Wednesday, October 19, 2005

Why don't movie theaters charge different rates for different movies?

PVR is playing three movies: one is an Aamir Khan movie; second is a Nagesh Kukonoor movie and third is "Aurat ki Jawani, Sharabi ki Kahani" kind of movie!

The question is why doesn't PVR charge different rates for each of these movies? Usually, it doesn't! And this is common through out India! Movie halls don't charge different rates for movies even when they know that a movie may make a lot of money! Why is it so? You would expect a shopkeeper to charge different rates for different kinds of products like Lux or Cinthol even in the generic category of soaps.

There are expections but I haven't seen a movie theater raise its prices for a Shahrukh movie and then decrease the prices as the demand peters down. Why doesn't that happen? Why doesn't the theater market, as a matter of routine, charge varying rates for movies that are expected to be "hot" or "cold"?


Here is a tip! When you want to understand a market, look at its corresponding black market! That will lay a few bare truths!

A movie-scalper (and I did this sometimes to make it possible to see the next hit movie) is selling the ticket at a premium because he is selling the "movie experience"! On the other hand, the theatre owner is selling the theater experience! Both are related but imagine a spectrum with movie experience on the left hand side and theater experience on the right hand side! And you will understand why a distributor looks at the "movie experience" and a theater owner thinks of the "theater experience"! The theater owner's product is primarily the theater experience.

So what?

Why can't I charge more for a Shahrukh movie?
Well, he can! But pricing a product without market research is very difficult. And there are still no economists on the planet who can predict whether a movie can be a sure-fire hit. You can bet but not predict. In fact, even market research is not reliable. One IIPM-Arindam did market research for his movie Rok Sako to Rok Lo, and concluded that there was a market segment for a teenybopper movie. Unfortunately nobody stopped its downhill slide at the box-office. So even if I priced the movie high, and within a week the movie seems to be a flop. And if then I lower my rates, people will come but there is a key tip: people can be fooled only once. This does not hold true during election periods. The next time there is a movie, people will wait for prices to be lowered or well, just go to other movie halls. Imagine SALE placards on theater ticket counters, who would go there except sunstruck people yearning for AC like me?

So the movie owner changes seat capacity according to the predicted demand for the movie and not the rate. It is easier to allocate seats than predict rates. And they have rates for the different kind of seats as well. So showing off to your girlfriend will cost a balcony seat, having privacy will cost you a luxury seat. If I had real estate I did rent them out for vertical car-parking and love-making cubicles. There are exceptions like lesser rates for movies in the morning or afternoons or for other language movies. I saw a Bengali movie on a Sunday 10 am for less than half the usual rate.

Do these reasons make sense? But I also believe as the market develops, all this will change in the future. Primarily because of better pricing strategies in the offing (technology driven) and pricing conventions being shaken off!

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