Another Moronic Analyst: Variable Movie Ticket Pricing
How can it be that people whose entire careers are about analyzing the film business can be so profoundly ignorant about the industry they cover… their beat… and not only like a journo’s beat, but these palookas are telling people how to invest their money!
Today’s ignoramus, coughed up by the LA Times without really considering how stupid the analysis is, is Todd Juenger, a senior analyst at Bernstein Research.
He notes, brilliantly, that “nearly 93% of theater seats go unfilled, he said, including 99% between Monday and Thursday.”
Yes. I have been pointing out this dirty little secret of the film business for over a decade. If a movie has a $5440 per screen average for the weekend (as #1 movie Hunger Games has this weekend), that’s a maximum of about 775 tickets sold per “screen,” spread over 5 showings, across 3 days. So, you’re averaging 52 people per screening in rooms that seat at least 120. But it’s worse than that, as most house are bigger and for the #1 film in the country, there are likely more actual screens than the screen count.
However, the entire industry, distributor and exhibitors, has changed how they do business in the course of the last decade or so, in part because of this. That is why they are capable of having an opening like The Hunger Games in 2012, which would have functionally (not literally) been impossible in 2002.
Of course, guys like Juenger – whom I don’t know – look at a “problem” like this and assume that they were the first person to notice it. It’s not like NATO (that’s National Association of Theater Owners, Todd… not the ‘boom boom” people) and all the individual theater owners and chain owners have ever considered this issue, right?
Variable ticket pricing, like variable VOD pricing and shortened Home Entertainment windows for wide-release films, opens the door to a lot more than “the negative perceptions that would come from some new offerings costing less to see than others.” The single biggest problem is that it creates price competition in an industry that is not consistent in its product, not easily predicted until a couple of months out (in general and for non-sequels) and often inaccurately even then, and has a history of creating trouble for itself by increasing prices too much (see: 3D). There is nothing more suicidal than basing an industry-wide plan on the potential success of a few sure-fire outliers.
Remember, the reason Lionsgate had The Hunger Games to open… and Summit had Twilight… is because other studios didn’t step up to the plate to make them. So while it is easy (and moronic) to hypothesize about how much money THG could have made on opening weekend if only the tickets were $1 more apiece, you have to understand the Hunger Games that is now in front of us is not the issue. There are a ton of variables on the way to a mega-hit. And the realities of changing the system will have a greater impact on the majority of films that are not pre-sold.
It’s a digression, but our idiot friend also deigns to include international numbers in his “THG could have opened bigger” analysis, but does he even know whether the opportunity was maximized overseas? Could WB have done better? And for that matter, would a movie cost more – relative to average tickets – to see in a market it does well in than in a market it’s not so big in? Would Bond tickets cost 40% more in England than in Germany? (I’m making up numbers… no idea how these markets match up on Bond.)
And what of Home Entertainment? If THG costs $10 an average ticket and Stooges costs $7.50 a ticket, what do the DVDs or downloads cost?
But back to Variable Pricing by Juenger…
Let’s start with Juenger’s reference to Wal-Mart’s alleged variable pricing on DVDs… he does get that Wal-Mart is getting out of the DVD business as quickly as it can, right? Discounting has not been enough to make the floor space worth it for them to stay in that quickly dying game. So much for that analogy. (“Todd Juenger wants to do for theatrical what Wal-Mart is doing for DVDs!” I can see the forum at CinemaCon now.)
And unlike the mentioned airline and hotel inventory that Juenger uses as an example, movies are not – with the rare exception of the big sequel or hot franchise film – a “need” commodity. If you are going to Boston to see the family, you need transportation and you need somewhere to stay. No one ever NEEDS to go to a movie. And when do airlines tend to discount? Well ahead of travel, not on demand. Yes, there are cheaper airlines. But those airlines have a fixed offering, so when making a discount decision, you are making based on those stable considerations, not the projected weather that day and whether it is going to make you queasy on your flight.
When do hotels discount? Not when they think the housekeepers have neglected one part of the hotel while keeping up another. They discount based on demand in that city in that period. And again, quality and location. But those two elements do not vary when the pricing shifts. The 5 Star hotel is still significantly more expensive than the 3 Star hotel in almost all circumstances.
