The price of movies
“I’ll wait until it comes out on DVD.”
If you find yourself saying this more often when you see a new movie hit the theatres, you’re not alone. DVD sales are skyrocketing while theatre ticket sales are slumping. More people are staying home to watch movies rather than schlepping out to the local cineplex. Some blame a decline in movie quality, others cite to the rise of the home theatre as the reason behind the trend. Either way, it’s bad news for the theatres. So, what are they supposed to do?
In the past, theatres had an easy claim to what could be termed “the theatre experience.” The average TV at home just couldn’t compare to the big screens and sound systems that theatres offered. But now consumers can afford something pretty close to the theatre experience for their own living room without having to get in the car, wait in lines, or endure the chatty moviegoer sitting behind them. Renting a DVD costs less than a single movie ticket, and buying a DVD pays for itself after a few viewings. Economically, the home is starting to have more bang for the entertainment buck than the theatres.
To the studios that pump out the movies, this development is actually welcome. Instead of having to share ticket revenues with the theatres, DVD sales are providing more and more direct revenue for studios, even to the point that some studios are considering releasing a movie on DVD at the same time it hits the theatres. It’s the theatres that are feeling the pinch as box office revenues declined last year; the studios are still raking it in.
Theatres may start to reverse the trend by redefining the “theatre experience” to better compete with home entertainment technology. For example, National Amusements operates several theatres, such as “The Bridge” in Los Angeles, which offer a “Director’s Hall” theatre for movies. The Director’s Hall features big leather seats with plenty of legroom, among other niceties, for about three bucks more than the standard theatres.
But the more innovative alternative is for theatres to rethink the way that movies are priced. While theatres may differ in the set price they charge for a movie ticket, all movies shown at any one first-run theatre will always be priced the same, regardless of whether the movie is a much-anticipated blockbuster like “Revenge of the Sith” on opening night, or a proven bomb like “Gigli” after three listless weeks. In a supply-and-demand economy, flat pricing like this makes little sense.
To some extent, supply and demand is already accounted for in theatre tickets through discount matinee prices, since fewer people tend to see movies before dinner than after. As a logical matter, then, why not reduced prices for Monday-Thursday shows for the same reason? As it is also common industry knowledge that a typical movie will take in only half as many tickets in its second week as it does on its opening week, shouldn’t older movies be discounted to account for this reduction in demand? These are simple considerations that would help make theatres more competitive with DVDs.
The most common objection to variable pricing for movies is to question the premise of being able to judge one movie as more expensive (and hence, better) than another. Isn’t art subjective? Perhaps, but other forms of art vary their prices without incident. The Rolling Stones don’t charge the same ticket price as the local garage band, for example, nor should they. Supply and demand affects the price of art as much as any other commodity, and movies should be no exception.
Nor would consumers be confused by variable prices between movies. In fact, consumers rely on price differentiation to give them additional information about the products they buy. Flat pricing between movies serves only to make all movies seem the same, which is clearly not the case. Perhaps studios prefer the illusion that all movies deserve equal merit, but box office choices by consumers every day indicate otherwise. Some movies are indeed better than others.
Today’s flat-pricing scheme is an archaic throwback to the days of the nickelodeon in 1905, when every movie ticket cost a nickel and movies were quick, humdrum affairs with little to differentiate between them. As movies became more complex and artistic, theatres began to use price differentiation. In the 1920s, studios rated their own films as either A, B, or C, based on the budget of the film, the leading actors’ popularity, genre, and story quality. As you might guess, tickets to B-list movies cost less than those for A-list movies. Nowadays, “B-movie” is just a description for low-budget or low-quality films.
All this changed in 1972 with the release of “The Godfather,” which heralded the coming of the blockbuster. Tickets for “The Godfather” were priced uniformly, and when the movie went on to break box-office records it persuaded the industry to adopt one-price-fits-all pricing rule for all future movie tickets.
Or, more appropriately, studios were persuaded to require theatres to adopt uniform pricing, using as leverage the studio’s ability to deny disobedient theaters the next big blockbuster movie that the studio produces. Without theatres having alternative sources for movies, it was an offer they couldn’t refuse. Movie pricing was back to being done the way it was with the nickelodeons.
A flat pricing regime not only makes it harder for theatres to compete with DVDs, but it will tend to degrade the quality of movies being produced by the studios. When bad movies get the same price as good movies, the tendency will be that bad movies will make more than they deserve while good movies will make less. Hence, studios will not be as averse to making bad movies as they should be, and so more bad movies will be produced. Variable pricing will encourage studios to produce better movies so as to claim higher prices for their tickets, which in themselves will advertise the higher quality of the movie to moviegoers.
Variable pricing could also help independent filmmakers get into the market, as indie flicks that couldn’t attract audiences when priced the same as big-studio movies could be discounted. If an indie flick manages to sell enough tickets, theatres could start upping the price to reflect its popularity.
One thing is clear: the current movie market is putting the squeeze on the theatres. If theatres break out of the one-price-fits-all approach to selling tickets and redefine the “theatre experience,” audiences can be lured from their homes and studios will have a better reason to produce better movies. Otherwise, the days of the cineplex may be riding into the sunset.
James N. Markels is an attorney and a regular columnist for Brainwash.