Title: Contents

1
COMPANY INVERSE A MUSICAL THEATRE
COMPANY OPPORTUNITY EVALUATION FOR STONNINGTON
CITY COUNCIL

Double i CMR Final Draft 3
July 2000
2
The Proposal
For Stonnington City Council to support the
establishment of COMPANY INVERSE, Australias
first not-for-profit Musical Theatre Company in
the Chapel Street Tourist precinct at Stonnington
City Centre (Prahran). Company Inverse is
seeking the following support
3
The Proposal (cont)

In return, Company Inverse will provide
social and cultural benefits for Stonnington City
Council and its community
recognition and image for pioneering the
initiative associate the company logo with an
initiative of Stonnington City Council, thereby
providing council with national/international
brand exposure
an opportunity for a nominated Stonnington City
Council representative to sit on the Company
Inverse board.

4
The Business Opportunity

Vision

Company Inverses vision is to secure the future
of Australian- created Musical Theatre by
creating a one-stop shop for the evaluation and
development of new Australian musical theatre
product, and to enable best fit of such product
with established networks, or the development of
new market opportunities.

The opportunity

To fill a gap in the arts industry to enable
local creative talent to incubate and develop all
aspects of musical production by providing a
network for collaboration and communication by
Australian composers and lyricists and establish
a sustainable framework for the creation,
development and marketing of Australian musical
theatre works (locally, nationally and
internationally). This will increase the profile
and market share of these musicals and increase
the opportunities for Australian talent. Also
there exists an advocacy role for the place of
musical theatre within our national culture.
5
The Opportunity Evaluation Objective

The objective of this Opportunity Evaluation is
to investigate whether Stonnington City Council
should invest in Company Inverse as a Musical
Theatre Company based in the Stonnington
precinct. We have used an opportunity
evaluation model to assess the benefits to
Stonnington City Council and its community.
Benefits have been categorised in terms of
Social and cultural benefit
Economic returns, and
Recognition and image for pioneering the
initiative.

6
Why should Stonnington City Council be involved?

Association with Company Inverse will provide the
following benefits
Alliance of the Stonnington Brand with innovative
leadership in culture and the arts.
Attraction of media and focus to the Stonnington
precinct, including media exposure on a national
level. Potential to be one of Stonningtons
largest positive branding products, as Company
Inverse, an initiative of the City of
Stonnington will be cross-promoted on all allied
sponsor brandings, such as Ticketmaster mailouts
and website.

7
Why should Stonnington City Council be involved?

Local community cultural benefit as it initiates
a dynamic, broad appeal asset to local
environment.
Entertainment industry (3 billion industry - ABS
1996) focus to the Stonnington precinct and
alliance with peak industry body
Positive market positioning for the Stonnington
Brand within corporate market place, in terms of
partners/networks.
Recognition and image for pioneering the
initiative.
Utilisation of existing physical asset/buildings,
including the presentation/marketing of these
assets to the Entertainment Community.
Ideal match for contents of City of Art plan.

8
Why the Stonnington precinct?

Inner city precinct with national and
international recognition as leading edge
destination for shopping, dining, entertainment
and cultural experiences.
Stonnington City Council has a reputation and a
trade record as a visionary, progressive and
innovative local government industry leader.
The high presence of Melbourne-based business and
arts industry leaders.

9
Why the Stonnington precinct? (Cont)

Stonnington City as Art Plan - 2000 Beyond
identified a strong, dynamic Cultural Industries
Business Sector exists in Stonnington, evidenced
by a total of 780 individual arts/culture related
businesses and over 45 community and cultural
venues and organisations
Two major segments within the plan support the
citys investment in this proposal, namely
- Creative Arts - investing in creativity and
developing opportunities for local artists and
groups to create new works, and
- Business Arts - adding value to the
business of culture by creating a co-operative
climate for innovation and investment.

10
Industry Statement of Support and Need
I am writing to commit my strongest support to
the proposal of establishing a company dedicated
to the creation, support and development of new
Australian musicals. Any efforts to help
consolidate the foundations of new work
development in this country would benefit the
industry on all levels - producers, venues,
artists and, ultimately, audiences. Ultimately
this initial investment pays off many times over,
for our industry, our culture and our nation. I
wish you the best for your endeavours and offer
any support that I can. You are filling a great
need, one that has gone unserved for too long.
John Frost Australian Theatre s Most
Successful Commercial Producer.
11
Company Inverse 3 Year Financial Summary
12
Conclusions
The seed funding from SCC is required as a first
step to realising the potential for Company
Inverse. The seed funding will enable Company
Inverse to commence operations and begin the
tasks of securing other sponsorship and revenue,
developing a business plan, consolidating
national and international partnerships and
realising their market entry strategy.
Company Inverse has demonstrated support for its
establishment evidenced by-

