If you were one of the millions of Americans who walked into theaters to watch “The Batman,” in March, you’re likely to pay more than any other movie of the same time. The same is true for Chinese Spring Festival movies. Data from the State Film Administration shows that the average ticket price of movies from New Year’s Eve to the sixth day of the lunar new year is 52.8 yuan, a record high.
Where does this so-called blockbuster premium come from? Recently, Adam Allen, CEO of AMC Theatres, talked about his trial of “variable pricing” at the chain, in which tickets for high-demand movies are raised, surpassing the levels of films of the same period. .
According to the data of the media “Deadline”, “The New Batman” contributed $134 million to the North American box office in its opening weekend, with an average ticket price of $14.50 in AMC theaters and an average of $13.22 for other films in the same period.
AMC is not the first theater chain to adopt a premium strategy. In late 2021, within days of the release of Spider-Man: No Way Home, Regal and Cinemark have raised their ticket prices by 82 cents and 67 cents, respectively, while AMC has risen by 71 cents. cents. Audiences weren’t deterred, however, as the film’s U.S. debut just passed the $260 million mark.
The reason why theaters continue to adopt this “price surge”, “variable pricing” or “dynamic pricing” strategy – apparently to make up for the losses caused by the new crown epidemic. After nearly two years of shutdown, with the introduction of the new crown vaccine and the relaxation of the mask restrictions, people are no longer as fearful of the new crown epidemic as before, and everyone began to return to the theater. For the theater chain, every dollar of ticket price is enough. precious. Moreover, small price increases for premium products are not new to consumers.
Comscore’s senior media analyst Paul Dergarabedian said: “It’s very common for movies to have dynamic pricing, such as Tuesday’s specials days or the usual matinees where tickets are cheaper, such as children, adults and seniors. The same. Everyday consumption will have price changes, especially Lyft and Uber now. Many companies will set prices dynamically, and different goods and services will also increase in price. But the film industry did not have such a price increase before. It is the viewing value and demand for movies today that drives the price increase.”
Added Eric Wald, senior analyst at B. Riley Financial: “I think it’s long overdue for dynamic pricing in the movie industry. The only concern a lot of people have is timing. Now that the coronavirus is not over and inflation is still there, The economic situation is worrying – people will worry about whether the time is right to start special pricing on movies.”
The theater side must think the answer is yes. John Harrison, EY’s head of U.S. media and entertainment, pointed out: “From 2020 to 2021, theaters did have a very difficult time, and they are basically in a recovery phase after reopening. Theaters hope to be able to increase seating Every dollar of price increase matters. Given the current state of theaters, it is understandable that ticket prices for these blockbusters are soaring.”
The rise in blockbuster prices also raises a key question – how should low-budget independent films be priced? Considering that these films have a 45-day theatrical window before they go live on streaming platforms, will theaters use discounts to sell low-occupancy movies in order to attract audiences?
So far, neither major studios nor independent studios have commented on variable pricing, and AMC has declined to say whether there will be a special revenue distribution for The New Batman in partnership with Warner Bros. Today, AMC and other theater chains have set ticket prices, but there is no clear template for how much revenue the theater can get after the price increase.
As long as it does not affect the attendance rate and can bring a higher box office return, Warner and other film studios can probably accept the price increase. However, experts interviewed by Fortune all expressed their desire to know what the outcome of the price increase will be. Will movie studios continue to raise prices for movie IPs that can guarantee high attendance? Will there be discounts on ticket prices in order to increase the schedule and box office of low-occupancy movies? Would a particular movie be considered inferior in quality just because its ticket price was lower?
“I would expect the ‘variable pricing’ effect to go both ways,” said Jeff Bock, senior media analyst at Exhibitor Relations. “The dynamic pricing of the theaters is Favorable. After all, the advertising and promotion costs have been spent, and the theater will at least try to attract people to watch it. But there must be a negotiation between the theater party and the film studio. The theater is responsible for pricing. If the ticket price is too low, the film studio will It must be unhappy. Therefore, if it is determined to open dynamic pricing, it must be communicated in advance.”