Back to movies, how much math does he think the film industry wants to put its customers through in selling their content?
Now… the reality is, variable pricing for movies already exists. I can choose, where I live, to see a film at a nearby theater and pay max retail outside of NYC. Or I can drive 20 minutes and see the same film, presumably at the same level of quality projection, for 20% less… in the valley. Or, as is noted in Juenger’s thing, I could go to a matinee.
But Juenger makes the huge mistake that so many have… to assume that movie attendance is primary driven by price considerations. This only seems to be true in the broadest of terms, as in the deep discounting of second run theaters (now a rare thing) or big added costs, as in 3D bumps of 25% – 35%. But even Juenger isn’t suggesting 30% price bumps for a movie like Hunger Games. Nor is he suggesting $5 tickets for Lookout.
The costs of tickets are the most significant as a percentage of the cost of the experience for those who, generally, are not paying for their own tickets… the under 20s. For the over-30s, who have kids, for instance, 5 hours out of the house can mean that $20 for a pair of tickets is 20% or less of the cost of a night out.
More simply, do we think anyone who didn’t go to Lookout this weekend was going to go if it was $2 cheaper? Does anyone actually believe that people are going to take off work or take the kids out of school for the Tuesday matinee because the movie they didn’t really want to see that much is now $3 cheaper per ticket?
Personally, I do believe that the film industry would be well served by a revival of second run theaters, set at a price point around 50% of opening weekend, starting 6 or 7 weeks out of release. It would serve exhibitors well, whose revenue is primarily driven by bodies, not by the money they take from the tickets. Keeping exhibition healthy is in the interest of the industry. And it would produce incremental income for the distributors. Would there be some cannibalism of first run? Yes. But exhibitors would still be earning a living. And I think there would be more earned in a new/resurrected window than lost in the launch window.
Reasonable people can argue this.
But Variable Pricing? No. It’s a reactive idea, not proactive idea.
And we haven’t even discussed how these variable prices would be set. By tracking? By opening weekend? HSX? Nikki Finke, who thought The Three Stooges was going to open bigger… until it didn’t and she erased her claim to know better than Fox?
Do we have ads for Bridesmaids, claiming that the film is going to be a phenomenon, so see it cheap on opening weekend before the price goes up?
Thing is, if you start doing any of this on an ad hoc basis, you destabilize, by design. The margins are too low in this business for such destabilization to be anything but a deal breaker.
One last analogy. I now shave with a 5 blade razor… you know, the kind they made fun of on SNL years ago. It is insanely expensive per blade. But it works magnificently for me. If they lowered the price, more people who don’t need all those blades as much as I do would try it. But 3 blade and 2 blade razors would lose customers. Meanwhile, you could give me a 2 blade razor for free and I would still happily overpay for my 5 blade. But if a 4 blade razor was available for half the price of the 5 blade, I might try it and if it just meant another minute, pulling it across my face for a few more strokes, I might leave the 5 blade.
Now… was that a confusing jumble? Welcome to Variable Pricing. And as we speak, subscription models for shaving are developing because the best blades have become so expensive. That’s Netflix for blades, folks… post-theatrical.
Theatrical has an eco-system. I don’t really understand how theater owners over the last 4 decades have been at peace with so many empty seats either… but they have been there for those 4 decades and even rebuilt their businesses from the ground up (after conversion multiplexing was the trend for about 15 years).
But Variable Pricing would, again, do for theatrical what it’s helped do for DVD… devalue and destabilize a healthy market.
I think the overall increase or decrease in price per ticket would be a better conservation, if not exactly a new one. We all know that less people are seeing movies partly because of the ever increasing ticket sales for films that aren’t really increasing in quality. Maybe they look better technically but that’s a subjective argument as well. I’m still not buying the death of dvd/blu ray via streaming because there’s never going to be a service that offers everything online. Then there’s the issue of bandwidth that is a long way from offering blu ray or cable/satellite quality picture and sound. Internet Streaming is a crap shoot. Either you can rent a 1080p movie for $6 on cable/satellite, or wait 4 to 5 months to see it on premium cable. Or go the cheap route with Netflix, which is a poor quality alternative but relatively cheap. That’s why the theater business is still chugging along, because of the experience. If and when cheap streaming will catch up with blu ray and satellite ppv will we see a true shift from the old home video format.
