Theatre Owners Considering Variable Movie Ticket Prices Based on Movie Quality?

If you happen to think that movie ticket prices are way too high nowadays, here’s an interesting proposition that could shake things up a bit. Todd Juenger, a media industry analyst for Bernstein Research, recently took a look at movie ticket pricing and concluded that theatre owners are doing it all wrong. Unlike most other industries, movie ticket prices are fixed and do not take into account the overall demand for the product. Sure, prices can vary based on time of day and day of the week, and they also vary based on whether or not the screening is in 3D, but the price for a movie is generally always the same no matter what movie you are seeing. Why do movie theatres never offer sales or discounts on certain films, particularly if they are performing poorly? Wouldn’t that help fill empty theatres and give thrifty consumers more options?

The L.A. Times recently reported on Juenger’s findings, adding that the idea has been bounced around by some exhibitors in the past but never really caught on. Juenger’s argument is that almost 93% of all theatre seats go unfilled, which makes it the “largest amount of excess capacity of any industry we could find in the free world.” Setting lower ticket prices for less popular movies would fill some of those seats and allow a bomb like Lockout or John Carter to recoup more of its production costs. Unfortunately, movie studios are afraid of the negative connotations that might result from discounting any major new release. In other words, they don’t want to admit that any of their movies might suck.

It’s too bad that pride is getting in the way of a pricing strategy that could ultimately make them more money. I’m sure people would be willing to take a chance on a movie that got poor reviews if the price was lower. The flip side of this is that it would drive up the prices of tickets for massive blockbusters, especially on their opening weekend. That might not go over well with hardcore fans, who could see themselves as victims of the new pricing system. Still, it’s something for theatre owners and movie studios to keep in mind the next time there is a big box office drought. Do you think variable movie ticket pricing is a good idea? Would you be more willing to take a chance on less popular movies at the theatre if they cost less?

  • Kasper

    It’s a great idea and I don’t get why it isn’t already implemented. A lot of the movies I want to see isn’t the transformers or battleships, so it’d be a sweet deal for me and would probably get me into the theater more often – and I always buy at least a coke when I’m there, so more money for them!

  • Ovenball

    What metric would be used to determine pricing? Polling data before the film’s release? Per screen revenue after 1 week of play? Rotten Tomatoes score? This seems extremely problematic and could potentially lower the perceived value of all content played in the theatrical release window.

  • Yeah, finding a way to objectively judge quality is tricky, but there are a lot of other options too.

    For example, if something comes in under expectations on its opening weekend, the next weekend they could cut the price. Or maybe if a studio knows their movie is opening against a bigger blockbuster, they could set a lower price right off the bat to try and compete. Maybe one theatre would set The Avengers a few dollars cheaper on opening weekend just to draw people in. It could be just like any other retail business.

  • Kasper

    Yeah, I don’t get why it has to be judged objectively or by any specific method. Like with games, there’s the Call of Dutys at full price and there’s the Sniper Elites V2 at a discounted price. Supply and demand.

    Everybody wants to watch Avatar – Avatar is expensive.
    Nobody wants to watch John Carter – John Carter is cheap!

  • Steve

    I would love this, but being that I usually buy one ticket and sneak into 2, it wouldn’t affect me hugely either way.

  • It makes sense because they are not fooling anyone. Everyone knows that Transformers costs more to make than say Win Win – why make the price the same. The other positive affect is if Hollywood blows up the system on fixed prices and distribution windows we may free up more ‘green-lights’ for unique ideas and the dead adult drama!

    on a the flip side, this is the death notice for the second run theatre market. That’s a shame because, like here in chicago, that is the only option for our great old theater houses

  • tjg92

    I think it’s a great idea. Companies make a lot of money on Steam when they drop the price of their game to almost nothing, I figure movie studios can do the same.

  • tjg92

    Actually Steve raises an interesting point. If you want to see a blockbuster film that costs full price, and there’s some pile of shit play at the same time with a discounted price, I feel like a lot of people will buy the B movie ticket and just waltz in to the blockbuster. Then theaters will have to have more people checking tickets, and after that who knows if it’s worth it or not.

  • Matt Gamble

    Well, this kind of market already kind of exists, as most mainstream theatres have discounted pricing based on the time of day and the length of time the movie has been out. The problem is, after opening weekend attendance and interest plummets, and you’d have to have a pretty significant price decrease to offset that. As said by Russ, that would kill the secondary market but it has other negative consequences as well.

    To adjust the value to compensate for opening weekends, you are far more likely to see ticket prices raise, and by raise I mean skyrocket for opening weekends. On top of that, you’d see a minimized selection of films as the profit margins would simply be too high to compensate for the lower ticket prices.

    Why sell 50 tickets of John Carter for $1/ea when you can sell 10 tickets of Hunger Games for $50/ea?

    On top of that, the per cap for concessions tends to remain low for most theatres, and when attendance goes up it actually tends to drop, not go up. Its been pretty corollary that people who spend less on tickets rarely spend money on concessions, in fact they tend to be more price conscious than other theatre goers. That means having discounted movies in the theatres would be even less appealing for exhibitors.

    Also, when attendance goes up, people also tend to avoid the stand because they don’t want to wait in the lines. Thus theatres would need to beef up staffing and devote more expensive real estate to put in extra concession stands, in order to make up for the number of people attending. That means potentially less screens per theatre, less choices in product, and higher prices.

    Now, none of this may happen, but trying to convince an industry that has pretty much been steady as she goes for a century that everything they have metrics on will vary from the metrics they’ve been using is a ridiculously tough sell.

    And this isn’t even getting into if the studios would even allow it in the first place.

