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Tue July 15, 2014
Why Blockbusters And Flops Cost The Same At The Box Office
Originally published on Tue July 15, 2014 5:23 pm
AUDIE CORNISH, HOST:
If you go to the movies this week, you might find yourself sitting in a sold-out show of "Dawn Of The Planet Of The Apes," the summer's latest blockbuster. Or, you might be sitting in a nearly empty theater down the hall watching something far less popular. Well, here's the thing - the ticket price to the blockbuster is exactly the same as the less popular movie. Jacob Goldstein from our Planet Money team wondered why.
JACOB GOLDSTEIN, BYLINE: Think about airline tickets. If a flight isn't selling well, you're probably going to get a deal. If there's a flight everybody wants to get on, you're going to pay more. This is called variable pricing. In the past decade, technology has made it much easier to do. And, among other businesses, major league baseball teams have started using variable pricing in a big way. It used to be maybe $10 for a bleacher seat, and say, 100 bucks to sit behind home plate. Today, the price of a ticket is not just about where you're sitting. The price of the ticket is based on...
BARRY KAHN: The pitcher, the opposing team, the day of the week, the time of the year, the playoff implications.
GOLDSTEIN: ...This is Barry Kahn. He runs a company called Qcue that helps sports teams do variable pricing. And, he is not done with that list of things that affect baseball ticket prices.
KAHN: To how the building's selling, or even other events that are competing in town.
GOLDSTEIN: Kahn says, this works great. And yet, the movie industry, for some reason, puts the same price tag on every seat.
KAHN: I mean, the fact that almost every movie - and that ranges from flops to blockbusters, that ranges from opening night to, it's been in the theaters for three months - is basically a single price is crazy.
GOLDSTEIN: So I asked Kahn, how would it work if movie theaters varied their prices?
In a world where movie prices are based on demand - you know this part is coming - you're going to pay more to see "Dawn Of The Planet Of The Apes" on opening night.
KAHN: You know, when you see a movie that has a line at the door, when you actually can't get to see that movie at that theater, I mean if you've run out of seats in that theater, the theater should be charging more.
GOLDSTEIN: Kahn said, he could easily imagine, say, $20 for a hot new movie. And he said, if you're the only theater in town showing that movie, and you've sold out most of the theater in advance, then maybe, you can go big.
KAHN: You know, maybe it is 75 bucks, maybe it's 100 bucks, for those last four seats.
I couldn't imagine doing this across the entire theater, but I could imagine that if you four seats left.
GOLDSTEIN: There is a flipside. Kahn says, tickets to flops could be much cheaper. In fact, they might even be free - at least, free with an asterisk.
KAHN: Some comedy clubs, I feel like, are good example of this, where there might be no cover, but there's a two drink minimum. Could you do something like that? Where maybe you don't even - you don't even charge to go in - but, you have to at least go purchase two things from the concession stand.
GOLDSTEIN: Knocking a few bucks off when a movie's not selling, charging a few bucks more for the hot new movie - that all seems at least plausible, so, why hasn't it happened in the real world? To find out, I called up Byron Berkley, who owns a small chain of movie theaters in Texas, and is on the board of the National Association of Theater Owners. He says, cutting the price for an unpopular movie could send the signal that the movie might not be worth seeing at any price.
BYRON BERKLEY: We don't want to give the public the impression that any of the movies that we play are stinkers. We don't want to be part of setting a value on the movie.
GOLDSTEIN: And he says, if he tried to raise prices for a blockbuster, there'd be angry townspeople with pitchforks outside the theater, or something like that.
So. that is going to happen either. Even if Berkley did want to start experimenting with prices, there's one other big thing that will stand in his way - the movie studios. Berkley, like every other theater owner, has to negotiate with the studios for every single movie he gets. And these negotiations can get tense.
BERKLEY: We're in bed together, but you know, we kick each other often times during the night.
GOLDSTEIN: This tension between the theaters and the studios turns out to be a big part of the reason every movie is the same price. All those millions of dollars the studio spends on previews and posters and TV ads for a big new movie, all that goes out the window the minute a moviegoer sees that a ticket to "The Lone Ranger" is on sale for a buck fifty.
Berkley pointed out that theaters do cut prices for matinees, they charge more for 3-D movies, for IMAX. The only thing you can't do, he says, is change the price based on the movie itself.
BERKLEY: That seems to be - invalid. It's - it's one of those - one of those things that you don't mess with I guess. I don't know (laughing). Tradition. I don't know what it is (laughing).
GOLDSTEIN: Jacob Goldstein. NPR News. Transcript provided by NPR, Copyright NPR.