Introduction
This study examines the complex strategic dilemma faced by Portsmouth City Council, in its popular bid to save its two landmark Grade II listed theatres. This complex journey continues to involve a diverse range of stakeholders, the majority of which are highly attached to Portsmouth’s theatre heritage. The ‘Two Theatres for Portsmouth Project’ was clearly hugely challenging from the outset and was hampered by lack of effective strategic planning, limited funding, changing consumer trends and its ever developing, successful competitors. The project has taken the council into conflict with stakeholders as well as into significant debt and the future of Portsmouth’s beloved theatres is arguably no more certain than when the dilemma began in 1999.

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Strategy Overview
In 1999, due to changing consumer behaviour trends and increased competition for Portsmouth’s live theatre industry, Portsmouth Council developed its ‘Two Theatres in Portsmouth Strategy’. The project budget was to be stretched across two different theatres, offering quite different entertainment products and targeted at different audiences. Originally this strategy aimed to fill an ambitious 2,000 seats per week, all year round.
Strategy elements:

Kings Theatre – 1,500 seating capacity Focus on major popular entertainment products including for example musicals and major UK touring productions. Set up as a non-profit theatre trust in 2001, this theatre was managed by the company ‘Kings Theatre Southsea Limited’ until its bankruptcy in 2003

The New Theatre Royal – 500 seat capacity Focus on smaller commercial productions such as experimental drama. Theatre also managed by ‘Kings Theatre Southsea Limited’

Funding for the project was a seriously contentious issue from the outset. It focused on possible grants from The Heritage Lottery Fund and The Arts Council of England. Although worth millions, these grants would not cover the further estimated £4 million required for essentials such as putting disabled access in place and installing new lighting systems. These significant costs would need to be met by Portsmouth City Council. It is important to note that although The Arts Council did agree to provide grants amounting to several million pounds for this stage of the project, no money was actually released.
From the case study evidence, it seems unlikely that Portsmouth Council would ever have been able to meet its financial commitments to the two theatres project. For example, its leisure budget was already under heavy pressure from existing approved projects including a new swimming pool and the City museum. These initiatives represented an expenditure of £13 million over five years. Ultimately such financial pressures would put the two theatres project in danger.
Little consideration seems to have been given to how the two ailing theatres were going to attract sufficient audiences in order to secure viability. For example, no specific market audiences were targeted; instead hopes were pinned on Portsmouth’s existing core group of loyal theatre goers. From the outset, key players in the project recognised this group was insufficient to fulfil commercial needs or to enable the two theatre strategy to become sustainable and profitable. Nevertheless, the problem was not tackled.
The initial two theatres strategy positioned The King’s Theatre as Portsmouth’s main commercial theatre, which would attract major touring companies and bring in the most revenue possible. This aim was unrealistic as the theatre was unable to cater for such touring companies as its facilities were so out of date and insufficient – it was therefore unable to fulfil its basic purpose. Furthermore, two of The King’s Theatre’s nearby competitors (Mayflower in Southampton, Festival Theatre in Chichester) were already able to attract such artists with vastly superior facilities, which did not need heavy investment. It can therefore be argued that even a renovated, updated King’s Theatre would be unable to compete with key local rivals.
It was doubtful that the Portsmouth strategic plan was ever going to break even with the city subsidy of only £135,000 per year. It is important to note that a quarter of this annual subsidy could be risked in one week alone, through the practice of offering guaranteed revenues to attract large scale productions to The King’s Theatre. Although officially no direct explication was given, the offering of such risky guarantees was one of the most likely factors behind the bankruptcy suffered by the limited operating company in March 2003. Other additional factors included the consistent inability to reach the audience capacity target of 70% as well as management’s lack of financial control of the project.
Eventually the Council was forced to consider making a complete U-turn and pull away from its original two theatres strategy altogether, with its new plan to sell off The King’s Theatre and direct its limited funds towards The New Theatre Royal. This plan would commit the Council to a more manageable annual subsidy of £130,000 per year to be backed up with ‘other’ significant funding which remained to be confirmed. However, ultimately this plan was rejected and the Council voted to keep both theatres going under subsidy, for a further three years.
2008 Situation
After major interior restoration work, funded by the Council and a separate restoration appeal, The King’s Theatre reopened and enjoyed a well-supported programme of live theatre. The New Theatre Royal is also doing relatively well although it has suffered staffing issues.
The Portsmouth Theatre Dilemma in detail
Pestle Analysis
Political factors

Portsmouth’s theatres are run by the local city Council but are operated within limits and guidelines as defined by national government

The Council is run by Councillors, who are elected local politicians. The Council has some element of choice in managing its arts provision including how it allocates its limited budget for such activities

The threat of closure for The King’s theatre became a major political pressure for the city Council

The Council was hung and there was little enthusiasm from councillors, to take locally unpopular decisions to, for example, close the King’s Theatre

Economic factors

Portsmouth City Council has an annual budget of £200 million from which to draw funds for supporting its arts activities such as the theatres

Insufficient restrictive funding for the modernisation of the two theatres was provided by for example, The Heritage Lottery Fund. Portsmouth Council and its citizens were also required to raise a further £4 million, in order to top up grants

Portsmouth is a major tourist venue supported by major employers including IBM and its European HQ

In the past, arts activities including live theatre, have been underfunded in Portsmouth

Sociological factors

The total population of Portsmouth is over 170,000

In line with general UK trends, the public are consistently turning away from live theatre in favour of more ‘fun’ entertainment options including nightclubbing

The spread of mass car ownership opened up the competition to include other theatres and rival venues from outside Portsmouth

Technological factors

To become competitive, significant investment in updated operational technology is needed by both theatres

The New Theatre Royal was partly destroyed by fire and so has extremely limited operational facilities. For example, the theatre is unable to accommodate even basic large scale scenery.

