SMITH BRAIN TRUST — Clowns are creepy and dancing elephants upset PETA, so maybe the Ringling Brothers and Barnum & Bailey Circus had no chance. After producing the greatest show on earth for 146 years, the three-ring spectacle announced Saturday that it will close forever in May. The news does not surprise strategy professor Rajshree Agarwal, who includes the Ringling Brothers case in her executive MBA course at the University of Maryland’s Robert H. Smith School of Business. Agarwal says several factors have worked against Ringling Brothers for years, making its closure inevitable.
For starters, advancing technology has created new competition for entertainment dollars. Netflix, social media, video games and 24-hour cable channels did not exist during the heyday of traveling circuses. Most entertainment was local, and families had to wait for shows to come to them. Even movies had limited distribution. “Circus coming to town was a big deal,” says Agarwal, director of the school’s Ed Snider Center for Enterprise and Markets.
Entertainment seekers still appreciate live theatre, music and comedy. Broadway revenue hit an all-time high in 2016, for example. “People still look for the intimacy of the live experience,” Agarwal says. “But the rewards go to the big names.” Nobody has a bigger name in the three-ring world than Ringling Brothers, which explains why the show has outlasted so many smaller, regional circuses. But Agarwal says costs continue to climb for Ringling Brothers while revenue drops, creating a “double whammy” that makes the business model unsustainable.
One problem is Ringling Brothers’ reliance on star performers who command big salaries. Another problem is reliance on aisle concessions to supplement ticket sales, which distracts from the show. Just imagine a concessionaire yelling, “Peanuts! Popcorn!” during a performance of “Hamilton.”
Another factor working against the circus is changing attitudes about animal rights. Activists celebrating recent victories at SeaWorld and Ringling Brothers already have moved their focus to zoos. Agarwal says the negative attention affects the family experience, even if parents believe animals are receiving quality care. “If you’re taking your child to the circus, and you have to navigate through these protests, there is this ‘ickiness’ factor that comes into play,” she says.
Cirque du Soleil, a Canadian alternative launched in 1984, has avoided these problems and grown while Ringling Brothers has died. “They can rely on the artistic music, acrobatics and technology to create a refined viewing environment, as opposed to this showy, flashy, song-and-dance, overwhelming type of feeling,” Agarwal says. “Cirque du Soleil has melded circus with theatre, and they have continued to be profitable.”
Ultimately every industry changes. Agarwal says the key to stay relevant in business is to remember your purpose — or the main social problem you are trying to solve — because this tends to survive regardless of the latest technology or shifts in consumer appetites.
Newspapers exist to inform the public, for example. The purpose does not demand that children on bicycles throw printed bundles onto people’s driveways. That business model worked great in suburban America circa 1980, but different or better solutions might exist in 2017.
Likewise, taxis exist to move people around crowded cities. The horse and buggy might have worked best in the 1800s, Uber might work best today, and self-driving cars might work best in the near future. But the purpose of taxis remains the same.
“In order to stay relevant and current, you need to think continuously about your value proposition,” Agarwal says. “Profit can only follow purpose.”
In the case of Ringling Brothers, the purpose is entertaining families. “If someone else is better at solving that problem, in light of changing technology and tastes and preferences, then you will be left on the wayside with Borders and Circuit City.”
In contrast Agarwal points to IBM, which survived the demise of the typewriter, and Pepsico, which has survived a growing distaste for sugary drinks. “The reason why they have continued to become giants today as well as yesteryear is because they are first and foremost focused on what problems they can solve better than anyone else.”
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