Strippers or Exchange Memberships
- Posted by Jeff Carter
- on July 14th, 2010
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For a familiar sounding case study under the title:
“STRIPPERS LAW” by Atlantis Consigliore
…..Once upon a time, in a free market low tax economy far, far away, a Chicago investor group looked to buy a profitable business; high cash flow, high-margin, secure markets, that was offered in bankruptcy. You see the Government, by regulation, put it out of business, first. The Industry platform existed in Las Vegas, as a model industry as a high margin, good employer, successful business, and profitable working platform for years, but changes occurred overnight, that were political, and the regulatory payback, put it under.
The Club available paid for its captive order flow (payment by order flow, clients) by directing payment by the doormen, in cash, payable to the cab drivers (a dedicated pipeline). The orders, who were picked up at hotels, were “high rollers”, ID’d at the Casinos, to visit the clubs. Many moved out from waiting in long, slow, non- VIP waiting lines, for cabs, by paying faster access fees, for entry to the Clubs through special Member Portals. (higher usage guaranteed faster access/special VIP entry.)
The Casinos, losing gambling clients and VIP action, to the Clubs, likewise retaliated getting higher access fees for high speed (nascent) VIP entry lines for their version of the club, ‘preferred quicker access to entry’ for the high roller promising better action.
The Club, getting a revenue stream of $ 25 million a year, wanted client flow through the cab pipeline, once the order was in the cab pipeline, the customer was ‘on order’ in the pipeline up for bid by Clubs fighting over the Cab in the pipeline radioing his customers description and putting them up for bid.
The Casinos, seeing their high rollers pick up and moved by Cab, door to door, resented ‘the action’ moving to the clubs, so they implemented restrictions and slowdowns on Cab Stands, with much slower lines, and delays of ½ hour to 45 minutes, picking up their clients.
So the Clubs and Cabs moved to Limos, weeding out the low margin riders, for higher margin, high rollers in bundled orders, who would get VIP for attending the clubs, sending limos to pick up groups of 4 – 6 at once. $ 250 bucks a delivery and special VIP order arrangements speed entry and special seating.
The rates for orders in the cab Pipeline moved up from $ 20 to $ 40 to $ 60 per customer to ‘market,’ and the order flow to the club was controlled now, by threat and intimidation, by the cab drivers. Their pipeline moved product “client to the door” delivery. Cash flow and profit, moved from the Club to the Cab Company, which now directed the client flow, to the club.
The economic model changed to a pipeline access model with a fee for carry, fee for volume, incentive fee for size of the order, and frequency of customers brought to each Club bidding for orders.
The Cab drivers “associations” cost some clubs monthly, as much as their total cash flow, of over $ 1 million a month per club. The cash flow model of the club was changed forever.
The order flow was paid for entry at the door (reimbursed by the entertainer’s first lap dance) and a new pipeline model (cash flow and pricing,) passed from the club owners to the cab drivers.
“Cab Wars” broke out as cab operators and Cab company owners, became more militant, and more business savvy, playing one club off against the other, choking off revenue on one night favoring one club over another, and if a club protested, or tried to break the pipeline, banded together in a Pipeline Syndicate, redirecting order flow as a Cartel.
One large Club saw the handwriting on the wall, and even considered buying the model of “buying the cab pipeline entirely,” and providing captive access, and paying itself $ 100 per client at the door, and generated $ 2 million per month, cash flow by getting control of its own fleet of cabs.
It raised prices for its pipeline, as an exclusive delivery vehicle for pipeline order flow delivery to its own club’s front door.
The local Airline Carriers saw this economic market place battle played out and reported daily in the media, and sensing a new pricing model opportunity, limited air landings and raised prices on air travel in and out of Las Vegas on the hotels, and forced hotel rooms to discount heavily their pricing and by buying blocks of rooms, to get customers into package deals, shifting profit to the Airline Pipeline Model.
The Pipeline Model, once providing order flow, was establishing a change in the business model, by being the pipeline of delivery and its owner monetizing revenue, to the bottom line.
The other clubs seeing this new business model achieved by “owning the cab delivery system,” scrambled to buy up the remaining cab medallions left and copy the revenue model.
The Cab license regulator and local government immediately moved to “study the problem”, consider how to reregulate the cab medallions to assure fair access to order flow, and the VIP line passes to determine whether it was “ fair or not” to the customer wanting equal and fair faster access to the lap dance by waiting in line and willing to pay for it, first come first served.
Such a “change” in a business model supplying a commodity of order flows, in a Pipeline Model, could only happen in Las Vegas Strip Clubs, or Airline flights (limited supply) over hotel rooms (commodities in oversupply)
Where else would a pipeline model work? Check out my charts.
by Atlantis Consigliore
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Jeffrey Carter is an angel investor and independent trader. He specializes in turning concepts into profits. He co-founded Hyde Park Angels one of the most active angel groups in the United States in April of 2007. He previously served on the Chicago Mercantile Exchange Board of Directors. He has done market commentary for (More...)