Interest by key players to sit on a high level
Board
Interest from high profile artists and business
people to act as patrons and supporters of the
company
Interest from nationally recognized arts
organisations including Arts Victoria, MTC, VAC
Initial high level sponsor interest (including
Ticketmaster, Millmaine Entertainment, SEL,
Qantas, Marriner Theatres and Macpherson
Promotions)

13
Conclusions (cont)
Additional sponsorship will be required beyond
the SCC s contribution. However a ground
breaking initiative such as this requres a
progressive community leader to provide the
intial impetus to get the ball rolling. It has
been evidenced that previous endeavors similar to
Company Inverse have failed because the Arts and
Entertainment Industries percieved them as solely
commercial endeavours, and it is expected that
the stage one commitment of Stonnington City
Council will allay those fears and open other
potential revenue opportunities for the company
(Federal and State funding, philanthropic
giving). It is expected that commitments from
state, federal and philanthropic funding bodies
and revenues from originating producer and
publishing royalties will in time replace
original sponsor load.
14
Recommendations
Although the Opportunity Evaluation supports the
view that there are very many good indicators for
success for the establishment of Company Inverse,
there are correspondingly a couple of risks that
need to be mitigated before Stonnington City
Council should provide full commitment to this
project. We therefore recommend that a two stage
approval process be adopted

Stage 1 Stonnington City Council commits now to
provide
Stage 1 seeding grant of 30,000 to commence
company operations and prepare a Business Plan
Fitted-out office space for three workers at
Prahran Town Hall for a 6 month probationary
period
Kris Stewart and Sam Schwarz provide Stonnington
City Council with personal guarantees that
should Stonnington City Council decide to provide
full commitment to supporting Company Inverse
that they will remain committed to the project
for at least 3 years, and will leave the Council
with no financial liabilities

15
Recommendations (cont)

Stage 2 On the basis that within 6 months
a detailed Business Plan has been prepared and
the outcome supports the sustainability of
Company Inverse, and
Company Inverse has obtained formal commitment
from major sponsors to at least 265,000 for the
first year of operations, plus 175,000 for each
of the next 2 years, then

Stonnington City Council would commit to provide

Stage 2 seeding grant of 70,000 to continue
company operations for the balance of the first
year
Fitted-out office space for three workers at
Prahran Town Hall for a guaranteed period of 3
years
Provide strong public support for the
establishment of Company Inverse at the time of
the public launch

16
Contents

The Opportunity Evaluation Screening Process
The 2-stage Screening Process
This is based on the work by Jeffrey Timmons and
a frequently used investment evaluation tool.
Stage 1 The First Cut
Stage 2 Detailed Screen
Attachments
A. Opportunity Screening Benefits
B. First Cut Screen

17
The 2 Stage Screening Process

Stage 1 The First Cut

Stage 1 of the screening process involves a quick
audit of the knowledge of the opportunity from
the key stakeholders. In this evaluation, the
market, economics, competitive advantage, team,
risks and presence of any fatal flaws are briefly
evaluated using the Leichardt Scale to provide a
visual appreciation of the broad merits of the
idea. If most of the scores appear between 5 and
10, then the decision can be made to move to
Stage 2.

Stage 2 Detailed Screen

Stage 2 involves more detailed analysis on the
basis of hard data and hard evidence. It expands
on the areas of the First Cut. Although the
Detailed Screen is more detailed than the First
Cut, it does not go to the depth of analysis as
required by a Business Plan. The key focus of
our Opportunity Evaluation approach is to quickly
show whether an opportunity exists before moving
to the Business Plan.

18
The 2 Stage Screening Process (cont)

The difference between the Opportunity Screening
and Business Planning approach is that
Opportunity Screening focuses more on the Why?
and the What? of the Opportunity rather than the
implementation. If the Opportunity is not there,
then there is no need to go to the trouble of
doing the detailed planning.
Further reasons for carrying out Opportunity
Screening rather than Business Planning are
summarized in Attachment A.

19
Stage 1 - The First Cut
From the First Cut Opportunity Evaluation
(details are contained in Attachment B), the
following conclusions were drawn

Market Needs seem clear, Customers are
identifiable, and Products are able to value-add
to customer needs Risks to success are
associated with the large market size, low growth
rates low gross margins
Economics The opportunity will have low
commercial return, low capital cost but will
generate high strategic value
Competitive Advantage Company Inverse is able
to control distribution channels and marketing
it has a strong management team, and it should be
able to create high barriers to entry
Risks and Fatal Flaws Although a number of
risks could be identified, there appeared to be
nothing which would constitute a fatal flaw which
would prevent proceeding to the next stage.

