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TK's MORNING BUZZ: Is Loews Raising Ticket Prices a Signal to Video Retailers It's Time to Raise Rental Rates?

27 Feb, 2001 By: Thomas K. Arnold

It's no secret that the theatrical exhibition business is ailing even more than the home video business, with at least six major chains having filed for Chapter 11 bankruptcy protection in recent months. The theaters are to blame for their own woes; after years of furious overbuilding -- and over-plexing -- there are simply too many screens to meet demand.

And now we hear that one of the troubled chains, Loews Cineplex Entertainment, is raising ticket prices in markets all over the country an average of 4%. In Loews' home base of Manhattan, adult admissions will rise to a record $10, up 50 cents; in Los Angeles, tickets will be bumped up to $9.00 from $8.75.

The increase isn't a lot, and it's the first price hike in two years. And yet it's the first salvo in what observers predict will be a trend among other major theatrical chains as well, as they desperately struggle to stay in business.

Now, it's interesting to note that while gross box office revenues are continuing to climb, year after year, these gains come solely due to escalating ticket prices. The number of admissions has actually been declining.

One of my regular readers e-mailed me an ominous comment: "I've always said that a business that is strong can raise prices, but a business that is failing will not get away with raising prices."

I'm curious to see how things will shake out. If my reader's comments ring true, the theater chains -- assuming they follow Loews' lead -- could bring even more trouble upon themselves than they already have.

But if the ploy works, and helps lift even a couple of chains from the throes of Chapter 11, it may be time for video retailers to think twice about their longstanding reluctance to raise rental rates.

Comments? Contact TK directly at:TKArnold@aol.com

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