Legal factors

Both theatres remain at least partly un-modernised and out of date and could therefore arguably fall short of legal requirements such as current health and safety measures etc.

Bankruptcy of the theatres management company in 2001, threw doubt on the entire viability of the two theatres project

Environmental factors

Porter’s Five Forces
Degree of rivalry

According to The Arts Council for England, Portsmouth’s two major theatres did not appeal to the specialist niche markets which it needed to reach, in order to become viable. Key rival theatres and other venues within reach of the city were far better positioned to fulfil the needs of these markets.

Portsmouth city itself provides fierce competition for its theatres, these rivals include numerous comedy and night clubs, sporting venues and The Guildhall Concert Hall

Supplier power

The Arts Council for England, a major funder of the arts provision in Portsmouth, did not agree with the ‘Two theatres for Portsmouth’ strategy from the outset. Funding and support for the project was therefore difficult to obtain

Threat of substitutes

Buyer power

With the advent of mass car ownership and the trend towards more accessible ‘fun’ pastimes, live theatre still finds it challenging to compete and attract audiences. Customers now have far more choice as to how, where and when to spend their money on live entertainment.

Barriers to entry

Funding for the two theatres project was stretched from the outset and so it can be argued that the project was always going to be financially fragile

On top of initial investments on acquisition of the theatres, Portsmouth Council also initially needed to raise around £4 million to top up possible funding grants for its project

Experts in the field of arts development such as The Arts Council for England predicted that the theatre market would be particularly tough for Portsmouth and that niche target marketing would be needed for strategic success. This advice seems to have been ignored by the theatre management in Portsmouth.

SWOT Analysis
Strengths

Although much diminished since its heyday n the 1950’s, Portsmouth still has a devoted live theatre audience

Both theatres are historically much loved, Grade II listed arts venues

Weaknesses

The King’s Theatre was re-launched in 2001 but its subsidiary commercial operating company was unsuccessful and became bankrupt only 2 years later

Portsmouth’s loyal live theatre audience still exists but is much diminished and is not sufficient to fill the 2,000 seats needed each week, for the ‘Two Theatres for Portsmouth’ strategy to be financially viable and sustainable

The flagship King’s Theatre, although an impressive Grade II listed building is poorly located, away from the city centre, with inadequate parking facilities

Portsmouth’s two theatres were unable to compete on ticket price with key rival theatres. For example, King’s tickets sold for up to £10 each with Southampton and Chichester theatres averaging a ticket price of up to £14.

The Portsmouth population’s interest in live theatre has clearly dwindled over time. For example in 1950, the city boasted four live theatres which were so popular that they were full every performance night. By the end of 1990’s only two major theatres remained plus a smaller arts theatre which was relocated in 2003 due to lack of funding.

Opportunities

Portsmouth’s ‘ two theatres strategy’ has the public’s backing

Leading decision makers such as former Council leader Frank Worley, publicly recognised that Portsmouth is a city with cultural ambitions and thus a desire to support cultural activities (such as live theatre)

Threats

Both theatres require substantial investment in order to modernise them and to enable them to compete with successful rivals such as The Mayflower Theatre in nearby Southampton. For example, The King’s Theatre initially required an investment of up to £13 million and The New Theatre Royal required £5 million.

Key competitors include the large, modern and well located city centre theatres based in nearby Southampton and Chichester as well as popular local town venues and numerous Portsmouth based rival live entertainment venues

The development of mass car ownership has enabled once faithful Portsmouth theatre goers, to travel to competing theatres

Other forms of entertainment have become more fashionable than live theatre – these include television as well as nightclubbing. The trend for more ‘serious’ entertainment as offered by live theatre, including opera, drama and ballet, are on a continual downward spiral.

Following bankruptcy in 2003, The King’s Theatre still carried over £200,000 of debt

Councillors are elected politicians which can arguably be swayed by vote winning policies rather than by purely altruistic objectives, such as keeping theatre alive in Portsmouth

An Arts Council for England study argued against the two theatre policy from the outset, claiming that there was simply not enough customer demand to support two theatres in the town. The Arts Council wanted Portsmouth to focus its resources on the smaller New Theatre Royal which was in a stronger city centre location.

Ultimately lack of funds could force the sale of the well-loved King’s Theatre, to a brewery chain

Conclusion
Portsmouth Council’s two theatre strategy seems to have been doomed from the start. It is clear from the case study evidence that the strategy was financially unsound with wholly insufficient funding. Expert advice was ignored by the theatre’s management and obvious strategic measures, such as targeting niche audience markets and putting together a strategy to compete effectively with stiff growing competition, were left un-tackled. The strategic mismanagement of the project forced Portsmouth City Council to make two entire strategic U-turns in the space of only four years. Although both theatres are currently operating, it is clear that they still face an uncertain future.