
break-even point of the project including cost of finance when it starts to operate at full
capacity ( year 3) is estimated by using income statement projection.
BE =
Fixed Cost
=
21
%
Sales – Variable Cost
3.
Payback Period
The pay back period, also called pay – off period is defined as the period required to
recover the original investment outlay through the accumulated net cash flows earned by
the project. Accordingly, based on the projected cash flow it is estimated that the
project’s initial investment will be fully recovered within 4 years.
4.
Internal Rate of Return and Net Present Value
The IRR of the project which is the discounted rate at which the present value of cash
inflows is equal to the present value of cash outflows or in other worlds the discount rate
for what the present value of the net receipts from project is equal to the present value of
the investment is computed to be 15.06%.
Net present value ( NPV) which is defined as the value obtained by discounting, at a
constant interest rate and separately for each year, the difference of all annual cash
197-21
outflows and inflows accruing through out the life of the project, this differences is
discounted to the point at which the implementation of the project is supposed to start, the
NPV obtained for the years of the project life are than added to obtain the NPV.
Accordingly, the net present value of the project at 8.5% discount rate is found to be
Birr 11.07 million..
D.
ECONOMIC BENEFITS
The project can create employment for 24 persons. In addition to supply of the domestic
needs, the project will generate Birr 7.30 million, per annum in terms of tax revenue.