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http://www.digitalcinemareport.com/node/1644
Submitted by Nick Dager on Fri, 04/02/2010 - 09:50.
Pricing, as anyone in business knows well, is always one of the biggest challenges. Make the price too high and you run the risk of driving away business. Make the price too low and you run the risk of devaluing your product or service. When How to Train Your Dragon underperformed at the box office its opening weekend there was widespread speculation that a significant factor was the recent decision by some major exhibitors to raise ticket prices by as much as 26 percent. There is no way to know for sure what caused the movie to do less well than expected, but if you enter the phrase "movie ticket prices" on Twitter you'll discover a lot of consumer anger. The challenge for exhibitors now is how to train your audience.
Of course, another factor is that there is still a shortage of available 3D screens and both Avatar and Alice in Wonderland are occupying theatres that might have otherwise carried Dragon. But that was the same problem that Alice faced and it fared well despite the situation.
By almost all accounts Dragon is a good movie although most of the reviews I read went out of their way to note that 3D wasn't used that effectively in the movie and wasn't worth paying extra. And as Brandon Gray wrote in Box Office Mojo in its opening weekend the film earned "$43.7 million on approximately 7,000 screens at 4,055 theaters, but it fell far short of the last DreamWorks Animation 3D feature, Monsters Vs. Aliens, which opened to $59.3 million on the same weekend last year. That along with a somewhat tepid start for Hot Tub Time Machine led to a 12 percent drop in overall business from the same timeframe in 2009."
This was not good news for DreamWorks Animation. Lazard Capital Markets analyst Barton Crockett told USA Today the morning of Dragon's release, "Anything below $55 million we believe would weigh on [Dreamworks Animation] shares."
Many factors probably contributed to Dragon's box office results. First, of course, is the fact that we're still dealing with a poor economy. Second, it should come as no surprise that the initial reaction to the recent price hike would be negative. Third, Avatar has spoiled audiences and, again, many reviews that noted that the 3D effects were not that critical to the enjoyment of Dragon. Fourth, the movie couldn't get as wide a release as possible because of the current shortage of available 3D screens. Fifth, and probably the least important, is the fact that the movie opened during the NCAA men's basketball tournament, which is very popular this year.
In an email response to my request for an interview on the subject of the price increase, Sun Dee Larson, AMC Entertainment, vice president, corporate communications, wrote: "Across our circuit, AMC offers guests many ways to experience and enjoy a movie. Pricing varies based on many factors, including location, time of day, day of week and of course, the sight and sound presentation experience. The range of sight and sound presentation experiences includes traditional 2D, 3D, our proprietary ETX, ETX 3D, IMAX and IMAX 3D. The technology, production and associated costs behind films presented in the new and emerging formats do indeed cost more, and it is inevitable some of those costs will eventually appear at the box office. Even as those escalate, we have committed to hold the line as much as possible on our 2D pricing, as we want to continue offering great value to our guests." She declined further comment.
Regal did not respond to an email request for comment. In an email, Cinemark spokesman James Meredith said earlier press reports about his company were inaccurate: "Cinemark did not raise prices last week." He did not respond to further questions on the topic.
This issue is so sensitive that no competing exhibitor wanted to comment on the record either. The head of marketing for one major competitor of AMC, Cinemark and Regal was also trying to understand why Dragon had no done the business people expected and said privately that he thought the price hike had hurt Dragon but added that his company plans to raise ticket prices later this year.
Exhibitors knew this could happen because there has always been resistance to price increases. They also knew that, as more theatres get 3D screens the chances of getting audiences to pay a premium for 3D will diminish. Why pay Theatre A an extra two-five dollars for a 3D movie when Theatre B a few miles away is showing it for less? They also have expensive new technology to pay for to remain competitive. Thus, the need to boost ticket prices now across the board.
There was mixed reaction from the Hollywood studios to the hike in ticket prices but the move does have its supporters. Dan Fellman, president of domestic distribution for Warner Bros. told the Wall Street Journal, "The exhibitors are trying to push the needle on ticket prices and see where it ends up. So far charging a $3 or $4 premium has had no effect on consumers whatsoever, so I'm in favor of this experiment to raise prices even more. There may be additional revenue to earn here."
