Friday, April 13, 2012

Is Variable Pricing Coming for Movies?

LA Times -- "It's time for studios and the cinema industry to stop charging the same price to see any movie any day of the week, a media industry analyst said in a strongly worded research note Friday.

"Movie exhibitors are operating with the largest amount of excess capacity of any industry we could find in the free world," wrote Todd Juenger, a senior analyst at Bernstein Research. Nearly 93% of theater seats go unfilled, he said, including 99% between Monday and Thursday.

Over the years, many industry players and observers have called for "variable pricing" for movies. The basic idea is that the more popular films should cost more to see, while those that don't pack theaters would get a discount. But theater owners and studios have resisted, in large part because they are concerned about the negative perceptions that would come from some new offerings costing less to see than others.

Juenger noted that everything from airplane tickets to hotel rooms and even DVDs at Wal-Mart have some degree of variable pricing. "The only industry we could think of that is remotely similar to movies in terms of flat pricing with big spikes in utilization is fast-food," he observed."


30 Comments:

At 4/13/2012 4:02 PM, Blogger Jon Murphy said...

I like this idea. I've not gone to a movie in over two years simply because it's too expensive. Hopefully this will change things.

 
At 4/13/2012 4:24 PM, Blogger NOTR said...

If Dr. Perry is a Keynesian he likely would support means testing for those who want to go see that movie too. If from the Austrian School, then more likely he would support letting the owner, not the studio/distributor make that decision on the pricing.

 
At 4/13/2012 5:04 PM, Blogger Oak said...

I'd much prefer a federal mandatory minimum pricing per ticket, DVD, or internet viewing. Along with a new federal film rating agency rather than the MPAA. Then the entertainment people could get a taste of what that does to industries.

 
At 4/13/2012 5:16 PM, Blogger Oak said...

I forgot to include Congressional hearings on the disparity in pay between A list actors and the interns and other common workers who work on the films.

 
At 4/13/2012 5:24 PM, Blogger juandos said...

Why go to the movie theater now a days when for a few grand you can have better and more flexible home theater equipment in your domicile?

 
At 4/13/2012 5:43 PM, Blogger Pulverized Concepts said...

The bride and I attended a movie in a new tri-plex theater in a small town in Arizona a few years back. We were the only patrons, period. There were more employees than us and they ran the movie solely for our benefit, a private screening more or less. Hard to believe a business like that can survive.

 
At 4/13/2012 7:03 PM, Blogger Benjamin said...

I like being told by government what I can, and cannot, watch on television and in movie-houses. Protect me from certain words, uttered millions times day everywhere but not in movies, such as "shit."

I especially like it that TV shows can show a husband shooting his wife in the chest with a gun, but not tenderly kissing her chest. Oh, excellent. Janet Jackson showing that tit was way too much to bear.

For high enough pay, I might watch recent Hollywood drivel. Maybe $30-$40 an hour would get me to watch Titanic or Sex in the City (sans any really good sex scenes), if the theater was close by.

 
At 4/13/2012 8:38 PM, Blogger Ken said...

I've not gone to a movie in over two years simply because it's too expensive.

Adjusting for inflation, the price of going to the movies isn't much more today than 20 years ago. On top of that movie theater seating is much more comfortable, with reclining/rocking chair and much more room.

I don't think the price is what keeps people from going to the movies. I think the main reason people don't go to the movies is that they can get a comparable or even better experience at home with a choice of thousands of movies on demand or from their own private collection that is stocked entirely with movies they like. Going to the movies you have, at the top end, a choice of 20 movies, of which only one or two may be worth seeing. If that. On top of that, the viewer has no control over what time movies start, nor can the movie be paused to go do whatever (bathroom, pop popcorn, etc).

 
At 4/13/2012 9:40 PM, Blogger kmg said...

Those who give reasons such as 'variable pricing will shift perceptions' are clueless.

They seem to think that people can't check online reviews of a film before going to see it.

I for one never go to the theater unless a movie has gotten a pretty good user-voted rating on the major websites like IMDB, Box Office Mojo, etc.