i’d like to see unlimited monthly movie passes – people would watch a lot more movies that way – there’s no pressure on time / date – plus it would help the indie films after people see the blockbusters …30-50 dollars per month would be nice.
i like Tuesday matinees – its just cheaper – if you have
the time – it not less crowed depending
on the movie – lots of people want to save
money that way.
as for the razor blades – the 5 blades go on sale every few months – Gillette makes the 5 blades and the 3 blades – if they stopped making the 3 blades – the 5 blades could be cheaper but they don’t do that … 5 blade makes it faster but no razor burn…
I live in central NY, and my nearest theater is a newly refurbished AMC with all digital projectors and leather reclining seats. The theaters now hold significantly less people (the largest I believe holds 96), but I’ve noticed that showings are definitely more crowded, even early afternoon ones during the week.
Their pricing (which thankfully, and surprisingly, remained the same from before the remodeling) is as follows…
Mon-Thurs – $4.50 before 6pm, $6.75 after 6pm
Fri-Sun – $4.50 before 12pm, $6.75 from 12pm-6pm, $9.00 after 6pm
That relative cheapness is actually what inspired me to start a blog and just go and see everything, no matter how bad it looked. Even before I decided to do that, I would have been much more likely to check out something I was on the fence about if I could see it for under 5 bucks.
Why hire any analyst when DP is literally giving away this info for free!
Variable pricing would just be another scam to get more money from the theaters. All movies would end up being the same price as they are now, they’d just jack the price up on Dark Knight, Twilight and whatever new pixar film that’s coming out. It may start off w/a few heavyweights but pretty soon the percentage of films at the premium rate will shoot up.
I did love the 2nd run theaters. Mainly if I didn’t catch something I intended. It also was a way for me to consider something I was on the fence about the first time around. If there was something I wanted to see, though, I would go to the first run theater out of concern that I miss it all together. Some films you’d rather see on a big screen than just wait for video.
I like how AMC intro’d those first showing of the day discounts. Once upon a time they had twilight specials, which I loved since I got out of work earlier then. But now, I just noticed a fifty cent jump in the price. Which is up 50 cents from last year. I’m not saying anyone owes me anything, I just think the way prices keep going up and up so quickly, mentioning any type of discount is a joke. Like brack was mentioning, I don’t see what is driving the substantial rate increase.
Another problem that I don’t know has been mentioned (didn’t follow the link) is that anyone who’s a profit participant would flip out and sue if his or her movie isn’t showing at the max rate. I’d say 80% of something is better than 100% of nothing and there could be a significant pot accumulated for people who wouldn’t otherwise see a film but decided too because it was playing at a discount. But this whole thing will turn into another way for exhibitors to hide money from the studios and the studios to hide money from the talent and unions.
Roll back prices, decrease the margins, get a higher turnout, and reap a bigger net. That’s my solution. FoC!
Like brack was mentioning, I don’t see what is driving the substantial rate increase.
Devalue of the dollar. We’re sitting on a stagnation fence with stagflation on one side, and deflation on the other. Incremental hikes have been pushed into the market to offset service costs even though we can barely absorb it.
The food industry has a few ways to combat this; trim packaging costs by making smaller boxes, buy more localized produce and meat to cut down transportation miles, and whatnot. This has kept prices relatively stable until the past year, which has seen an 8% jump and is in line with the .50 hike you’ve run into with tickets. I don’t see where film has a crunch option, outside satellite feeds to theaters.
Variable ticket pricing would be a nightmare. The minute you declare one movie to be of a lesser price, the potential audience will see it as a lesser product.
I have a Scene Card, so for every ten movies I go to I get one free. I try to go every 1/2 price Tuesday as it’s still the same amount of Scene points regardless of what you paid for your ticket, plus with my family of five, there is a popcorn deal for $24 that gets you a free movie as well.
I also use the second run theaters quite a lot for the family, as it saves me a bundle.
Luckily I also work for a local radio station so I get a few advanced screenings every month.
The point is, I still don;t understand why the popcorn and soda has to be freakin expensive, and every year there seems to be a mandatory price increase in the tickets.
