COMMENT: Theatre At Home Concept Is Smart But Is It Viable?
Credit must be given for the recently announced Theatre at Home initiative, as there is a market for a complete home theatre in a box concept, but the big question is whether the concept is viable.
The cost for a home theatre complete with acoustic panels controller, projector, audio, screen, and a couple of chairs is cheaper today, due in part to new networking technology, faster broadband speeds, and a new generation of high-performance home theatre projectors. The single biggest issue is the cost of acquisition of a customer and the costs associated with an install.
The Lifestyle Store, guys behind Theatre at Home have been installing premium home theatre for decades, they know the pitfalls and more so how to install a quality home theatre solution.
The target audience is technology dyslexic people who want a home theatre but don’t have a clue as to how to go about it.
This is an audience that is either renovating, building a new home, or have decided that entertainment is a key part of their lifestyle and want to improve on their current solution of a telly and soundbar.
The TAH offering is all about cheap home theatre solutions that will be purchased outright, or via finance deals, and therein lies the first problem margin, the second problem is the cost of acquisition of a customer.
Is there a market for the concept?
Research group Global Industry Analysts claimed in a recent research study that by 2026 the home theatre market will be worth $17.8.
The market was originally estimated to be worth $13.4 Billion by 2025 however this target is set to be hit this year.
It appears customers want “hidden gear” as opposed to large speakers and exposed cables.
The market wants simplicity which Theatre at Home believe they can deliver.
A recent business model seen by ChannelNews reveals that by 2025 TAH aspires to be turning over 100 theatres a week or 5,200 a year. This is one hell of a lot of home theatres they are also relying on electricians and builders to generate customers sand therein is a 20% margin at least.
TAH claim that they can do a home theatre install in a day and in my calculations the labour costs on this is at least $1,000 for two people.
In the USA two business organisation tried to roll out a similar model to what TAH are proposing and failed.
In Australia Klapp AV tried a similar model several years ago when they had four stores, it failed.
The TAH concept is bold and on paper appears to be a neat concept, but that nagging issue of margins and competition keeps popping up coupled with the cost of acquisition of a customer.
What if an install goes wrong, especially as the business is operating on low margins compared to a premium install that the Lifestyle store is used too?
The model is built around third parties such as electricians and builders carrying out installs which in itself becomes a management nightmare.
Then there is the issue of support and warranty.
For example, if a builder has a lead, that’s converted into a sale for a new home theatre and the job goes pear shaped because an electrician is busy on another job, or has made a mistake and the job blows out by a day, where is the margin in a cheap home theatre install.
Then there is the issue of competition.
ChannelNews understands that at least two major retailers who already have a network of stores across Australia are talking to potential partners, to role out a similar model to the Best Buy Magnolia concept.
This could see result in competition for every home theatre installer especially the man and a van operator.
The TAH model has legs but is going to struggle to run the way it’s currently envisioned.
Winning thought they could do home theatre installs and they ended up bringing in third parties to finish jobs because their model was not workable, it cost them a lot of money.
The people behind the Theatre at Home Concept have one thing of value, two decades of experience in the home theatre and custom install market.
The concept of a store that only shows a finished home theatre option is workable and consumers will go there however it’s the cheapness of the deals they are proposing that is the main problem.
They also need to appeal to females who like to control the aesthetics of a media room, most don’t like really dark colours.
What I suggest is that their entry point should be $50K with their stores being in destination locations that consumers drive to with options given over $50K, the value could be in a perceived finance package or monthly payment fee. They could also be the option of a subscription model where gear is updated after 3 years.
The TAH stores could be located in retail locations that have a high furniture or home products clientele and not necessarily mainstream retail outlets.
Artarmon in NSW is one classic example of a location that gets the right sort of target audience.
What TAH also need to do is walk before they try to run with only two stores in key locations opened in Melbourne and Sydney or even Brisbane to trial the concept before they sign up lease deals across the Country.
In Melbourne they are going to have to compete with what is being billed as “Disneyland” a massive home theatre experience store that is set to be opened by Paul and Denise Riachi. The Rio Sound & Vision store will have several home theatre experiences for consumers with the added traction of a store experience that has been described by several brands involved in the fitout as being “like no other thing” they have ever experienced when it comes to entertainment marketing.
Only time will tell where the Theatre At Home Concept goes, its got legs and is a neat concept however in todays environment and with only 25M consumers to target the sell through has to be constant as the margins are not there in small jobs.