As a result, I am rarely disappointed, knowing that the film got at least a 7 out of 10 on IMDB. Unlike 15 years ago, when a movie could be much worse than you expected, and the cost is sunk.

 
At 4/13/2012 9:41 PM, Blogger kmg said...

Variable pricing will make it harder to sneak into a different movie if the first one was not good (or, conversely, see two for the price of one).

Actually, a lot of people will buy the cheap ticket, and then sneak into the expensive one.

 
At 4/13/2012 9:58 PM, Blogger jorod said...

That's OK. Illegal immigrants do it all the time.

 
At 4/13/2012 11:00 PM, Blogger Benjamin said...

But no free markets in oil:

from CNBC
http://www.cnbc.com/id/31781232

July 7, 2009

by Tom Brennan

"Without further regulation, Cramer told viewers on Tuesday, manipulation of the energy futures market is virtually inevitable. Right now traders can use near-unlimited credit to swing prices in either direction, and that’s causing false valuations of oil and natural gas.

“The oil futures market? It’s a total farce,” Cramer said, adding that he was “stunned and outraged” by the speculation and Washington’s seeming inability so far to curb it.

The Mad Money host named margin requirements as the big issue. Right now energy traders need to put only 10% down on a position big enough to move markets. Just last week a rogue London trader pushed Brent crude higher with a mere $10 million. As a result, Cramer said, people wondered if gas prices would cross $3, airlines were given pause, and the idea of a consumer-led recovery came into question. Those requirements need to be increased, he continued, if the manipulation is to end.

Cramer also pushed back against anyone who says the energy markets are too “deep” to be manipulated....Cramer said that people denying the effects of speculation have a “vested financial interest in maintaining the status quo,” or they are academics with no real-world trading experience.

While the government finally seems to understand the severity of the problem, as the Commodity Futures Trading Commission on Tuesday announced it would consider limiting trader positions on commodities with finite supply, Cramer doubted the CFTC could fight off the industry’s powerful lobby.

“They’re just too big, and they’re more powerful than the government,” Cramer said, “and they have never yet been defeated.”"

Read more: http://unlawflcombatnt.proboards.com/index.cgi?board=oil&action=display&thread=5474#ixzz1rz49fCtQ

 
At 4/13/2012 11:29 PM, Blogger Ken said...

Ben,

Do you have anything to say about the actual post or are you just trying to hijack the thread? The post is about variable pricing for movies. The word "oil" doesn't appear anywhere in this post.


Start your own blog if you don't like the posts here. If you have a blog and you don't get enough traffic, so troll elsewhere, write a better blog.

 
At 4/14/2012 12:21 AM, OpenID Sprewell said...

Movie theaters are yet another market that's getting destroyed by the PC and the internet. They're trying to differentiate themselves by going nuts on 3D, shoehorning it into every movie they can, but that can't last. Noodling about ticket pricing is like talking about what subscription model the newspapers should use: none of it matters because they will all be dead and gone within a decade. As others have pointed out, a home theater provides a much better experience for most, which is why I've probably been to less than 10 movies in a theater in the last decade. The theater model is dead, only a matter of time till they realize it.

 
At 4/14/2012 1:01 AM, Blogger OBloodyHell said...

>>> because they are concerned about the negative perceptions that would come from some new offerings costing less to see than others.

So retarded it's mind boggling. All you have to do with this is to decide on a flat-rate price based on the "day of release -- $15 the first day, $14 the second, and so forth, until it reaches $5, then it goes down to $25 the next week.

Anything like that would not say anything about the picture -- though the studios could clearly differentiate some of them, too.

Theater owners would happily take this, as they've long been getting almost nothing whatsoever, and are required to make most of their money off of concessions.

Whenever there's been efforts to provide such pricing models in the past -- notably for second-run movies (often at more relaxed places that also served beer and wine) or for "$2 Tuesday" and the like, the studios have squashed them.

 
At 4/14/2012 1:11 AM, Blogger OBloodyHell said...

>>> letting the owner, not the studio/distributor make that decision on the pricing.

