The Price of Everything: Are Movie Tickets Too Expensive?

Nowadays people know the price of everything and the value of nothing.
-Oscar Wilde

A disappointing summer movie season we thought was safely in the rearview mirror popped up again in January with the release of a Price Waterhouse Coopers report on moviegoers’ attitudes toward the moviegoing experience. The 28-page report covered a lot of ground but, inevitably, the report focused on one thing: the cost of movie tickets.

One of the most interesting findings was that although moviegoing was off by roughly 15 percent last summer, the moviegoers surveyed perceived that they had gone to movies at the same rate as they had the previous year. Nearly half said they had gone the same number of times, while more than a quarter said they had attended more often. A quarter said they had gone fewer times. Further, 81 percent said they had seen at least one of the summer blockbusters in a movie theater, while 49 percent saw at least one at home. Unsurprisingly, moviegoing frequency is highest among young adults, with interest declining among older demographics.

While ticket prices got the lion’s share of attention in the media, with Time gleefully announcing that “Fewer People Are Going to the Movies Because Ticket Prices Are Just Too High,” the reality of what consumers were telling PwC was a bit more complex. Fifty-three percent of those responding selected “Ticket price is too high” when asked the question, “If less or about the same, which of the following best represents the reason for going to the movie theater less often?” Keep in mind that this is a group that overall estimated they went to the movies the same number of times as the previous year. These are not people who are avoiding the cinema because the price is too high.

The next most frequent response to the question was, “Movie genre/themes/titles not as interesting to me.” These two reasons are, quite frankly, linked. Price is a raw number and does not really reflect what people are responding to when they answer these surveys. The real question at hand is value. Unlike almost any other consumer proposition, moviegoers recalibrate the value of going to the movie theater every time they think about going. The question in our guests’ minds is not “Is going to the movie theater worth it?”-it clearly is, as the respondents in this survey go a bit more often than average. The question is, “Is going to see this movie worth it?”

This becomes a bit clearer when we look at a couple of other data points. The No. 1 response, at 75 percent, to the question “How influential to your decision process about whether or not to see a movie at the theater are the following factors?” was, “Depends on what’s playing and if I’m interested in the genre/type.” Second, and interestingly, only 23 percent said better movies would motivate them to go more often. Clearly, moviegoers base their moviegoing decisions on whether they are interested in the movies that are playing and are, broadly speaking, satisfied with what they are seeing.

This is not to say that price is not a factor. Respondents say that last-minute cheaper pricing on seats (53 percent) and $20 all-you-can-watch subscriptions (87 percent) would encourage them to see more movies. The most frequent moviegoers, unsurprisingly, are most interested in subscriptions. At that price, who wouldn’t be?

Indeed, price comes quite strongly into view when respondents are asked to consider home options. Eighty-two percent are willing to pay a premium of between $10 and $20 to watch movies at home at the same time they are released in theaters. Interest falls off steeply at a higher premium. This is consistent with what theater owners have warned are the pricing traps of so-called “premium” home releases in a short window. Beside the enormous gap of potential profitability represented by that $10-$20 range, that number falls short of what distributors thought they could get at 60 days ($30) or at three weeks ($60). And that’s the opening bid.

There is also a hint in this report of the effect that shrinking windows are having on the perception of price across the board. Just as moviegoers calibrate their sense of value based on their interest in the movies that are offered in theaters, so, too, do they adjust that sense on how long they think they’ll have to wait to see the movie at home. Right behind price and interest in the movie as reasons why they might go to the movies less often is “Prefer to watch movies on my own schedule” at 30 percent and “Can see movies at home (on demand) shortly after they are released in the theater” at 24 percent.

Keep in mind that these perceptions of pricing come as, on average, ticket prices have increased a modest 3.5 percent since 2010 to $8.17 in 2014. That includes 3D, luxury cinemas, premium large-format screens and theaters offering seat-side food and beverage service. The average is up 8.9 percent since 2009, reflecting the large-scale introduction of 3D in 2010, and is still below the rate of inflation.

Although recent eye-popping attendance gains after reseating older theaters suggest otherwise, in-theater improvements like better seats, better presentation technologies, and the like stir only incremental interest in the respondents’ minds as ways to increase their moviegoing. Better, of course, is a rather amorphous idea. How much better is the determining factor and a difficult one to imagine as a motivating factor unless one actually experiences it. It is also a truism that consumers rapidly accommodate improvements, and the improved experience becomes the new minimum expectation. The experience is good, is getting better, and has to keep getting better.

The summer that this report aims to explain is more easily explained by a simple lack of movies in the marketplace that would induce customers to part with their hard-earned dollars. In the record-breaking summer of 2013, there were 22 $100-million-plus budgeted releases. In the less-than-stellar summer of 2014, there were 12. With a 45 percent decrease in inventory, a 15 percent decrease in attendance isn’t a disappointment; it’s a miracle.

More movies mean more patrons, pure and simple. For movies that played on at least 1,000 screens in 2004, 24 movies (including those that continued in release in the subsequent year, grossed more than $100 million and accounted for 704 million admissions. In 2014, 33 movies grossed more than $100 million and accounted for 770 million admissions (that’s down by two movies and 43 million admissions from 2013). The studios’ tentpole strategy is working.

However, the movies that aren’t in movie theaters tell the tale. In 2004, 41 movies grossed between $50 and $100 million and tallied 444 million admissions; in 2014, 33 movies in that grossing range accounted for 272 million admissions. For under-$50-million grossers in wide release, 15 fewer movies brought in 83 million fewer admissions in 2014 than a decade earlier.

The movies that are in the marketplace are attracting customers. We just don’t have enough of them.

And the remarkable box office of the first five weeks of the year shows just how anomalous the past summer was. Without a marked change in pricing, without a fundamentally different movie theater experience from half a year ago, box office is booming. Through February 8, box office is up 6.5 percent over the same period last year-which was up 11 percent over the same period in 2013. In fact, box office is on pace with 2010 when Avatar was demolishing box office records.

What has changed? The movies. And the audience thinks they’re worth the price.