Movie Theaters Begin Their Adjustments

The news coming out of the second quarter is that movie ticket prices inched up a bit but are still down from the high they reached a year ago. But at the same time both revenue and actual ticket sales are down, 3.8 percent and 2.5 percent respectively. The second quarter was better than the first, with almost all the growth coming from Disney’s biggest releases.

At the same time, reports are coming out that theater chains are interested in experimenting with variable pricing models for tickets. Premium exhibition formats already cost more but they want to be able to charge different prices for different movies, with higher prices for the most in-demand films like the Marvel Studios blockbusters and less for the kind of mid-level and indie movies that have recently tanked or at least underperformed.

Part of that anxiousness to mix up the pricing model is the realization that MoviePass was kind of a good idea, adding significant amounts to the box office take for those smaller, non-franchise movies because the barrier to experimentation was reduced to almost nothing. That’s the same reason people are choosing to stay home and watch the latest “sure, that looks fine” release on Netflix or binge a buzzed-about series. To counter that, more theater chains are implementing their own subscription plans. Otherwise audiences will stick with the known quantities and safe bets coming out of Disney instead of trying anything new.

Doing so is an attempt to accomplish a handful of things:

• Get more people in theater seats. Data from the days when MoviePass wasn’t an ongoing dumpster fire showed that the service notably increased the number of people heading to theaters. As of now services like AMC Stubs A List have released subscriber numbers but not (unless I’ve missed it) information on how it’s moved the needle on actual ticket sales beyond vague statements about members seeing more movies than they otherwise would have and concession sales rising as a result.
• Build brand loyalty. One reason chains didn’t like MoviePass was that it was good in most any theater. That sort of level field is one big companies in any industry don’t like playing on, so they pushed back. If you can lock someone in to your own brand, though, you build in repeated instances of the desired behavior and make the opportunity cost of switching too high. It’s why you haven’t actually deleted Facebook, because it’s where all your friends and family are.
• Get that sick data. More than anything else, the chains want the data. They want to get the demographic information about their customers, find ways to gain insights into their other behavior and habits. All of that can then be used to target ads and other promotions on behalf of studio partners, increasing revenue streams.

Where this gets interesting is that any alterations to the theatrical pricing model significantly impact studios’ marketing efforts for their movies. If an individual knows their local theater does or doesn’t implement variable pricing it’s going to change their perception to and reception of the campaign.

And studios will be able to track how that plays out.

Let’s use the weekend of 12/20 as an example and presume that select theaters charge more per ticket for Star Wars: The Rise of Skywalker than they do for Superintelligence, the upcoming comedy from Melissa McCarthy.

If ticket sales for Superintelligence are higher in Zone 1 than they are in Zone 2, Warner Bros. will be able to see part of that is because more theaters in Zone 1 have variable pricing models and charged less for the comedy than they did for Star Wars. In Zone 2 sales were lower because ticket prices were level and people chose the familiar over uncertainty. People still went to see Star Wars, of course, but because there was little risk involved and the incremental cost reduced or eliminated they went out later in the week to see something else.

Now consider what can be done with those insights. More TV spots could be run in Zone 1 for movies similar to Superintelligence and more online ads targeted to people in those locations. There’s more ROI to be had through that kind of targeted marketing than a more evenly-distributed campaign. Some of that marketing is even done through the apps theaters are using for their subscription loyalty programs because, again, that’s who now owns a good chunk of valuable data.

What happens then is that those in Zone 2 see even fewer ads and other marketing elements for non-blockbuster franchises because the data models predict they’re less likely to take a chance on an unknown quantity. Cultural hegemony is reinforced by reducing exposure to messages that challenge the most powerful ideas.

We’re about to see how something like this plays out in real time. AMC has been aggressively promoting its Artisan Films program to keep smaller movies on screens for longer periods of time so people who catch word of mouth have an opportunity to see them. That includes in-theater signage and even custom trailers for those movies that include an Artisan Films callout.

The key becomes apparent when all of this is put together.

First, a small movie that didn’t receive a big nationwide campaign is kept in theaters for more than two weeks before being booted because it’s not performing at the same level as the latest blockbuster. So more people are catching the positive buzz coming from those who already saw it, including critics.

Second, the campaign itself from the studio is run differently because marketers know it’s still in theaters in select markets. More TV spots are run and online campaigns are lengthened to keep reaching potential audiences.

Third, members of the audience more easily make the decision to see it because either A) the ticket price is lower than usual due to variable pricing models or B) the cost is zero because they belong to the chain’s subscription plan.

Disney’s box-office dominance has already changed how movies in general are released, forcing studios to scramble for the few Disney-free weekends or become more creative with their marketing efforts to cut through the carpet-bombing campaigns run in support of super heros and remakes. Shifts in how exhibitors handle these smaller releases may be good for indie filmmakers and audiences, but it also means that power is being consolidated at that end of the pipeline, which could create its own set of problems in the long run.