The owner does do so. That would be the owner of the FILM, not the theater, though (who do you think the owner of the film is, if not the studio or their agent, the distributor?).

Sorry if that's not what you cluelessly meant.

I'm no fan of idiot studios and their price gouging, but failing to grasp that's where the pricing authority derives from is less than brilliant.

I'm with jon for the most part -- I see far fewer films than I have in the past, simply because the entertainment price-per-hour pretty much sucks.

I can buy a video game, and even a moderately sucky one costing US$40 can provide a few dozen hours of amusement, or on the order of $1.70 an hour of entertainment -- or, better still, take something like Guild Wars or Diablo II, which each provided on the order of $0.10 per hour of entertainment. I strongly suspect I'll get A LOT more than 60 hours of amusement out of Diablo III ($60), due to be released next month.

Now contrast to a movie, roughly 2.5 hours (being generous) and costing $10. That's $4 an hour. Not such a good deal.

Even buying an older movie or TV series can be far more cost effective. If I pay $5 for a three year old movie, and watch it twice in a year, that's a buck an hour, too.

 
At 4/14/2012 1:14 AM, Blogger OBloodyHell said...

>>> Hard to believe a business like that can survive.

It can't, if that was constantly the case.

First off, realize that they don't really make money off the movie, they make money off the concessions.

Second off, it's the friday and saturday business that primarily makes the dough, and often only a couple movies, and sometimes during certain key times of year (May/June/July and Nov/Dec) it's substantially greater. Those times and those times of year there are going to be much more full showings.

 
At 4/14/2012 1:17 AM, Blogger OBloodyHell said...

>>>> The word "oil" doesn't appear anywhere in this post.

That's ok, it doesn't appear anywhere in benny's brain cells, either, because, well, you'd have to have two brain cells to make it a plural.

 
At 4/14/2012 1:22 AM, Blogger OBloodyHell said...

I'm not so sure variable pricing can't work, because there IS something to sharing a movie with an audience -- not all of it bad, either. Comedies, in particular, benefit from such -- there's a reason the laugh track was invented.

But the movies are, as I have delineated above, no longer the sole entertainment option, even if we exclude home theater. And they aren't a good value any more as a result of that competition.

Audiences have been falling pretty steadily since the 1930s.

More recently, they've been able to make up the difference so far with price increases, but how long will that last...? Variable pricing might help a lot, by allowing someone to essentially "vote" on what they are willing to pay to see a movie.

 
At 4/14/2012 1:46 AM, Blogger Ron H. said...

All of you old farts recommending home theater are forgetting that you can't make out with your girlfriend when you invite her over to watch a movie at your house while your parents are home.

 
At 4/14/2012 1:55 AM, Blogger Ken said...

Ron H,

Get a job. Rent an apartment. And stop whining about free housing.

Also, there's this new thing called a back seat. Use it.

 
At 4/14/2012 2:16 AM, Blogger kmg said...

It is funny that Ron H would talk about something he has no direct experience in - romantic contact with women.

Given how he thinks all single mothers are victims of callous fathers who ran off, when in reality, most single mothers are so by choice, because there are laws that reward them for this choice of excluding fathers from their children.

Ron H is the perfect example of a so-called fiscal conservative who turns into an outright socialist as soon as the prospect of groveling to feminists presents itself. Women hate grovelers, btw.

 
At 4/14/2012 2:20 AM, Blogger Ron H. said...

Ken.

"Ron H,

Get a job. Rent an apartment. And stop whining about free housing.

Also, there's this new thing called a back seat. Use it.
"

I have a job mowing my parents lawn, but I can't afford an apartment on that, and I don't have a back seat, as I'm only in 7th grade, and can't drive yet.

Where can I go to have a little fun with my girlfriend?

By the way, I suspect I was conceived in a back seat, so that might might not be a good idea. I certainly don't need THAT kind of trouble.

 
At 4/14/2012 9:49 AM, Blogger Methinks said...

No reason to pick on Benji. He's just doing his bit to impress upon CNBC that Cramer has reached his target audience of drooling morons.

