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Is It Time To Dynamically Price Movie Tickets?

There are two ways to increase revenue for movies: sell more tickets or increase the price of tickets.

Viewership has been stagnant for a while, so Hollywood has looked for ways to justify increased ticket prices. First there was 3D, and soon there will be 4D

But why is it that Hollywood keeps pushing gimmicks as a not-so-backdoor method to raise ticket prices? Why not simply raise the prices?

With most other forms of entertainment — concerts, sports, theater, etc. — tickets are dynamically priced. The price can change from day-to-day reflecting supply and demand.

The most sophisticated pricing systems work like this: The goal is to sell out the house right before the curtain goes up. If sales slow because ticket prices are too high, you lower them. If sales are so hot that you’re going to sell out early, you raise them to push down demand.

That way you are selling for tickets for the maximum possible amount while still selling your entire inventory.

With movies there is obviously a much shorter window between when tickets go on sale and when the film starts, but a dynamically priced system would see substantially higher rates on opening day and prices would only fall as demand begins to wane. 

Planet Money did a story one why this doesn’t happen. Besides there being technical issues with the relationship between theaters and studios, one of the major reasons is that it would put studios in the position of acknowledging that a movie is a bomb.

For example, take a movie like John Carter.

If all of the test screenings and critics reviews point to failure, the studio would need to debut the movie at a ticket price well below the average market rate (where as studios could sell tickets to the next Hunger Games movie at three to four times the average price). That’s just humiliating.

A broader culture reason against such a pricing scheme is that it makes movies less democratic. Dynamic pricing can lead to people being unable to afford a ticket. Under this system seeing a movie on opening weekend could become too expensive for many people — just imagine the cost for a family of four wanting to see the latest Pixar movie. It would be another instance of their being a fast lane for the rich.

But here’s the thing: Right now prices are going up for everyone — studios just justify the across the board increase by offering movies in 3D and 4D. And that hypothetical family of four could already face steep fees to see that new Pixar movie if the only local showings are in 3D.

With dynamic pricing, the people who absolutely have to see the movie at 11:59 PM on Thursday night would help subsidize the cost for everyone else willing to wait a few days or even weeks.

So movie-going would defiantly become less democratic, but it would be a lesser evil of where things are currently headed.

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