20
CHECKPOINT!
Do the broad merits of the First Cut Opportunity
Screen warrant moving to Detailed Screening?

Yes - many of the First Cut scores were at the
higher end of the scale, therefore lending
support to making a more detailed evaluation of
the opportunity

?
21
Stage 2 - The Detailed Screen
In proceeding with the Stage 2 - Detailed Screen,
the Company Inverse opportunity was evaluated
under the following headings

Description of the business opportunity
Description of the product
Opportunity Conditions
Evidence
Total market size trends
Primary customers
Competition - vulnerabilityi.e.s?

22
Stage 2 - The Detailed Screen (cont...)

Window of opportunity - perishability?
Market Structure
Entry Strategy
Competitive Advantages - Sustainable
Economics
Degree of Control
Team capabilities
Programme
S.W.O.T. analysis

23
Stage 2 - The Detailed Screen (cont...)

Financials - Margins, Cash Flow, Profit, Start Up
Capital, PL, Sensitivity
Harvest Potential
Exit Mechanism
Major Assumptions Risks
Fatal Flaws / Issues

24
The Business Opportunity

Vision

Company Inverses vision is to secure the future
of Australian created Musical Theatre by creating
a one-stop shop for the evaluation and
development of new Australian musical theatre
product, and to enable best fit of such product
with established networks, or the development of
new market opportunities.

The opportunity

To provide a network for collaboration and
communication by Australian composers and
lyricists and establish a sustainable framework
for the creation, development and marketing of
Australian works (locally, nationally and
internationally). This will increase the profile
and market share of these musicals and increase
the opportunities for Australian talent. Also
there exists an advocacy role for the place of
musical theatre within our national culture.
25
The Product
Company Inverse will provide the following
Products and Services to the Australian musical
theatre industry
A. Assisting the development of composers and
lyricists of New Australian Musicals B. Promotin
g, developing and marketing New Australian
Musicals nationally and internationally C. Produ
cing small to medium scale productions for
on-selling D. Advocacy of the Musical Theatre
industry in Australia
26
The Product - Writers and Scripts
With regard to assisting with the development of
writers and scripts for new Australian musicals,
the nature of the product, tools and the various
sources of income are summarised below
Product Nature
Tools
Income Source
Establishing focus for the Australian Musical
industry, building interaction and facilitating
collaboration
Providing a referral service for authors,
producers, set and costume designers Acting as a
national and international conduit for
collaboration and Co-production Review,
mentoring, workshops, collaboration,
networking Review, mentoring, workshops,
collaboration, networking
Based on annual sponsorship and funding
levels Based on annual sponsorship and funding
levels Based on annual sponsorship and funding
levels Based on annual sponsorship and funding
levels

Between different writers
Between writers and producers

The evaluation of new Australian musicals, and
workshopping to develop potential The skill
development of Australian authors, producers, set
and costume designers
27
The Product - Promoting, Developing and Selling
With regard to promoting, developing and selling
new Australian musicals nationally and
internationally, the nature of the product, tools
and the various sources of income are summarised
below
Product Nature
Tools
Income Source
Promoting the excellence of new Australian
musicals internationally The marketing of
Australian works to producers / presenters and
performing arts bodies Providing development
services to the industry
Marketing, promotion and collaboration Marketing,
selling. collaboration, Co-production,
contracting Development workshops
Requires funding from industry, training and arts
bodies Revenue raised by royalties split between
Company Inverse and authors Fee for service
28
The Product - Producing
With regard to producing small to medium scale
productions for on-selling, the nature of the
product, tools and the various sources of income
are summarised below
Product Nature
Tools
Income Source
Producing concerts and full productions of new
Australian musicals - productions for whom
opportunity doesnt currently exist
Script development, production development
workshops, final production
Revenue raised by ticket sales and
commissions Economies of scale require
scaled-down operations / costs Revenue raised by
ongoing Originating Producers Royalty Revenue
raised by Publishing rights
29
The Product - Advocacy
With regard to advocacy of the Musical Theatre
industry in Australia, the nature of the product,
tools and the various sources of income are
summarised below
Product Nature
Tools
Income Source
The advocating of musical theatre as a major form
of art, entertainment and a significant industry
Establishing focus, promotion, collaboration,
lobbying
Funding from industry and training bodies
30
The Product - How it Works

Company Inverse will work through initiation of
the following key programmes to support its core
business
The American Society of Composers, Authors and
Publishers Program (ASCAP), which will take
worlds-best artists and bring them to Australia
to work with our emerging authors
The Ferrier Prize, which will be an award for
unproduced new Australian musicals that will help
us discover the as-yet unknown talents in
Australia
The commissions, which will seed-fund new
Australian musicals from industry professionals
(allow us to develop works that target perceived
industry and cultural needs)
The workshops programs, which will develop works
and make them industry ready

31
The Product - How it Works (cont)

The national marketing of developed works to
performing arts organizations
The presentation of new Australian musicals at
International Festivals and Industry Conventions
and our cultural exchange programs with
international companies
The companys mounting of full-productions/co-prod
uctions of new Australian musicals, potentially
in partnership with National Festivals or touring
networks.

