Getting the big picture
Careful, constant attention to metrics has helped online cinema ticketing service Fandango become a prominent player in the US entertainment industry. See how CFO Rob Leff, CPA, CGMA, and his staff use forecasting to help the company build successful partnerships, targeted marketing initiatives and focused strategic plans.
The 3D format for films supposedly was taking its last, dying breaths when spikes began to show up in the metrics monitored hourly by the business intelligence team at Fandango, a company that has risen to prominence by selling tickets online to filmgoers before they arrive at the cinema.
The analytics showed that 91% of the early tickets purchased this fall through Fandango for action film Gravity, starring Sandra Bullock and George Clooney, were for 3D venues. Earlier, the film had ranked No. 3 among the most anticipated fall films (trailing The Hunger Games: Catching Fire and Thor: The Dark World) in a Fandango survey of filmgoers.
Armed with that information, Fandango’s marketing and public relations teams quickly got to work to take advantage of — and build — the film’s popularity. Fandango’s website held a sweepstakes contest giving away four film posters signed by Bullock and director Alfonso Cuarón.
Fandango alerted news outlets that the percentage of presale tickets bought for 3D showings was the largest in Fandango’s history. Forbes, the Los Angeles Times, the Chicago Tribune and entertainment news outlets such as Variety and The Hollywood Reporter picked up the news.
The promotions work for Fandango on two fronts — building buzz about the film and reminding filmgoers that they can purchase seats on Fandango. This helps build two of Fandango’s most important metrics — volume of overall ticket sales and Fandango’s percentage of the sales. Constant monitoring and acting on the key performance indicators that feed those metrics is essential to Fandango’s success.
“We’re looking forward, all the time,” says Rob Leff, CPA, CGMA, the CFO of Fandango. “And we can see those nuggets of what’s happening, especially on a movie product basis, and we try to amplify that trend of getting people excited about the movie.”
Gravity proved 3D is not dead. It achieved the highest grossing October opening weekend ever, far exceeding expectations with $55.8 million in North American ticket sales and an additional $27 million outside North America on its way to earning more than $400 million worldwide by early November. That was good for the cinemas and good for Fandango, which secured a strong percentage of the sales for Gravity that weekend and can account for 10% to 20% of US ticket sales of high-demand films, according to Leff.
The 12-year-old company’s partnerships with cinema conglomerates allow it to connect directly to points of sale, and advertisers crave the attention of Fandango’s web and mobile visitors, who have totalled 41 million in peak months. This leads to revenue streams for Fandango from both customer ticket purchases and ad sales.
In 2012, the company reported record highs in ticket sales, web and mobile traffic, and app downloads. Annual ticket sales rose 57% in 2012, over 2011. Also in 2012, monthly visitors to Fandango’s online and mobile destinations grew 34%. The company’s mobile apps have been downloaded more than 38 million times, according to the company, which is a unit of NBCUniversal.
The finance team’s attention to strategy has played an essential role in the growth (see sidebar, “Seven Steps for Effective Strategic Planning”).
VOICE OF THE CONSUMER
Leff joined Fandango as director of finance in 2008 after serving in a variety of roles with organisations such as America West Airlines, Intel and Countrywide home loans. He has worked in options trading, corporate development and e-business strategy, product development, and marketing analytics in addition to financial planning and analysis.
Working in other functions, in addition to finance, has helped Leff understand how to use financial data to contribute to a company’s performance. “Not having a traditional financial planning and analysis background, I look for research on the voice of the consumer,” Leff says. “I’m thinking about how operationally it will work. I also, of course, care what the numbers are.”
Leff has served as CFO of Fandango since March 2012, and he is also responsible for finance, accounting, business intelligence and research.
The company’s partners include Amazon, AOL, Apple, Google, Microsoft, Samsung, Yahoo and cinema chains representing 22,000 screens at more than 1,900 locations across the United States. Leff’s finance team helps the company evaluate those partnerships.
