Movie Ticket Prices: One Size Fits All? It’s Time to Experiment

The current movie exhibition model is under incredible stress. Although increasing ticket prices have often masked steadily declining movie attendance figures, there has been precious little experimentation to fundamentally address the issue of getting people back into the theater. As Doctor Phil would say, “how’s that current model working for ya?” The time has come to experiment and tinker to see what can be done to improve the initial window of movies, the window that drives all downstream revenues that finance the business. C’mon, guys, let’s try some new things.

Several recent articles have suggested ways theater operators can increase movie attendance in North America. Putting aside this year, which has been down a disastrous 22% from last year, movie exhibitors have generally kept revenues up slightly from prior years by increasing ticket prices. But attendance, the number of tickets sold, movies123 has been declining for years. Aside from relying on Hollywood studios to make better, more broadly entertaining films, are there other techniques to lure people back to theaters more often?

Economists have noted that theater chains have priced their inventory (seats in theaters) in the same simplistic way for decades. Basically there is one price for adults, children, students and seniors, and often a discount for matinee showings. But airlines (also in the business of filling seats) and the hotel industry (filling hotel rooms) have used complex algorithms to minimize the number of empty seats or rooms and maximize revenues from paying customers. In addition, these industries have harnessed the power of the Internet to create an auction marketplace to induce customers to make a purchase. The Internet also allows the creation of massive and valuable databases, which can be mined to analyze consumer behavior and fine tune optimal pricing and timing strategies.

An article by Steven Zeitchik on LAtimes.com examines how variable pricing might be implemented by the movie industry. It concentrates on pricing movies differently according to performance. Poorly performing or less anticipated films could see lower admission prices to lure customers in (although a dog of a movie would probably play to an empty theater even if the ticket price were near zero). Highly anticipated or blockbuster movies might command higher prices (fans of Harry Potter or Batman or Twilight might pay more for the chance to see the movie first).

But this only scratches the surface. There are a number of different ways to implement variable pricing. A few ideas for pricing variables

* Day of week. Rather than having the same price structure across the week, price the highly attended Friday-Sunday period slightly higher and price the poorly attended Monday-Thursday period slightly lower. In this scenario, weekend admissions might rise to $9.50 (from the average $8 ticket price) and weekday admissions might decline to $6.50. See if this $3 spread induces more admissions during the weekday dead period, and see if admissions during the weekend stay relatively constant (when the audience is used to seeing films, when they are more available, and when there is a premium on seeing the film first). Or theater owners might find this a cannibalistic practice (the same number of movie goers simply shifts their “movie nights” despite increased competition from television and weekly activities). The point is, test it and see what happens.

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