32
Key Market Information

The place of culture, performing arts and musical
theatre in Australia
Arts and Culture industry within Australia had a
turnover of 19.6B on 1996/97 (equivalent of 2.5
of GNP and larger than the industries of road
transport and house building).
7 of Australian workforce is employed in Arts
and Cultural activities (ABS 1996/97).
1399 businesses currently operate in the
performing arts (ABS 1996/97), with 881 of these
working in music and theatre.
Most popular of the performing arts (ABS
1996/97) was Musical Theatre with 3.3m attendees,
surpassing pop music, which had 3.1m.
In 1995 ABS survey, 2.7m Australians attended a
musical theatre event, the equivalent of 21 of
Australia s adult population.

33
Evidence of Market Demand

General Market Needs
Currently an identifiable market need in
Australia for musical theatre (3.32m attendees in
1996/97 Financial Year).
Due to lack of Australian product, the
musical theatre market is being filled largely by
American, British and European product.
The Australian audience wants more varied
product at reasonable cost, as well as product
outside of metropolitan centres.
There is also an identifiable need from
producers and presenters for new works. They
want polished and developed Music Theatre product
that matches producing organisation needs for
less investment than doing it individually. Such
users include

commercial producers
subsidised theatre companies
Arts centres
regional touring networks

educational touring programs
educational institutions
amateur theatres
casinos

34
Evidence of Market Demand (cont)

Stonnington City Council Needs
To contribute to its mission to work in
partnership with the community to add to the
quality of people s lives through the
preservation and enhancement of Stonnington s
assets and the provision of innovative, equitable
and quality services.
To enhance the amenity of the precinct so
that is remains a sought-after location in which
to live, work and do business.
To develop Chapel off Chapel as the Council s
major Arts Centre to play a significant role in
assisting creativity through a diverse range and
style of performances.
To generate opportunities for creative
collaborations with key arts organisations and
theatre companies.

35
Evidence - The Customers

Who are the Customers?
Creative-Industry Professionals

writers, directors, performers
50 of the new business focus.
business growth will rely on quality networks of
contacts in Australia and overseas.

Business - Producers and Promotors

commercial producers, presenters, funding bodies,
sponsors.
30 of the new business focus.
growth is limited, however opportunity will grow
as the business gathers a strong reputation.

Public Audience

large and diverse.
20 of new business focus.
highly competitive market due to wide range of
other
entertainment options.

36
Evidence - The Competition
Where is the Competition?

The main competion comes from overseas sourcing
of product, and local production, such as Sound
of Music.
Producing organisations (can be either
competitors or collaborators) such as Cameron
Mackintosh, Edgley International, David Atkins,
Jacobsen, Melbourne Theatre Company.
Non-live entertainment.
American productions, such as Disney.

37
Market Value
What Value is Added for Customers?

For the creative industry professionals, provide
a one-stop-shop to create more of a sellers
market for their creations.
For producers and presenters, Company Inverse can
polish and develop musical theatre product to the
required standards, but at less cost than doing
it individually (introduce some economy of
scale).
For Australian audiences, create a focus / outlet
for creative expression re research and
development of new Australian musical product.
General by providing

An advocacy role in the promotion of the cultural
necessity of Australian product - need to address
the perception that overseas product must be
better.
An education role in skill development of
training musical theatre artists.
A networking role in linking artists to the
market and providing an information exchange.

38
Market Window
Window of Opportunity?

Current opportunities exist due to recent United
States venture by Company Inverse.
Potential to ally international activities with
increased post-Olympics knowledge of Australia
and its comtemporary culture.
Political climate seems right at this time
Would lose energy and support from some major
sponsors if this venture does not become reality
in six months and the potential remains to lose
key personnel.

focus on regional / outer suburb producing
networks
Stonnington City Council has good match in terms
of aspiration.

Overall the window of opportunity seems no more
than 3 months due to potential to lose the
support of key personnel.
39
Market - Product Substitutes
What Product Substitutes Exist?