Before a deal is struck, the finance team and Fandango’s management build a discounted cash flow model that captures the key assumptions, metrics and financials to provide an accurate picture of the opportunity. The finance team is involved in all the strategic discussions and provides input into the deal terms and structure.
“It’s not like some other organisations I’ve worked at, where finance is where you run the numbers,” Leff says. “On these key partnerships, the finance team is involved from start to finish.”
WHAT’S IN THE FORECAST?
Forecasting plays an essential role in strategy at Fandango. Over the past year, Leff’s business intelligence and finance teams have created analysis and regression models to forecast Fandango’s ticket sales up to 18 months in advance on a daily and monthly basis.
The models are built to consider historical ticket performance that includes trends for three waves — presale, opening weekend and post-opening weekend — that Fandango sales typically experience. The genres of upcoming releases, time of year and other factors (such as holiday weekends) are included in the forecasts, which originated as an art but have evolved into a science.
The ticket sales forecasts have allowed Fandango to significantly improve its profit and loss forecasting, Leff says. The forecasts also are considered in the operating plan development and implementation, including the product road map and marketing initiatives.
Fandango’s ticketing projections and conversion rates (the percentage of site visitors that buy tickets) also are forecasted on a daily basis for the upcoming weekend, taking into account industry experts’ projected opening ticket sale revenue. These are compared to the actual ticket sales and conversion rates, which are used to update forecasts after each weekend; this allows the company to understand the effects of rate and volume in a simple cost accounting format.
All these data help Fandango’s management team decide where to allocate resources in the budgeting processes for initiatives to help drive the business forward.
“We don’t want to just move with the market,” Leff says. “We want to continuously grow and expand the marketplace. But we always need to first examine what’s going on in the underlying industry.”
The performance at the box office and Fandango’s percentage of the action are an important part of what drives the company.
“We want all studios to do well, all theatres to do well,” Leff says. “And we want to help represent a continuously higher percentage of the box where people buy online, and also help grow the box, and have people utilise our service. We are all on the same team, as we want to motivate more people to enjoy a night at the movies . … And then everyone in our industry wins.”
US filmgoers use Fandango’s website and apps to learn about films, locate cinemas and show times, and purchase tickets. Customers who buy tickets through Fandango can print them out at home or pick them up at the cinema kiosk or box office by presenting a confirmation number or the purchasing credit card. At some cinemas, Fandango mobile users can go straight to the ticket-taker and gain admission with scannable tickets on their smartphone. Fandango earns revenue through a per-ticket convenience charge, digital advertising on its site and mobile platforms, gift cards, and promotional sales.
SEVEN STEPS FOR EFFECTIVE STRATEGIC PLANNING
The finance team plays an essential role in strategic planning at Fandango, whose management embraces a data-driven approach in the fast-moving digital media industry. CFO Rob Leff, CPA, CGMA, follows a seven-step process for finance’s contributions to strategic planning at Fandango:
1. Define the objectives. The CFO and head of financial planning and analysis meet with the president and head of strategy to come up with a set of key questions for the management team to answer.
2. Perform preparatory work. The finance and strategy teams analyse industry and financial trends to create a “kick-off document” for management team working sessions. A calendar and list of deliverables are created to provide the management team with a timeline, deadlines and expectations.
3. Participate in working sessions. Leff prefers a series of several-hour, on-site working sessions for the management team, instead of multiple-day, off-site working sessions.
4. Create first draft. Finance creates the first version of the strategy or operating plan and reviews it with the management team.
5. Delve into the numbers. The finance team builds metrics, financials and key performance indicators that quantify the strategic or operating plan that is being created.
6. Review and revise. Finance goes through several iterations of the plan and the supporting numbers with the president and head of strategy.
7. Finalise. The final version of the plan is completed and presented to Fandango’s management team and executives at Fandango’s parent company, NBCUniversal.