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Why Do All Movie Tickets Cost the Same?
gambit3 sends this quote from The Atlantic:
"Like tens of millions of Americans, I have paid money to see Mission: Impossible, which made $130 million in the last two weeks, and I have not paid any money to see Young Adult, which has made less than $10 million over the same span. Nobody is surprised or impressed by the discrepancy. The real question is: If demand is supposed to move prices, why isn't seeing Young Adult much cheaper than seeing Mission: Impossible?"
I've gone to see plenty of big films whose ticket prices were higher than the other films playing at the same theater in my town. I get that this is supposed to be a ~Big Evil Movie Industry~ article, but the premise isn't true--especially with Avatar, which the article acknowledges as an "interesting exception."
Economy of scale.
However it is probably a good time for the cinemas to approach the movie industry about trying this.
The Kruger Dunning explains most post on
What I've found interesting is that video games actually DO follow the rules of supply and demand, even at Best Buy, and this surprised me! Skyrim was on sale for a whopping $60, some less-popular-but-still-new games were in the $50s, and my brother and I got a good laugh when we saw poor Duke Nukem Forever sitting there for a measly $15.
Ticket prices are the same because the studios mandate the minimum price for ticket prices. The standard agreement between the theatres and the studios specifies what percentage of the gate receipts the studio gets (can be as high as 90% of the ticket price) and that the theatre will charge a certain minimum price. There are exceptions to this, but that is a default situation. Ticket prices therefore don't float in response to market demand because the enitity charging the prices, the theatre, is contracted to keep them fixed above a certain minimum.
Theatres would give movie tickets away in some circumstances if they could, in order to get you to come in and buy the concessions, which is where they make the bulk of their money. Studios counteract this behavior by mandating the high prices in the film rental contracts.
I know this because I used to support a software system that managed theatre accounting for a chain of movie theatres.
I was taught to respect my elders. The trouble is, it's getting harder and harder to find some.
oops, that should have read "...pay back the same amount per ticket to the studios..."
I'm out of my mind right now, but feel free to leave a message.....
Like so many before you, you're making the mistake of thinking that prices are determined by the manufacturer's costs. They're not. They're determined by what consumers are willing to pay. As you decrease your asking price, you'll get more and more people who are willing to pay, but you'll lose out on money from those who would have been willing to pay even more.
Here's an oversimplified example:
Let's say no one is willing to buy your widget for $100
At $99, 100 people will buy it.
At $98, 200 people will buy it.
At so on, down to 9900 people buying it for $1.
In this case, it is trivial to prove that the optimal price is $50, at which 5000 people buy it, for a total revenue of $250k.
Using the same logic to show a comparison between a blockbuster and a bomb:
Let's say the blockbuster and bomb both cost $10 million to make and $1 per viewer to distribute. The blockbuster will draw one million people for every dollar below $20 on the ticket price. No one's particularly eager to see the bomb, and even those that are will wait for it on DVD if the ticket costs more than $15. So let's say the bomb will draw only 200k people for every dollar below $15 on the ticket price.
The blockbuster's optimal price comes out to $10.50 at which it draws 9.5 million people, for a revenue of $99.75 million, with costs of $10M (fixed) + $9.5M (distribution), resulting in a total profit of $80.25M.
The bomb's optimal price turns out to be $8, at which it draws 1.4 million people, for a revenue of $11.2 million, minus $11.4 million in total costs, ending with a small ($200k) loss.
But if the bomb tries to charge the same as the blockbuster ($10.50), it only draws 900k people, for a revenue of $9.45M, minus $10.9M in costs, ending with a much larger loss of $1.45M.
In real life the relationship between price and people willing to pay isn't linear, but it is still monotonic (i.e. if you get a million people willing to spend $10 on a movie, you won't have two million wanting to see it for $15), so the same logic applies just with harder math.