Producing organisations (can be either
collaborators or competitors)
Non - live entertainment
American productions
Overseas sourced, local productions

40
Market Structure
How is the Market Structured?

Creative - Industry Professionals

Small select
Easy to identify and target
Largely creative - writers, composers, directors,
performers
Limited growth
Target - best of the best, best of the emerging

Business - Producers and Promoters

Small select
Easy to identify and target
Highly competitive
Limited growth
Fickle market - investors prone to move with
entertainment fashion

Public Audience

Large and diverse
Traditionally aged 28-70
Consumer choice largely driven by the female
partner
Opportunity to expand audience participation
beyond one
show per year

41
Market - The Value Chain
THE TRADITIONAL VALUE CHAIN
Script Idea
First Draft
S C R E E N I N G
S C R E E N I N G
Collaboration
FINAL PRODUCTION Large investment, taken to
audiences with sets costumes, cast etc.
Producing Presenting Organisations (John
Frost, MTC)
Developmental Workshop Process Producer Funded.
(repeated many times)
Review Cycle
REJECTION
REJECTION
PHASE C
PHASE A
PHASE B
Eight Weeks Rehearsal Many months Pre-production
Nine Months to Three Years
Nine to Eighteen Months
COMPANY INVERSE VALUE-ADDING ACTIVITIES
42
Market - The Value Chain (cont)
For Phase A of the Value Chain

Market Gaps identified in Phase A of the
Tradition Value Chain are

Little matching of Industry needs with writer
activity.
Little return / investment to skill development.
No focal point or support system.
Works not completed as no financial support at
early stage.

Fitting the Gaps and Value Adding of Company
Inverse are by

Investment in skill development (ASCAP, Ferrier
Programs).
Linking Artists to the Market.
Seeding Projects.
Servicing of script ideas to meet market needs.
Providing network and information exchange.
Advocating cultural necessity of Australian
Musical Theatre.
Opening new stakeholders in Aust MT
(non-commercial funders).

43
Market - The Value Chain (cont)
For Phase B of the Value Chain

Market Gaps identified in Phase B of the
Tradition Value Chain are

Reject Rate too high.
Evaluation and development very financial, labour
and skill intensive.
Focussed solely on commercial (not cultural
needs).
Process repeated by each individual Producer.

Fitting the Gaps and Value Adding of Company
Inverse are by

Creating a sellers market, by establishing a
one-stop shop.
Creating economy of Scale - focus to produce
critical mass.
Identifying Centralised skill base for evaluation
and development.
Packaging and marketing finished works to
appropriate producers.

44
Market - The Value Chain (cont)
For Phase C of the Value Chain

Market Gaps indentified in Phase C of the
Tradition Value Chain are

Simpler to import rather than invest in
Australian Product.
The scale of projects needed to generate a
profit.

Fitting the Gaps and Value Adding of Company
Inverse are by

Providing full production for audiences that
otherwise may not have access to Musical Theatre.

45
Market Entry
Market Entry Strategy

Identify target key producers, presenters,
funding bodies - both government non
government, venues and presenting venues, and
sponsors.
Identify key date for launch of company. Must
fall prior to opening of next major musical in
Melbourne - November 2000.
Launch company with media driven campaign
spanning four weeks, so as to heighten
expectation and develop curiosity.
Together with launching kit, provide mission
statement, strategy, major activities, values and
role to be filled within the industry.
Launch company in 2 stages, a media announcement
launch followed by an afternoon of discussions,
networking and Q A.

46
CHECKPOINT!

Do we have sufficient market (rather than
product) focus to support the venture? Yes,
there appears to be identifiable market gaps for
which Company Inverse can provide significant
value.

47
CHECKPOINT!

Do we have enough experience to tackle this
venture? Yes, Kris Stewart and his team have
much hands-on experience with the successful
production and presentation of musical theatre
events. Kris is a multi-award winning director
for his work in new musicals (1997 Emerging
director Prize, 2000 Murdoch Prize, 2001
Churchill Fellowship) and is widely respected as
a leader within the industry, as is attested in
the letters of support for this project and an
article on Kris from Feedback, the Musical
Theatre and Cabaret Industry Journal. He has
obtained an in-principle commitment from Sam
Schwarz to work as General Manager, and Sam has
many years of experience across Musical Theatre,
including currently working as Major Events
Manager for the Australian Entertainment Industry
Association (AEIA).

48
Competitive Advantage Issues

Company Inverse will generate competitive
advantage through having the following
attributes

Providing the only one-stop-shop for
collaboration, networking and workshopping of
Australian musical theatre for production and
presentation.
The people resources available now to create
strong leadership in the industry.
Strong contacts and networks in the musical
theatre industry to influence the channels of
distribution.