Dergarabedian disagrees. “The basic question is, how do you say to a filmmaker, ‘other movies are $15, but yours is worth $10’? If it’s a blockbuster, the industry doesn’t exist,” he said. Sex issues, you can say: ‘This movie is very expensive to make and there is a huge demand, so we’re going to increase the price.’ But if the opposite is the case, the value of the independent film will suddenly be devalued at this time, which will lead to lower ticket prices. I I think this will lead to a landslide phenomenon that is not beneficial to the industry.”
The location and quality of theater seating will likely be another variable pricing factor. Adam Allen, CEO of AMC, hinted at this in an online earnings conference on March 1, saying that the company is not afraid of risks and is willing to “innovate boldly.” “Cinema in Europe charge extra for the best seats, just like in industries like sporting events, concerts and theatres,” he said.
Wald believes that since audiences can accept the premium price of blockbuster movies, it is also feasible to increase the price of seats. He said: “Having a base fare for core seats, offering discounts for those seats that are relatively unpopular, such as first row or side seats. It makes sense to increase occupancy rates and increase the sale of discounted tickets. .”
Bock believes changes in seat pricing are unlikely to follow after fares have skyrocketed. “It’s hard to do that,” he said. “We’re used to first-come-first-serve queues. Now, if you plan ahead, you can get a good seat at the same price on a mobile app. If theaters start implementing seating arrangements this year, Dynamic pricing, to be honest, I would be very shocked. In the short term, this phenomenon should not be there yet.”
Now, as cinemas fine-tune operating costs and strategies, Bock and fellow film industry experts can only hope that the dynamic price tag of films will continue.
“AMC and other theater chains have issued a more euphemistic warning that the premiums will continue throughout the summer, if not longer, unless theaters and the industry as a whole can return to pre-coronavirus levels,” Bock said. Production costs are different – just look at the budget – so some movies will have a different ticket price. There will be a price shock to some extent, but I think even if it goes up by a dollar or two, most people still Will be willing to go into theaters for some blockbuster, thinking they’re worth the price.” (Fortune China)
Translator: Chen Shutao
If you’re one of the millions of Americans who saw The Batman in theaters this March, there’s a good chance your ticket was more expensive than if you’d opted to go to any other movie playing at the same time. You might not have even been aware of this so-called tentpole tax, unless you read about AMC Theatres CEO Adam Aron touting his chain’s experiments with “variable pricing,” in which tickets for high-demand films cost more than the competition.
According to Deadline, the average ticket price for The Batman, which brought in $134 million in North American theaters on its opening weekend, was $14.50 at AMC theaters, compared to $13.22 for all other showings. (As of this week, The Batman has raked in close to $600 million at the box office globally.)
AMC wasn’t the first to do this in the movie-exhibition world. Both Regal and Cinemark hiked the cost of admission for Spider-Man: No Way Home when it opened in late 2021, respectively adding an average of 82 and 67 cents per ticket over movies during its first few days in theaters, while AMC tacked on 71 cents. And audiences certainly didn’t shy away from seeing that superhero flick, as it opened domestically at just over $260 million.
It’s a clear sign that this strategy—referred to interchangeably as a “price surge,” “variable pricing,” or “dynamic pricing”—is here to stay as theaters look to rebound from their pandemic woes. After two almost-lost years, every dollar counts as moviegoers return, bolstered by the vaccine and fewer restrictions on masking, not to mention less fear surrounding COVID-19 in general. Plus, a slightly higher price for what’s deemed a premium product isn’t all that foreign to consumers.
“Dynamic pricing has always happened in theaters, with regard to matinees or Tuesday bargain days, or different prices for children and adults and seniors,” says Paul Dergarabedian, Senior Media Analyst at Comscore. “We see this in every aspect of life, especially now with Lyft and Uber. You pretty much name the business and there’s some sort of upcharge being applied to many different goods and services. But it hasn’t been until now that this is something that is actually happening in terms of movies based on the perceived value of that movie and the demand for it driving up the price.”