I agree there should be no tier system for movies, that way lies madness, but if could we at least got a fairly decent system that awards frequent flyers so to speak, and pricing that made it easier on families, more people would go.
That’s a very long article, so, in the words of Princess Bride and Casablanca, let me sum up: “I am shocked! shocked! to find out that restaurants are mostly empty on weekdays.” Err, I Mean movie theatres, but it is terribly shocking all the same. That some sectors of the economy are inefficient at maximizing profits every day of the week is horrifying.
The problem the LA Times guy was facing is cultural, changing prices won’t fix it. Therefore variable pricing is undoable, because you have to convince people to attend the the theatre in the middle of the working day or on a work night in order to maximize profits at weekend levels.
Clearly we need a restaurant that efficiently maximizes it’s possibilities by being busy every night of the week, not just busy Friday/Saturday/Sunday. Oh wait. We do have that kind of restaurant–McDonalds–and it enjoys a special kind of scorn (and sometimes admiration) from the cultural tastemakers.
Ironically we had a “movie theatre” that did maximize it’s revenues in many ways–Blockbuster–but that has been killed by an even more efficient use of resources.
If the problem is truly inefficient utilization–empty seats–then there are a lot of different and good solutions that could fix it. But that’s not even the problem.
“The food industry has a few ways to combat this; trim packaging costs by making smaller boxes….”
If by “smaller boxes” you mean charging the same price for less product, then yes, that’s what they’ve been doing. Just read the front of many items you’ve been buying forever and I’m sure you’ll see that it has become smaller in just the last year or two.
Brilliant as always David. The reason why I come here to read and not anywhere else (unless of course, you provide a link to the articles).
Just one thing. Surely you meant LOCKOUT, not Lookout.
BTW, the food analogy applies to movies as well. I actually became interested in The Three Stooges movie when Carrey and Penn were mentioned, but the studio went with a no-name cast instead and still they expect us to pay the same price for a ticket?
Yeah, right.
I Love The Hunger Games!
So would we have paid the same or less for Wrath of the Titans, Sex and the City 2, Meet the Fockers, Ghost Rider 2, American Reunion, or any other box office underperformer compared to the original?
And would we pay more for Fast Five, or even Dark Knight, compared to their predecessors?
off topic bitch.
You know what kills streaming/vod tv content with ads? Repetition. I’ve watched hour long shows that show the same 2 ads at every break. It actually makes regular television ads seem far more palatable as opposed to the two ads for University of Phoenix running over and over and over.
Anghus, if you are watching them on your desktop/laptop. I highly recommend AD BLOCK chrome extension. It blocks every ad from any streaming content. It’s awesome.
The problem stems from the shortened DVD/VOD window, which effectively killed the second-run discount houses. If it were somehow feasible to bring them back, it would largely solve the problem, as I believe more people would be willing to risk $4 than $14 on, say, THE ARTIST, or even JOHN CARTER.
there’s probably a huge segment of the population that will pay full price for movie without checking reviews – maybe thats what keeps theatres going .
how many people paid full price for Jack and Jill ?
one of the worst reviewed movies in the last few years .
at this point – if a movie theatre offered Jack and Jill
for free – would people show up ?
movie theatres could spend 1 week testing different prices if they wanted and actually getting real
feedback.
“You know what kills streaming/vod tv content with ads? Repetition.”
Totally. I was watching some show on Crackle (via Xbox) the other day, and saw the same gum commercial at every single break. Irritating as hell.
Crackle just does not have their shit together when it comes to ad breaks. I tried to watch something on it a year ago and found the same problem, one ad going on a loop (it was 2 minutes of scenes from Priest). And to make it even worse the ads broke in every ten minutes on the dot, in the middle of scenes, in the middle of sentences, which is so much more annoying than a normal commercial break (also there was about a minute of buffering before and after the ad so it was going to take me about two and a half hours to get through Dick, which is just not worth it).
All I know is that I paid $16.50 to Fandango to see The Avengers on IMAX 3D at midnight, but only paid half that to see Hunger Games opening day at matinee on a normal 2D screen.
Variable pricing is here, spurned on by the distributors rather than the exhibitors, funnily enough.