The following issues need to be addressed in
managing the financial return on investment

Product produces a limited commercial return.
Limited opportunity for premium pricing.
Good control over expenses, but sustainability
dependent upon obtaining ongoing commitment from
sponsors.

49
Competitive Advantage Issues (cont)

Fixed And Variable Costs

It is of great benefit in a business start up to
have a low ratio of fixed to variable costs. For
2000/01, Company Inverse projects the following
position

Fixed Costs
Office Fitout 31,900
Total 31,900

Variable Costs
Project Costs 220,000
Sponsorships/Administration 83,000
Artistic/Project Development 73,440
Publicity 45,000
Total 421,440

50
CHECKPOINT!

Do we have sufficient competitive advantage?
Although there appears to be some weaknesses in
the degree of control over the financial return
for this investment, the overall conclusion is
that Company Inverse will have sufficient
competitive advantage to underpin the success of
this venture through the use of

The one-stop shop approach
Its people
Its contacts

51
Management Team Issues
Entrepreneurial Team

Key team members in Kris Stewart and Sam Schwarz
have a successful track record in the production
and presentation of musical theatre and have an
extensive network of contacts, including
potential sponsors. Kris has worked across
Australias subsidized and commercial theatre
organizations, while Sam has had daily contact
with our potential customers while at AEIA, and
has put together the sponsorship for the Helmann
Awards, amongst other projects.
Kris Stewart and Sam Schwarz have been involved
in the successful start up of other businesses
including Particular Productions and the South
Australian Youth Theatre Company.
Kris Stewart has clear understanding of the
requirements of the management team and has
selected strong candidates for the positions of
Artistic Director (Kris), General Manager (Sam
Schwarz) and Communications Director (to be
assigned)

52
Management Team Issues (cont)
The Board

A sample of people who have stated an interest in
joining the Board include John Frost, Ann Tonks
(MTC), Tim Jacobs and Milos Melandinovis (VAC),
David Penfold (Managing Director of Mike Walshs
theatre interests) and Sue Nattrass.

53
CHECKPOINT!

Do we have or can we get the right team?

Yes, one of the key strengths of this venture is
the composition of the management team and the
potential strength of the Board that can be
assembled by Kris Stewart.
?
54
2 Year Program of Events
55
SWOT Analysis

Strengths (Internal Focus)

Management team and potential Board structure.
Strong network of good contacts.
Relatively low fixed costs.
Stonnington City Council support.
Strong musical theatre industry support.
Sponsorship and letters of endorsement.
Creating a cultural asset.
Product development can be tailored to meet
client needs.

56
SWOT Analysis (cont)

Weaknesses (Internal Focus)

Associated Strategies

Limited commercial returns

Company is a not-for-profit organisation and is
structured with a low fixed cost to variable cost
ratio

Reliance on sponsor support

Identify target key sponsors for the industry

Capacity to service sponsor needs

Carry out structured survey of sponsor needs to
ensure that the product delivered is of value to
them

Potential to stray from core business

Clearly articulate business milestones and
regularly monitor activity against milestones

Ensure that focus of the team remains on the
business milestones

Time and resources may be stretched given the
national / international vision

Company fixed costs kept low and variable costs
tailored to meet development and establishment
period

Product lead time

Completely new business

Focus on business plan and sponsors

57
SWOT Analysis (cont)

Opportunities (External Focus)

Can lever up from existing good international
business models.
No other Australian company is providing the same
service.
Sharing of risk amongst current producers and
presenters.
Melbournes strong cultural positioning.
Australia is becoming more prominent /
fashionable globally.
Current Government commitment to regional
Australia.

58
SWOT Analysis (cont)

Threats (External Focus)

Associated Strategies

Vigorously carry out the advocacy role in the
promotion of the cultural necessity of Australian
product

Fickle / volatile arts / personality industry
Fickle / public / media environment
Public and government apathy to the arts
Public and government apathy to Australian
product
Foreign musical theatre product

Crowded arts market place
Other forms of entertainment

Create and implement a marketing plan to promote
the benefits of Australian product over other
forms of entertainment

Quickly seize the high ground through an
aggressive corporate positioning strategy

Someone else could seize the window of opportunity

Limited corporate support for arts

Identify and target key corporate citizens for
financial and other support

Prepare Opportunity Evaluation and detailed
Business Plan to demonstrate the market potential
and sustainability of the new business venture