 
At 4/14/2012 12:46 PM, Blogger NormanB said...

There is variable pricing. Seniors have Mondays for a 22% discount with like discounts for coming in early, <6:00pm.

I have to think that theatre owners know what they are doing as they have so many theatres they can experiment and run pretty good tests. Maybe they don't though.

I do think their popcorn pricing is whacky as the small is way overpriced but the jumbo is maybe underpriced. I guess this forces you up the ladder but it seems very minipulative and I think that hurts their goodwill.

One area I think they are really stupid in is that they don't sell the toys, posters etc that are generated in children's movies. Certainly kiosks in the lobby selling things that the kids have been all hyped up to love in the movie they had just seen would be a bonanza for the theatres. Disneyland, etc does it to great success. Because of this lack of marketing skill I'm thinking maybe the theatres really don't know what they are doing.

 
At 4/14/2012 1:35 PM, Blogger arbitrage789 said...

I am strongly supportive of the idea of variable pricing for movies, and even more so for the idea of variable pricing for tolls on highways.

But there’s always the risk that the politicians will get involved, and argue that it’s “unfair” to charge, e.g., $30 for a movie, or e.g., $15 for a highway toll.

There will be quotas and subsidies and such forth (not to mention all the bureaurocrats needed to administer the system)

 
At 4/14/2012 2:32 PM, Blogger Jon Murphy said...

Adjusting for inflation, the price of going to the movies isn't much more today than 20 years ago.

You're probably right, Ken, but for me the current price just isn't worth it. At the movie theater near me, it's $11 to see a movie. If you want popcorn and a soda, that can run the bill closer to $20. That's a lot of money for 2 hours of entertainment. For the same price, I can go two town over and watch some good minor league baseball with a hot dog and beer in my hand.

As you said, given the proliferation of the home theater system, as well as Netflix and Redbox, I just don;t think the price of movies is reasonable anymore.

But, of course, this is just my opinion.

 
At 4/15/2012 4:21 PM, Blogger Ron H. said...

Jon M" "You're probably right, Ken, but for me the current price just isn't worth it. At the movie theater near me, it's $11 to see a movie. If you want popcorn and a soda, that can run the bill closer to $20. That's a lot of money for 2 hours of entertainment. For the same price, I can go two town over and watch some good minor league baseball with a hot dog and beer in my hand."

I agree. But for some people, and on occasion I include myself, that going out to a movie is a fun experience, especially if it's with my 10 year old grandson. We also enjoy minor league games.

"As you said, given the proliferation of the home theater system, as well as Netflix and Redbox, I just don;t think the price of movies is reasonable anymore."

Perhaps home theater, Redbox, and Netflix is expanding the market for movies to people who would otherwise decide, as you have, that going to the theater is just not worth it, and to those on tight budgets.

It's just my own observation, but I don't see lines at theaters getting much shorter, especially for very popular movies (Hunger Games) that is currently showing on 5 of the 22 screens at my local AMC.

I now enjoy greater choice. some movies I really want to see on the big screen, and others I prefer to wait and see at home. I also willing to risk $1 for a movie I'm unsure I'll like.

 
At 4/15/2012 4:34 PM, Blogger Ron H. said...

NormanB: "...but it seems very minipulative and I think that hurts their goodwill."

Goodwill? We don't need no stinking goodwill.

If no one paid outrageous prices for snacks and drinks at the theater, they wouldn't still be available.

"One area I think they are really stupid in is that they don't sell the toys, posters etc that are generated in children's movies. Certainly kiosks in the lobby selling things that the kids have been all hyped up to love in the movie they had just seen would be a bonanza for the theatres."

And, if you don't like the prices for drinks and popcorn, just wait till you see what they will charge for toys.

 
At 4/15/2012 4:40 PM, Blogger Ron H. said...

"But there’s always the risk that the politicians will get involved, and argue that it’s “unfair” to charge, e.g., $30 for a movie, or e.g., $15 for a highway toll."

The politicians are already involved with public highways, and are the ones setting the amounts of tolls.

The market will set the price of movies, in fact is doing so now.

 

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