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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."
Because all the parking spaces are showing the same movie?
What a bad place to start your argument. In classical economics, demand shifts affect pricing if supply is a factor. When it comes to movie distribution, supply usually isn't an issue.
Also, profits of Mission Impossible to to cover the losses of the gamble on Young Adult. Essentially, movie ticket prices are aggregated and normalized across movies to mitigate risk. Do you really want to spend $40/ticket on Mission Impossible so that Young Adult would cost only $3?
The actually hard-costs to the theaters (staff, electricity, rent, etc.) is pretty much the same regardless if 5 people are in the theater or 500, and is relatively minor in their overall operations. They pay back to the studios based on how many watchers they have, which where most of their expenses actually lie. They have to pay back the same amount to the studios regardless how how many tickets they sell, so why would they implement variable pricing?
I'm out of my mind right now, but feel free to leave a message.....
But when DNF was supposed to come out, $15 could fill your gas tank AND have enough left over for a pack of cigarettes.
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It's not like buying a car or computer. Nobody says "Hey, I REALLY want to see this movie, but for $3 less I'd settle for this other one, even though I won't enjoy it quite as much". Not only are you spending your money on a movie, you're also spending time. Given the choice between a horrible, free movie, or a $15 supremely kick ass one, I'd rather invest a little in my life and actually enjoy it. In other words, people don't watch shitty movies because they're shitty, not because the price was too high.
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.
This is Slashdot, the only acceptable price for a movie is 0 because it doesn't cost anything to copy it.
Yes, but why not? For any given movie, at a given cinema, at a given time, there's an optimal price that maximizes profit: charge a little more, and you discourage enough people that you end up with less profit; charge a little less, and while you may get more customers, you still end up with less profit.
If it were practical to determine this optimal price, any rational cinema would charge it.
You've hit the nail on the head. A rational cinema might charge that price, true. But the cinema business is not strictly rational, any more than any other media business is (think: "agency model" pricing for ebooks).
Some in the UK may remember when the founder of EasyJet proposed to do just what is suggested. He wanted to create a chain of theaters that priced seats based on demand, in much the same way that EasyJet prices airline seats. Theoretically, you'd be able to see a first-run movie for as little as £0.20, depending on time, date, and how well the screening was showing. He couldn't do it, however, because he couldn't reach agreement with the film studios over a flat-rate pricing scheme that would allow him to set his own prices for seats.
Breakfast served all day!
I'm pretty sure it would work like wine - people would avoid the cheap ones.
I see a serious flaw in your reasoning. Bronco Wines (makers of Two Buck Chuck) sell more wine than any other California winery, especially ones like Opus One and Silver Oak; Yellow Tail Wines sell more wine than all other Australian wineries combined.
God invented whiskey so the Irish would not rule the world.
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.