Stonnington City Council political environment

59
Financial Objectives

Company Inverse is structured to be a small (lt1m
turnover a year) not-for-profit company which
will have national and international cultural
impact. At year one, the weight of financial
support for the company will rest with early
stakeholders (Stonnington City Council and
Industry Partners, which includes producers,
venues, ticketing agencies etc). As the Advocacy
element of the company consolidates and the
companys activities get widely known, the weight
of financial support will diversify to include
other government and philanthropic bodies, and
expand to include potential royalty and
publishing revenues. It is always intended that
Company Inverse always remain at its initial
scale and level of independence.
By end of September 2000, it is expected that
commitment to 80 of the first years sponsorship
requirement (outside of SCC) of 330,000 will be
obtained, namely 265,000.
In line with its not-for-profit company approach,
Kris Stewart and Sam Schwarz will manage the new
venture in accordance with the following
financial charter
No financial commitments will be made that put
the company into negative cashflow
Stonnington City Council will not be put into a
financially liable situation outside of the
initial seed funding commitment
Although remuneration for Kris and Sam will be
tailored to suit cashflow, they will put in
maximum effort to ensure the success of the new
venture (their remuneration will be tailored to
about 25 of the major sponsorship dollar
commitment for each year)

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Company Inverse 3 Year Financial Summary
61
Economic and Harvest Issues

Financial Analysis Sensitivity -
Sponsorship funds are reduced by 50 - By
keeping fixed costs low, Company Inverse has
high potential to tailor its expenditure to suit
the income/sponsorship levels actually achieved.
In this case, it is forseen that the Company
would reduce its level of activity (particularly
international), return to its stakeholders to
explore the possibility of adapting each
projects cost structure, and focus on core
advocacy activity. If this happened in year 2,
then 250,000 of projected expenditure would be
saved by cutting out the international program
(60,000), reducing salaries (60,000) and (what
else??)
Job Costs increase by 10 - If the Project Cost
budget blows out by 10, then the 27,000 would
be saved by reduction in the international
program (???) and reducing salaries (???)

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Economic and Harvest Issues (cont) (Kris to redo)

Exit Strategies
SCENARIO A Business proves to be sustainable in
2 years time but shareholders want to exit
Company Inverse
SCENARIO B Business proves to be unsustainable
in 2 years time (Kris to provide dot point
response in terms of the exit strategy for
Company Inverse. Need to assess impact on SCC,
sponsors, disposal of fixed cost)

Lets presume that by shareholders we mean
stakeholders. The fundamental activity must be
proving the cultural benefits brought by Company
Inverses existence. Stakeholders willing to
exit could be - THE FOUNDING PARTNERS who have
been the skill base and in this case there would
be an attempt to replace them CITY OF
STONNINGTON not wanting to continue to support
the company and in this case the company would be
moved and housed elsewhere - Im assuming that if
the business is sustainable sponsors dont want
to exit. If the business proves to be
unsustainable but has had a positive cultural
impact then it would be perceived that the City
of Stonnington has had a successful return on
their investment. We are assuming fixed costs
are manageable, then the company has the ability
to liquify its intellectual property assets, such
as the publishing rights to the musicals that it
has originated.
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Are our financial objectives being met? Yes,
given the commitment of Kris and Sam to tailor
expenditure to suit the income stream,
particularly income from major sponsors.
Is cashflow a problem? Cashflow may be a problem
if the sponsorship funding targets move out
beyond the milestone dates, therefore close
attention will be made by the General Manager to
ensure sponsorship targets are met.

CHECKPOINT!
?
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Major Assumptions Risks

Assumptions about Sponsors
Sponsors form an integral element of the success
of Company Inverse
Sponsors approached to date - Millmaine
Entertainment, Ticketmaster, QANTAS, Holden,
State Government of Victoria, Federal Government,
McPherson Promotions, Marriner Theatres David
Marriner, Telstra, Optus, and Vodafone. Second
stage meetings are being currently held with
Ticketmaster, Millmaine Entertainment, QANTAS
McPherson Promotions.
Expect a three month period of negotiations to
gain initial sponsorship commitment from seven
companies, each to the value of 50,000. An
eventual list of more than thirty companies will
be approached during this time. Based on current
feedback, there is a positive expectation Company
Inverse initial sponsorship goals will be met.
Letters of support can be provided by
Ticketmaster, McPherson Promotions, Millmaine
Entertainment, John Frost (GFO) and Sue Nattrass.
Value to be gained via sponsorship - The big
ticket item is product. Ultimately all companies
listed above stand to gain form increased product
in the market, from more entertainment
advertising (Millmaine Entertainment), to ticket
sales and support for new Australian musicals is
highly desirable to a company such as
Ticketmaster. All companies - apart from
government - stand to gain in both the direct,
and indirect (tourism) aspect of Company Inverse.
Government agencies are waiting to be associated
with new home grown product in the musical
theatre genre, something that has been very rare
to date.

