

Why Are All Movie Tickets the Same Price? - mhb
http://www.marginalrevolution.com/marginalrevolution/2009/10/the-.html

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CWuestefeld
I think the OP misconstrues the product of the _movie industry_ (as opposed to
the filmmaking art). They're not making movies _as such_ , they are making
films _for people_. That is, the real cost must be considered as amortized
over the set of viewers. A $100M movie watched by 1M people is the same as a
$10M movie watched by 100K people.

I read somewhere that Ford spent more money developing the first-generation
Focus than Boeing spent on the 777. We wouldn't expect a Ford Focus to cost as
much as an airliner, because the development costs are divided over a larger
base of customer.

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steve19
Good point.

It also applied to the music industry. The latest Britney album would have
cost a lot more to create and market than the album of a obscure indie band.

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run4yourlives
Because for the theatre chains, the costs are fixed? Doesn't sound to unusual
to me. It costs me as a theatre owner the same amount to show Gigli as it does
to show Titanic.

One could argue the length of the movie is a factor, but most people see
movies at set times, and at two showings a night it doesn't really matter how
long the movie is.

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hegemonicon
Exactly - it costs the same amount whether the theater is full or there is one
person in it. Therefore if the theater is empty, they should be charging LESS
to get more people inside it, since the marginal cost of each additional
viewer is very near zero.

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run4yourlives
Empty theatres are desired, because you always need somewhere for the people
who can't get into the box office smash hit to go.

Let's say you go to see Titanic. You get to the theatre and surprise, sold
out. What do you do? Go home? Nope. You go see Gigli, even though that movie
would never have brought you to the theatre in the first place. And, you pay
the same price as you would have paid to go see the movie you did want to see.

You're suggesting that these people pay less. You're also suggesting that if
Gigli was $3 instead of $12, you would actually get off your butt and come to
the theatre to see that steaming pile of excrement - knowing full well that
everyone reviewing it is telling you it's crap. I think not.

Why do you think the studios position the movies that they know will be very
good/in high demand to come out at staggered times? Yup, to ensure that there
is always overflow.

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hegemonicon
If that's true, then an overflow movie could gain a great advantage over the
other overflow movies by lowering its ticket prices.

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run4yourlives
Um, except that they are all in the same theatre?

The theatre owner doesn't give a damn what you watch, as long as you're
watching something and buying $10 popcorn.

In other words, blockbuster hits entice you to enter the theatre, his job is
to make you stay. If he fills up all his theatres with non-customers paying
$3, he is unable to achieve this task. Knowing that it is extremely rare for
you to make it to the theatre and _not_ see a movie, there is no incentive for
him to offer any lower prices.

If you make it to the theatre, the sale is but guaranteed. Lowering prices
after the sale is guaranteed is a stupid way to do business.

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hegemonicon
You paint a plausible scenario. But the ticket price isn't all going to the
theater owner. Most of it goes to the studio (theaters make most of their
money off of concessions as I understand it). Since different studios are
competing with each other in the same theater, there is definitely room for
price reduction.

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run4yourlives
Another thing to keep in mind is that discounted movie tickets run into
another problem - home rentals.

If the choice becomes, watch Titanic for $10, Gigli for $6 or return home and
watch last year's Titanic for $5, you're introducing a choice that the
consumer would have never before considered.

There was a trend ten years ago to take all those 80's style multiplexes in
malls and turn them into cheapo discount theatres. Most of these theatres no
longer exist, most likely because the product can't compete with the home
rental.

EDIT: You changed your comment, so I'll respond.

Theatres make about 25-55% of the ticket price, and their take increases the
longer the movie is shown. That's why you don't have 12 theatres of Titanic.
It's also why there is no real incentive for them to reduce the price.

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zacharydanger
Pricing is a signal. Lowering the price of tickets to "lower budget" movies
would be a pretty effective way to make sure fewer people watch them.

Of course, this article seems to assume that the cost of producing a movie is
directly proportional to the quality of that movie.

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stewiecat
Lowering the price might also make those "lower budget" movies more appealing
to those that choose what movies they see based on price. For instance, we
only go to movies if it's "25 bucks good" because that's how much two tickets
cost. We end up not seeing anything that has <80% fresh on rotten tomatoes
simply because of cost. We'd be willing to see more marginal movies if we
didn't have to risk blowing 25$ on a crappy film.