  • In the future it the headlines will read “Hunger Games 3, Biggest Full Price Opening Ever!”

  • I wrote a long response to Gamble but it got lost!!!

    in short:

    -theaters have changed – more screens per theater, different size theaters, basically the same as price adjusting
    -Matt doesn’t acknowledge the rapid advances in reserve seating, ordering food, VIP
    – Matt’s pricing example is not honest; its show business – if Hollywood knows anything its how to price to to maximize profits

    last point, lets not throw the baby out with the bath water – let an enterprising theatre chain try it and see..its just movies, not healthcare.

  • BarBar

    As an addition to quality, I also reckon there’s a chance to factor in duration…

  • Matt Gamble

    Meh, multiplexes have started getting smaller, or at least flat lining in recent years. You just won’t see the giant megaplexes (25+ screens) built all that often anymore simply because they are so damn expensive to run and in 5-10 years they have a high risk of being a financial black hole for a chain. Most chains now stick in the 12-16 mode because they have the least amount of long-term risk in terms of potential costs.

    I’m not sure how sliding the movie into smaller houses each week is corollary to price adjusting. Assigning houses is done on site whereas pricing is done on a national scale. On top of that, houses can be switched in either direction on the fly pretty easily if you misjudge, and I can’t see pricing ever being that dynamic.

    Reserve seating, VIP and delivery all are currently considered premium offerings and increase ticket pricing due to the labor and costs associated with them. Our VIP seats sold out months in advance for Hunger Games (all shows on opening weekend were sold out except late Sunday) and were $15.50 a ticket. We could have easily doubled the price of them and still sold out every seat up there.

    What you’re not grasping is that currently when you have a premium product, say IMAX or 3-D or VIP or what have you, their is a price ceiling that is in place. Once you adjust pricing to be dynamic based on demand those prices will skyrocket, especially if their is no ceiling put in place, and why would there be? With something like Hunger Games, where everyone in town is selling out left and right and customers have no where to go, why would you not keep cranking the prices upwards? It’s bad business not too.

    Will some movies have their prices deflated? Yup, I’m quite sure of it. But people seem to be under the impression that this would cause prices to drop wholesale and I’m trying to add a dose of reality by letting people know about a few proven “facts” that the industry tends to operate on.

    People do not spend more on concessions when ticket prices are cheaper.
    Customers tend to spend less on concessions when ticket prices are cheaper.
    Less customers visit the stand (on average) when theatres are busier.

    Thus, cheaper tickets and busier shows tends to be economically unappealing to many exhibitors.

    On top of that, at my own theatre by far the most popular tickets are the most expensive ones. Heck, we make a killing every two weeks on the MET opera shows that are $25 a ticket. We sell 400+ every one we have, because people are willing to pay premium prices for what they believe is a premium product, and the product doesn’t necessarily mean what is shown on screen.

    The minute you allow for dynamic pricing then higher ticket prices will add a perceived value to that product, which in turn drives up the likelihood that people will see that perceived value as being worth their money.

    I’m not saying it is a bad idea, I’m merely pointing out their are potential repercussions beyond “Cheaper tickets, yo!” that people are not accounting for, and that doesn’t even consider the fact that the studios may never drop their pricing enough to make this a viable alternative for exhibitors.

  • I’ve worked at a theater for a long time, and aside from the regulars that come in all the time, no one knows what anything costs anyway, they just pay up. Oh, they bitch about it, but they pay up. Also, despite multi-million dollar advertising campaigns, record-breaking openings, and word of mouth, we STILL get some people that ask “What’s Hunger Games?”. The people that are going to see “Three Stooges” or the newest Adam Sandler flick are going to see them because they want to see them, and I don’t think discounting something else is going to get them to change their mind. In fact, with variable pricing, I don’t think overall attendance would be helped at all, because you have these people that are coming to see something regardless, but they’ll be spending less money. Like many other decisions that are made FOR us, not by us, it might help the studios, but it wouldn’t help us as a theater. I don’t think we’re going to get people that otherwise wouldn’t have stepped foot in the theater showing up because it’s 2 bucks cheaper to see “Lockout” or something, because a) they don’t know what “Lockout” is, and b) they don’t know what tickets cost anyway. If price has ever played a factor for us in anyone’s decision to buy a ticket, it’s when we have both 2D and 3D versions of something, in which case (unless it’s a super huge “Avatar”-like ‘You HAVE to see it in 3D!’ event film), the 2D showing always cleans up.

    When it comes to the big theater chains, I’m not sure that there IS such thing as A theater owner. I manage a Regal, which is the largest chain there is, and I can tell you that things are pretty crooked when it comes to promotions and advertising because of who we’re owned by and who they’re in bed with. For instance, all of Regal’s digital projectors come from Sony. Those things aren’t cheap, and Regal will probably be paying Sony back for a long time. Whether any of that money comes from the box office take of Sony’s films, I don’t know, but I can’t imagine they’d want us charging any less than we already do for admission to their films, especially on their THEIR projectors. Also, for a time, our company’s biggest investor was an ultra-conservative and a bigwig with Walden Media, so in a surprise to no one, we always seemed to have Walden Media films as our project pictures, or movies that you see us promoting heavily in the weeks leading up to release. There are quite a few more examples, but basically there is way more going on behind the scenes than the customers are aware of or care about, and if there’s any change in price structure, it isn’t going to benefit the consumer so much as it’s going to benefit whoever is paying the bills.

  • And PlanB lets people peak behind the curtain. Heh.

  • “Unfortunately, movie studios are afraid of the negative connotations that might result from discounting any major new release. In other words, they don’t want to admit that any of their movies might suck.”

    Didn’t Disney basically admit that John Carter sucked?