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Could Tiered Pricing at Theatrical Be Viable?

8 Feb, 2004 By: Kurt Indvik

The movie business began the year much like it ended last year, with a slight dip in movie attendance. Only a moderate hike in the average ticket price is keeping revenues level.

But the theatrical business will have to do something else to counter the falling attendance other than raise ticket prices, because it's already obvious that that combo is just going to hasten the downward spiral of movie attendance. While there's no doubt that higher ticket prices have made the “I'll wait for the video” decision even easier — to the benefit of those of us in home video — in the long run, a declining theater audience is not good for home video either.

Declining theatrical attendance and revenue could mean fewer “serious” films get financed in favor of the sure hits targeted at young males (and their dates), and less money spent on marketing those more serious films that are made. This, in turn, could lead to a drying up of both secondary product and consumer awareness of those modest-budget films that traditionally have rented well and sold well in the previously viewed arena.

So what's the solution? How about tiered pricing — not just as a way to get more people in theaters, but also as a way to build a bigger audience for the film's home video release? I know there are a million variables and as many arguments for why it can't happen, but perhaps it's time for Hollywood to run the numbers again.

The concept (if not the execution) is simple: People pay a higher price at the box office for the big-budget blockbusters and a lower price for the smaller films. Theater owners and studios would have to work together to make the financials work on both ends — particularly for the smaller films. A lower ticket price would require a longer run to maximize revenue; studios accustomed to taking the lion's share of ticket sales in the first few weeks a film plays would have to rethink their strategy.

For arguments sake here, I am being very simplistic, but think about it. With ticket prices spiraling upward — not to mention the cost of soda and a tub of popcorn — the theatrical business may be slowly pricing itself out of existence. Families trying to decide between a night at the movies or a DVD at home are doing the math and voting with their feet.

If, on the other hand, there were a range of prices and films, I think you'd not only see more people in theaters, but you'd also find more willingness to take a chance on something other than the big-budget flavor of the week.

Tiered pricing may not make a huge difference, but I think it could benefit both the theatrical and home video businesses enough to justify serious consideration. By maintaining the flow of secondary titles — and increasing consumer awareness of them due to their longer theatrical runs and more attractive ticket pricing — studios could maintain and even grow the flow of independent, genre and other so-called “rentable” films into video stores. And with consumers continuing to transition into movie collectors, it's not implausible to suggest many of these films could sell as well, particularly on the previously viewed front.

It's time Hollywood takes a look at its product offering and begins to price accordingly given the fact that DVD, home theater systems and the coming high-definition era will only continue to usurp that movie-going experience. Tiered pricing could be a win-win situation, not just for studios and theater owners, but also for video retailers. But perhaps the biggest winner would be the consumer — and isn't that who matters most in this whole equation?

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