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Major Assumptions Risks (cont)
Assumptions Risks
Associated Strategies

Carry out a structured survey to identify sponsor
needs and how Company Inverse can provide ongoing
value

One of the main risks relates to the following
assumptions about sponsors

attract appropriate and timing
meet sponsorship needs
provide ongoing value to sponsors

Expenditure of company to be tailored to suit
level of sponsorship contributions

remuneration of the management team to be
benchmarked against the sponsorship target
being achieved
prior to formal start up, formal commitments from
sponsors are to be obtained

Another risk relating to the following
assumptions about the market

strong advocacy will help overcome fickleness,
public and government apathy and strong
competition from alternative forms of
entertainment
creative industry professionals, producers and
promoters will accept the product offer and want
to use the resources of Company Inverse

Grab the high ground and vigorously promote the
cultural necessity of Australian Product

Identify and target key user groups to ensure
product / offer is tailored to suit needs

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Fatal Flaws / Issues
The major assumptions and risks associated with
the ongoing success of Company Inverse, and
associated strategies to manage these risks are
clearly identified in the previous sections.
The highest risk associated with this venture is
its high reliance on gaining adequate sponsorship
and government funding. Although strategies are
in place to identify sponsor needs, the bottom
line is that full commitment to this project
cannot be made until substantial ongoing major
sponsor commitment is formally obtained the
target here should be 265,000, being 80 of the
first years sponsorship requirement of 330,000.
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Conclusions

The Positives associated with Company Inverse
are
The business opportunity can be clearly defined
in terms of the products and services that can be
provided to the Australian musical theatre
industry
The potential customer base is large (3.3m
attendees in 1996, surpassing pop-music)
There are clearly identifiable gaps in the
Australian musical theatre market which can be
filled by the products and services offered
The company will have sufficient competitive
advantage through use of the one-stop-shop
approach, its people and its networks
Kris Stewart is able to assemble a strong
management team, with high respect in the musical
theatre industry, as well as a strong Board to
give it strong credibility
Low ratio of fixed to variable costs means that
expenditure is more easily tailored to suit
actual income streams achieved
Association with the establishment of the new
musical theatre company will bring social and
cultural benefit to the Stonnington City Council
and its community

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Conclusions (cont)

The main risks to success for Company Inverse
are
High reliance on sponsorship and government
funding
Low commercial returns due to low growth rates
and low gross margins
High reliance on the skills, contacts and ongoing
commitment of Kris Stewart and Sam Schwarz
For Stonnington City Council, if Company Inverse
is not a success
Social and cultural benefits will not be
delivered as expected
Negative coverage can result from association
with failure
Stonnington City Council may feel compelled to
take care of any outstanding financial matters

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Recommendations
Although the Opportunity Evaluation supports the
view that there are very many good indicators for
success for the establishment of Company Inverse,
there are correspondingly a couple of risks that
need to be mitigated before Stonnington City
Council should provide full commitment to this
project. We therefore recommend that a two stage
approval process be adopted

Stage 1 Stonnington City Council commits now to
provide
Stage 1 seeding grant of 30,000 to commence
company operations and prepare a Business Plan
Fitted-out office space for three workers at
Prahran Town Hall for a 6 month probationary
period
Kris Stewart and Sam Schwarz provide Stonnington
City Council with personal guarantees that
should Stonnington City Council decide to provide
full commitment to supporting Company Inverse
that they will remain committed to the project
for at least 3 years, and will leave the Council
with no financial liabilities

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Recommendations (cont)

Stage 2 On the basis that within 6 months
a detailed Business Plan has been prepared and
the outcome supports the sustainability of
Company Inverse, and
Company Inverse has obtained formal commitment
from major sponsors to at least 265,000 for the
first year of operations, plus 175,000 for each
of the next 2 years, then

Stonnington City Council would commit to provide

Stage 2 seeding grant of 70,000 to continue
company operations for the balance of the first
year
Fitted-out office space for three workers at
Prahran Town Hall for a guaranteed period of 3
years
Provide strong public support for the
establishment of Company Inverse at the time of
the public launch

ATTACHMENT A
OPPORTUNITY SCREENING BENEFITS

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Why Screen?

Makes you ask the hard questions
Quickly shows whether theres an opportunity
Technique is not new
Approach used by Venture Capitalists
A practical technique THAT WORKS
Takes a fraction of time cost of a business
plan
If screening is positive, you can proceed to
business planning with confidence
Work isnt wasted business plan is half written
(if decision is made as a result of the screen to
prepare a detailed Business Plan).