Beyond Barbie and Oppenheimer, how do cinemas make money? And do we pay too much for movie tickets?
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Tuesday, August 8, 2023
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I’ve got two questions about blockbuster movies like Barbie and Oppenheimer.An obvious solution to such a rush of demand is to push up prices.
Key Points:
I’ve got two questions about blockbuster movies like Barbie and Oppenheimer.
- An obvious solution to such a rush of demand is to push up prices.
- When more people want to get a ride share, Uber makes them pay with “surge pricing”.
- But not movie tickets, which are nearly always the same price, no matter the movie.
Why not charge more for blockbusters?
- It’s also the same price as it is charging for much less popular movies, such as Indiana Jones and the Dial of Destiny.
- it costs you as much to see a total dog that’s limping its way through its last week of release as it does to see a hugely popular film on opening night.
- We turn out to be highly price sensitive.
‘There’s a queue, it must be good’
- Across the road was a restaurant that charged slightly more, sold food that was about as good, and was mostly empty.
- The “buzz” such queues create produces a supply of future customers persuaded that what was on offer must be worth trying.
- It was much easier for a restaurant to go from being “in” to “out” than the other way around.
Cashing in from the snack bar
- There are other reasons for cinemas to charge a standard ticket price, rather than vary it movie by movie.
- In the words of an insider, “nobody knows anything.” Another is the way cinemas make their money.
Rising prices, despite some falling costs
- From 2002 to 2022, Australian cinemas jacked up their average (not their highest) prices from $9.13 to $16.26 – an increase of 78%.
- Yet some of the cinemas’ costs have gone down.
- Whether “by design or circumstance”, the two cinema chains rarely competed with each other, clustering their multiplexes in different geographical locations.
Longer films no longer displace shorter films
- I think it might be the multiplex that answers my second question: why cinemas don’t charge more for movies that are longer (and movies are getting longer).
- In the days of single screens, a cinema that showed a long movie might only fit in (say) four showings a day instead of six.
- But these days, multiplexes show many, many films on many screens, some of them simultaneously, meaning long films needn’t displace short films.