“It’s something I think should have been in place long ago,” adds B. Riley Financial senior analyst Eric Wold. “The only thing that’s of concern is, for a lot of people, the timing. We’re coming out of a pandemic, we’re in an environment of inflation and concerns around the economy—is it the right time to introduce premium pricing for specific films?”
Theater owners certainly seem to think so. “The theaters really had a tough go of it during the pandemic, 2020 to 2021 and they’re very much in recovery mode as we open up,” says John Harrison, EY’s Americas Leader for the Media & Entertainment. “They’re trying to drive attendance but also really trying to drive financial performance as well, so every incremental dollar helps. Introducing a surge element to some of the biggest blockbusters, given the conditions of the theater owners, makes sense.”
The big question stemming from this blockbuster surcharge is what happens to the lower-budget indie fare? Will theaters offer a discount on lower-demand films in order to get people in the door, especially when there’s only a 45-day theatrical window before they hit streaming services?
So far, major and independent studios have yet to comment on variable pricing, and AMC declined to say what kind of special revenue split, if any, it had worked out with Warner Bros. for The Batman. As it stands, AMC and other exhibitors set their ticket prices, but there’s no template for the amount they can keep when tacking on a surcharge.
Warner and other studios are probably fine with the higher price as long as it doesn’t deter audiences from seeing their films and the box-office returns are high. But the experts Fortune spoke with are all interested to see how these deals play out. Will studios be in favor of even higher prices for movies with the kind of IP that guarantees big audiences? Will they allow the discounting of tickets in order to boost the reach and box-office returns of lower-demand titles, or will they view any price reduction as implying that their title is of lesser quality than the competition?
“I would hope that by ‘variable’ we’re playing in a two-way street,” says Jeff Bock, senior media analyst at Exhibitor Relations. “For films that bomb out right at opening weekend, having a variable window would be great. The advertising has already been spent. It would behoove theaters to at least get people to come check these films out. Of course, that’s going to be a discussion between theater owners and studios. Theater owners set the price but I think if you set it too low, you’re going to field a lot of calls from studios themselves. So, these are discussions that need to be had if we’re really going for variable pricing.”
Deragarabedian disagrees. “On a basic level, how do you tell one filmmaker ‘your movie is worth $10 a ticket and this other movie is worth $15’? Applying this to a big blockbuster, I don’t see that being an existential problem for the industry. ‘This movie has a huge budget, it has a massive demand, and therefore we upcharge.’ But going in the other direction would not be good for the industry if suddenly independent film was perceived as having a lesser value and thus commands a lower ticket price. That’d be a slippery slope that I think wouldn’t serve the industry well.”
Another area for variable pricing that’s likely coming to theaters is charging different amounts based on seat location and quality. AMC CEO Adam Aron hinted at introducing that on a March 1 earnings call, when he talked about the ways his company is willing to take risks and be “imaginative.” “In Europe, we charge a premium for the best seats in the house, as do just about all other sellers of tickets in other industries—think sports events, concerts, and live theater,” he said.
Wold believes it’s something audiences would accept, just like they will for higher blockbuster prices. “Have a base-level ticket price for the core seats, then discount the ones that are maybe not desirable—the front row, side of the theater. Getting more people coming in and more concessions being sold is something that would make sense.”
Bock, meanwhile, thinks that variable seating prices aren’t likely to be introduced so soon after surge pricing for tickets. “That would be tough to do. We are so used to standing in line to get the seats that you want. And now that you can get on an app and choose your seat, if you plan ahead, you can get a good seat and not have to pay more. I’d be surprised, honestly, if theaters went down that road this year. It’s something that maybe, in the not too distant future, could happen.”
For now, he and his fellow movie-industry experts simply expect dynamic pricing to stick, especially as theaters fine-tune their costs and implementation strategies.
“This was the warning signal sent by AMC—and other theaters, but not so bluntly,” he says. “This is letting us know this is going to continue all summer, and likely beyond, until theaters and the industry in general get back to pre-pandemic levels. All movies are not created equal—you can just look at the budget to know that—so there’s going to be a different price sticker on some. We’re all going to feel a little bit of sticker shock. But again, at $1 to $2, I think most people would agree that for certain films, that’s worth the price of admission.”