3-D, Price Hikes Lead to Drop in Cinema Sales

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The cinema was one of the Great Depression era’s most popular escapes. Today’s Great Recession, however, is seeing fewer cinema visitors. The reason? An increase in the price of the average movie ticket. The BBC has the story:

Box office receipts in the US rose by $100m (£64.9m) this summer, despite the lowest attendance in five years, figures have shown. Movie website Hollywood.com said the actual number of tickets sold was expected to be 552m – the lowest since 2005, when the figure was 563.2m.

The drop in attendance is thought to be due to a steep rise in ticket prices, mainly for 3D screenings. The cost of an average US cinema ticket rose by 5% over the last 12 months, according to The National Association of Theatre Owners.

Cinema-goers now pay an average of $7.88 (£5.10) per ticket, a rise of 38 cents (25 pence) from 2009.

Box office analyst Paul Dergarabedian said the higher revenue was a “shallow victory”. He added: “You want to see attendance go up every year, not down.”

According to WiseGeek:

A survey conducted by the American Association of Retired People show that 40% of seniors no longer attend films because they can no longer afford the prices. The average non-matinee movie ticket now costs about 10 US dollars (USD). Popcorn costs about six USD, and a drink, about four USD. Thus, the average expense at a theater is about 20 USD. For a family of four, that’s approximately 80 USD for two hours of entertainment.

A sixteen year old making minimum wage must work nearly four hours to afford seeing a film and purchasing concession items. Movie tickets for a poorer family might be 10% of a family’s weekly income. To an increasing number of people, movie tickets are now too high a price to pay for entertainment, especially when film rental is significantly less expensive.

Marginal Revolution describes questions the economics of the film industry:

(In the film industry,) the cost of manufacturing the product has no affect on the purchase cost to the consumer. For example Honda can make a cheaper car with less features and cheaper finishes than BMW without losing all of their customers to the superior car because they sell their product for less. You spend less to make something, you charge less for it. Makes complete and obvious sense. Not so in the film business.

I am an independent film producer and I make films that typically cost somewhere between $5M and $10M. But when I make, say, an $8M film it has to compete at the same price level as the studios’ $80M or $100M film. It costs the consumer the same $12 at the multiplex (and whatever it costs to rent a DVD from Blockbuster these days) for either film. There is no price advantage to the consumer for choosing to see a less expensive film. This naturally makes it terribly difficult for smaller films to find an audience. I find this quite fascinating and I can’t readily think of another industry like it.

A few years ago Edgar Bronfman Jr, during the time his family briefly owned the Universal film studio, suggested that theaters actually charge different admission prices for different pictures so those films that cost less to make had correspondingly lower ticket prices than the mega-budget studio pictures. He was roundly ridiculed by the industry. But truth be told I actually think the less-the-warm reception his proposal received had more to do with the fact he was an ‘outsider’ who had bought his way into Hollywood than on the actual merit of the idea itself. Sound like good economic practice to me.

Paying actors less than, say, $1 million per movie wouldn’t hurt, either. The Movie Blog has an excellent explanation of where your $10 goes when you pay for a movie.

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Written by Drea Knufken

Drea Knufken

Currently, I create and execute content- and PR strategies for clients, including thought leadership and messaging. I also ghostwrite and produce press releases, white papers, case studies and other collateral.