Content is, always has been and always will be king. That is a cliché but it's a cliché because it's also true. While not enough, in my mind, has been written about the absolutely brilliant marketing campaign that contributed to Avatar's success, my guess is even the people who created and executed that campaign were stunned and thrilled by the breathtaking size if its success. People around the world went to see Avatar – in some cases multiple times – because it touched them. And they understood that they had never seen 3D quite like that. There are several movies due out in the weeks ahead that, in my mind at least, fall into the category of must-see movies and will do good business regardless of the price of admission. I can name three: Harry Potter, Iron Man 2 and Toy Story 3.
Of course, another factor is that there is still a shortage of available 3D screens and both Avatar and Alice in Wonderland are occupying theatres that might have otherwise carried Dragon. But that was the same problem that Alice faced and it fared well despite the situation.
By almost all accounts Dragon is a good movie although most of the reviews I read went out of their way to note that 3D wasn't used that effectively in the movie and wasn't worth paying extra. And as Brandon Gray wrote in Box Office Mojo in its opening weekend the film earned "$43.7 million on approximately 7,000 screens at 4,055 theaters, but it fell far short of the last DreamWorks Animation 3D feature, Monsters Vs. Aliens, which opened to $59.3 million on the same weekend last year. That along with a somewhat tepid start for Hot Tub Time Machine led to a 12 percent drop in overall business from the same timeframe in 2009."
This was not good news for DreamWorks Animation. Lazard Capital Markets analyst Barton Crockett told USA Today the morning of Dragon's release, "Anything below $55 million we believe would weigh on [Dreamworks Animation] shares."
Many factors probably contributed to Dragon's box office results. First, of course, is the fact that we're still dealing with a poor economy. Second, it should come as no surprise that the initial reaction to the recent price hike would be negative. Third, Avatar has spoiled audiences and, again, many reviews that noted that the 3D effects were not that critical to the enjoyment of Dragon. Fourth, the movie couldn't get as wide a release as possible because of the current shortage of available 3D screens. Fifth, and probably the least important, is the fact that the movie opened during the NCAA men's basketball tournament, which is very popular this year.
In an email response to my request for an interview on the subject of the price increase, Sun Dee Larson, AMC Entertainment, vice president, corporate communications, wrote: "Across our circuit, AMC offers guests many ways to experience and enjoy a movie. Pricing varies based on many factors, including location, time of day, day of week and of course, the sight and sound presentation experience. The range of sight and sound presentation experiences includes traditional 2D, 3D, our proprietary ETX, ETX 3D, IMAX and IMAX 3D. The technology, production and associated costs behind films presented in the new and emerging formats do indeed cost more, and it is inevitable some of those costs will eventually appear at the box office. Even as those escalate, we have committed to hold the line as much as possible on our 2D pricing, as we want to continue offering great value to our guests." She declined further comment.
Regal did not respond to an email request for comment. In an email, Cinemark spokesman James Meredith said earlier press reports about his company were inaccurate: "Cinemark did not raise prices last week." He did not respond to further questions on the topic.
This issue is so sensitive that no competing exhibitor wanted to comment on the record either. The head of marketing for one major competitor of AMC, Cinemark and Regal was also trying to understand why Dragon had no done the business people expected and said privately that he thought the price hike had hurt Dragon but added that his company plans to raise ticket prices later this year.
Exhibitors knew this could happen because there has always been resistance to price increases. They also knew that, as more theatres get 3D screens the chances of getting audiences to pay a premium for 3D will diminish. Why pay Theatre A an extra two-five dollars for a 3D movie when Theatre B a few miles away is showing it for less? They also have expensive new technology to pay for to remain competitive. Thus, the need to boost ticket prices now across the board.
There was mixed reaction from the Hollywood studios to the hike in ticket prices but the move does have its supporters. Dan Fellman, president of domestic distribution for Warner Bros. told the Wall Street Journal, "The exhibitors are trying to push the needle on ticket prices and see where it ends up. So far charging a $3 or $4 premium has had no effect on consumers whatsoever, so I'm in favor of this experiment to raise prices even more. There may be additional revenue to earn here."
Content is, always has been and always will be king. That is a cliché but it's a cliché because it's also true. While not enough, in my mind, has been written about the absolutely brilliant marketing campaign that contributed to Avatar's success, my guess is even the people who created and executed that campaign were stunned and thrilled by the breathtaking size if its success. People around the world went to see Avatar – in some cases multiple times – because it touched them. And they understood that they had never seen 3D quite like that. There are several movies due out in the weeks ahead that, in my mind at least, fall into the category of must-see movies and will do good business regardless of the price of admission. I can name three: Harry Potter, Iron Man 2 and Toy Story 3.
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