The incursions of home cinema, piracy and the availability of a multitude of other entertainment options have wreaked havoc on the cinema business. What’s driving all this innovation, though, is desperation. In cinemas where the company has already tried it, attendances have reportedly increased by an average 80 per cent.Īccording to The Wall Street Journal, the company anticipates raising ticket prices in these refurbished cinemas by between $1 and $2 (and given that the average price of a cinema ticket in the US is just $8.13, that amounts to a boost of up to 25 per cent). The move would cost up to half a million dollars for each theatre and reduce capacity by between 50 and 70 per cent, yet it is still expected to increase revenue. America’s second-largest cinema chain, AMC, this week announced plans to introduce “fully reclinable” lounge chairs (similar to Gold Class-type seating) in more than one-third of its near-5000 cinemas. But it is worth noting that our exhibitors have generally led the way in the premium cinema experience, either originating or being early adopters of the cinema-as-lounge and cinema-as-dining-room concepts. Offering punters something they can’t get at home is the exhibitors’ best hope of staying in the gameįor now, that kind of thing is confined to the theme parks and tourist attractions in Australia (there’s one in Melbourne, in the Theosophical Society building in Russell Street, showing 15 to 20-minute packages of short computer-animated films). One of the leading proponents of the technology, the Korean company CJ, is mounting a push into the US. In Asia, they have been trialling 4D systems, in which the audience is bombarded with mist (to simulate being at sea or in rain) and various odours, while having their chair jerked around to replicate on-screen movement. It’s genuinely impressive – but it also allows Village to justify charging 15 per cent more for a standard ticket.
Two of Village’s Crown cinemas were recently refurbished with new seats, a wider screen and, most importantly, the state-of-the-art Dolby Atmos sound system, which features 45 speakers dotted throughout the cinema, in walls, across the ceiling and behind the screen, to create a genuinely all-encompassing sound experience (by way of comparison, a typical cinema has just seven speakers, plus a sub-woofer – the fabled 7.1 surround-sound system). And to justify those price hikes, it is beefing up the “experience” on offer. For while the cinema business in Australia is in reasonable shape – box office last year was $1.1 billion, only fractionally down on 2010’s record $1.13 billion – it is increasingly reliant on raising ticket prices to stay that way.
The major players have all identified the premium end of the market as the place where growth lies – and well they might.
Additionally, theaters keep the prices of tickets lower thinking that maybe the avid movie-goer is willing to pay a little more for a ticket, but the general public is not.In its place is a tiered experience, in which the standard cinema of old is now effectively an “economy” offering, Vmax and its equivalents are “super-economy”, and Gold Class and Co something like “business” (with the option of an upgrade to first class if you can afford to book a whole cinema with your corporate group or a bunch of mates, or if you take the full wine-and-dine package).
This leads to more people going to the movie in general and an additional profit for those willing to pay for the extra goodies. People are more likely to pay a higher price for a secondary item (concessions) than they are for a primary item (ticket). The study also states that theaters charge high concessions prices in order to keep the cost of the ticket lower. This is because when a theater shows a film, part of the money made from selling the tickets must go to the movie distributors, while 100% of the profit from concessions stay with the theater. Research from Stanford’s Graduate School of Business and the University of California says that although concessions are about 20% of theater’s gross revenue, they make up upwards of 40% of the theater’s profits.
But why are movie theater concessions so expensive? It is actually more out of necessity than greed.
To be truthful, I have done the latter many times. Most either go without food or resort to smuggling their own in a large bag or jacket. That is not to mention the soft drink prices (about $4.85 for those wondering). The big screen, the surround sound, and the smell of a $7.00 medium sized bag of popcorn. Going to the movie theater is an experience.