How Hollywood Can Save Itself: Offer Refunds

A few weeks ago a woman launched a lawsuit against the makers of Drive because the film’s trailer bore little resemblance to what the film was actually like (apparently she was expecting something along the lines of the Fast and Furious).

While it’s easy to snicker at this woman’s mediocrity — and that this must certainly rank among the top 10 most frivolous lawsuit of the last decade — there are some legitimate issues at play here.

With movie tickets costing $13 or more in NYC — and up to $20 for 3D — I can certainly sympathize with the feeling that you’ve wasted money when a movie fails to meet even the most minimal expectations.

While $13 might not be much money compared to other forms of entertainment — sports, concerts, drinking, etc. — the real issue is risk vs. price.

The more confident people are in the experience that the entertainment event will provide, the more they will spend.

For instance, sporting events costs substantially more than a movie ticket. But regardless of the outcome of the game — if your team wins or loses – your expectations are almost always met. There are no unknown variables or surprises. Or with a concert, even if the musicians have an off night, the experience is greater than just their performance — the end result is still in line with your expectations.

What makes movies unique from a consumer perspective is the element of risk.

The trailer (and reviews) are supposed to reduce the risk by showing you what you can expect from the movie, but there is obviously a limit to what can be communicated in two and half minutes of clips. And while I liked Drive a lot, I have to concede that it was not what I was expecting based on the reviews and the marketing materials (but I want to point out that I did not go to it because I thought it was going to be like the Fast and Furious).

So while the price of movies may be low, the risk is higher than other forms of entertainment.

There’s a really simple way Hollywood studios could take the risk out of moviegoing and increase sales: offer refunds. They don’t have to worry about losing a huge percentage of tickets sales — most people are too polite to ever actually ask for their money back. But the fact that the safety net is there will increase consumption. And it really works out well for theaters because they still sell food no mater what.

A refund policy would also allow studios to spend substantially less money on marketing, which can sometimes equal the cost of a movie’s budget. As I already said, one of the major objectives of marketing is to take the risk out of going to a movie by setting expectations. Have the refund option will make people more comfortable going to a movie blindly.

Perhaps the greatest benefit of a refund policy is that irate ticket buyers can quickly be pacified, decreasing the chances that they’ll tell friends, family and their online social network to avoid seeing the movie. That’s where the real damage can be done. There is nothing more dangerous than a customer who feels cheated and is intent on seeking revenge against the studios.