The Strategist

Sun King and his Circus: Cirque du Soleil's Story of Success

04/28/2015 - 15:16

Guy Laliberte made his fortune up to $ 1.9 billion, having built the world-famous Cirque du Soleil. After '31, he sold 90% of the company for $ 1.5 billion, and he decided to focus on his children and charity.

In April, Cirque du Soleil - one of the world's most famous theatrical circus operators - announced going under the control of the new owners: the American investment firm TPG (now it owns 60%), China's Fosun International (20%) and a Canadian pension fund Caisse de dépôt et placement du Québec (10%). According to media reports, the deal is worth about $ 1.5 billion (official amount was not disclosed). The founder of Cirque du Soleil  - 55-year-old eccentric Canadian billionaire Guy Laliberte - will get 10% of the company.

How to begin to receive such income just in twenty years, when the rest managed to achieve it only after about a hundred of years? The history of Cirque du Soleil Company is a superb example of how a young company was able to outflank the world champions circus industry such as Ringling Bros and Barnum & Bailey in less than twenty years on the highly competitive falling market.

Circus, notes New York Times, is only the third passion of Guy Laliberte. The second is traveling, but the first place takes the business. From the very beginning, Laliberte himself engaged in raising funds for the development of the company. In 1984, he knocks out of the Province of Quebec funding of $ 1.3 million to conduct celebrations of the 450th anniversary of the discovery of Canada, wrote The New York Times. Thus, Cirque du Soleil was born, even thought the company itself trained in a rented sports hall at that time.

The first show has brought a very small profit - $ 40 thousand. And after the second season, the company found itself on the verge of bankruptcy. But the public liked Laliberte’s brainchild, and it gradually became perceived as a national treasure, and the authorities once again started supporting the company.

Cirque du Soleil has made one very important lesson - to always win in the future, it is enough to stop competing with each other. The only correct way to beat the competition - is to throw away attempts to win. No wonder that now Cirque du Soleil’s Story Success is presented in business schools courses as an example of Blue Ocean Strategy (‘blue ocean’ as a metaphor for a new, free niche in the market as opposed to the market with a competitive environment already created - a ‘red ocean’).

And the first thing that Cirque du Soleil had made, was stopping paying attention to the activities of their competitors. Rather than follow the traditional methods and deal with competitors, the company has concentrated on creating a more fun and exciting circus.
Other circuses mostly paid attention to show with animals, but famous circus performers were invited for shows. Also, at the same time, multiple views on three arenas were shown. Renting places for trading during the performances was a common practice too.
At the same time, Cirque du Soleil arranged the performances without all of it. Having turned to spectators’ opinions, the company found that circus numbers with animals increasingly raised dissatisfaction and discomfort of the public. The so-called "stars" of the circus, compared with movie stars in the minds of the audience, were very small. A presentation on the three arenas create unnecessary stress because of the constant looking from one place to another. In addition, high prices and vendors between the rows of spectators kept the public away from purchases and gave rise to a feeling of being deceived.
Cirque du Soleil kept the clowns, giving their humor a shade more thin and light. The company brought back the classic symbol of the circus - tent, suggesting the idea of ​​magic and great legendary circuses. Acrobatics began to resemble theatrical action, and every performance had the theme and storyline. Unlike other circus companies, Cirque du Soleil has also introduced an artistic music and dance in a variety of productions, thereby reminding theatrical performances of Broadway shows.
Cirque du Soleil has been able to combine all the best of circus and theater in one, and all unnecessary items has been reduced to zero.
At the same time, giving up the cost of buying, maintenance, housing, insurance and transportation of animals by reducing the number of participants representations, the company dramatically reduce their costs.
Then, Cirque du Soleil has made a decisive strategic step - brought the level of prices for their tickets to theater costs level. This ticket price is several times higher than the cost of a standard ticket circus industry. But the calculation was made for adult viewers who are accustomed to the price of theater tickets, and visitors began to throng Cirque du Soleil.
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However, in 2012 the company ran into financial difficulties. In spite of the billionth revenue, it left without profit, and in 2013 the turnover decreased to $ 850 million. Laliberte itself call excessive expansion as one of the reasons for the decline in revenue: Cirque du Soleil began to put shows way too expensive, which were paid off too slowly. As part of the restructuring, Laliberte had to cut 400 employees. At some point the number of the circus’ staff reached 5 thousand man, but now there only 4 thousand left.
In the end, the Montreal circus group Cirque du Soleil (CdS) was acquired by investment firm TPG and China's Fosun Capital Group; the bargain was ended at the beginning of April this year.

The transaction amount is not specified, however, according to the Canadian and American press, it is about $ 1.5 billion. All other terms of the transaction are known and even widely advertised by the circus group itself and its founder Guy Laliberte. According to Mr. Laliberte, TPG (formerly known as Texas Pacific Group) will own 60% of the company, China's Fosun - 20%, still about 10% will be of Mr. Laliberte himself, and fund ‘Caisse de depot et placement du Quebec’, managing public pension funds of the province, is getting 10% as well.
"Hierarchy in Cirque Du Soleil is stricter than in a bank or a pharmacy, though at first glance everyone is very relaxed"

Selling CdS, Mr. Laliberte also bargained very special conditions for themselves and troupe. He himself, being a shareholder of the company, will become a creative and strategic advisor to the company. In addition, he received assurances from the buyers that the entire leadership of CdS, including President and CEO Daniel Lamarre, will remain in place, and the headquarters of the company will still be located in Montreal.

based on materials of Wall Street Journal, Reuters, New York Times