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run4yourlives
I don't think your method though is the normal behaviour. Most people "go to
see a movie". They may have one in mind, but once they get to the theatre they
end up seeing something regardless.

If this is the normal behaviour, why would you encourage this customer to
spend _less_?

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anigbrowl
Because in general you get the same thing: a ticket that allows you to go sit
in a theater and watch a big screen for ~100 minutes. You could argue that
long movies are worth a bit more (I personally prefer a long movie, but
theater owners don't because they can't do as many shows per day, so if it's
long it better be a crowd-pleaser).

The price of a movie doesn't have much to do with its overall quality, unless
your primary interest is special FX or special stars. But I think a cheaply-
made movie (like Pi, say - no stars, shot on 16mm, black and white) is worth
the same price as an expensively-made one, for the simple reason that I'm
willing to invest the same amount of time in watching it.

It also costs the movie theater the same amount to run the projector, clean up
the theater, and rent the print of the film from the distributor, except in
those very rare cases where someone self-distributes (called 'four walling')
and makes a private deal with the theater owner to rent one theater, in which
case they may agree on a special price for that show.

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dangoldin
I had similar thoughts about movie ticket pricing but focused on charging
different prices for the different seats in the movie.

I came to the conclusion that this hurts business for movie theaters since
some people may see that the theater being pretty filled up and not bother
going until a future time. On the other hand other people may be willing to
pay a lower price for the crappier seats.

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anigbrowl
I like the fact that seats are the same price and it's first-come first served
- if you're really anxious to see a film you can arrive a bit early and get
the seat you particularly like. I go to the opera occasionally and although I
enjoy it very much it really aggravates me how expensive it is and how the
seats are segregated by price, so if your spend is limited there is no way you
are ever going to be allowed to get a better seat even if the show is poorly
attended and there are empty seats in the box or near the front.

It doesn't help that the San Francisco Opera frequently does 3 different shows
on successive nights, incurring tremendous expense in breaking down the huge
stage sets and erecting new ones, when they could run the same opera for a
week (substituting singers who need a break for their voice to recover) and
save a ton of money on set builders. Every time they switch out the set it
costs > $10,000, probably a lot more.

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dangoldin
I don't think these two issues are contrarian. If there was a way to gauge
demand and supply in real time the prices could be improved.

It can be similar to buying an airline ticket - if you buy well in advance or
very late you can get cheaper tickets than if you buy a few weeks before the
flight.

Not sure why they only do 3 shows, the Met Opera in NYC does a performance
over a longer time period but allows multiple operas to occur over that time
period. Maybe that's a better solution.

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macco
First: Price are the intersection of demand and supply. Lifetime of movies is
very short, so it's hard to tell what is the "right" price. Second: Flat
pricing strategy make it easier for customers to select their movies. A
decision to buy a car is normally not spontaneous.

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moe
Indeed. Good Movies should be expensive and the crap movies could just as well
be free.

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hapless
1\. It's extremely difficult to determine which movies are "good" and which
are "crap" until they're already in theatres. The best minds in the business
routinely mis-judge the quality and popularity of films.

2\. Individual theatres are mostly interested in selling popcorn. They just
want to fill as many seats as possible, pricing tickets at just-above break-
even. Since their costs to show "good" first-run movies are about the same as
"bad," it makes no difference to them. (They do, however, do capacity
planning, allocating more screens to movies expected to draw larger
audiences.)

3\. The movie industry actually had variable pricing based on production
costs, back in the day. ("A", "B", and "C" movies.) It didn't work then,
either. Plenty of flop "A" musicals and hit "B" comedies/westerns.

Robert McKenzie goes on about this at length in his book, "Why Popcorn Costs
So Much at the Movies." I have crudely summarized his chapter on this subject:
[http://www.amazon.com/Why-Popcorn-Costs-Much-
Movies/dp/03877...](http://www.amazon.com/Why-Popcorn-Costs-Much-
Movies/dp/0387769994/)

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moe
I wasn't really serious (poor attempt at humor I admit) but thanks nonetheless
for clearing that up. ;-)

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mhb
Very good comments too.

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gcb
because they aren't :)

at least here in Brazil.

from cinema to cinema, it goes from R$2 to R$30. or US$1 to U$15

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alextp
Well, the lower bound is actually zero, if you know where to go (and some art
houses do charge).

Also, the price depends on the theater+day+time, not on which specific movie
it is showing, so, while price certainly correlates with movie budget, it
doesn't capture most variation.

