[00:00:00] Aidan: Hello and welcome to another edition of Pricing College with your host Aidan Campbell [00:00:06] Joanna: and Joanna Wells [00:00:07] Aidan: Often at Pricing College, we find new ways to show that we live in the past. And so today we are going to talk about cinemas, cinema pricing, and I predict somebody will say movies are not as good as they were in the old days. [00:00:21] So I'll let Joanna kick-off . [00:00:24] Joanna: I think we we're talking about cinema pricing, partly as response to that Bruce Springsteen, dynamic pricing scenario that occurred a few weeks ago. I'm sure we discussed it in a podcast few weeks ago, but it's been throughout the press and, you know, it reminded us of, you know, back a few years ago, when cinemas were sort of, I mean, struggling with their business model, less people going, demand for cinema and movies going down, rising of Netflix, all that sort of stuff. But, so they were thinking about, you know, how can we make more money and more margin as a cinema? What new pricing methods could we use? [00:01:03] And they're really toying with the idea of dynamic pricing. So yeah, when I look at that now, that strategy and you think, Oh, well, it seems to be working in the ticket industry for other entertainments. Why is networking so well for cinemas? Well, partly, I mean, through the pandemic, you know, it's been very difficult for, you know, cinema to even test new pricing methods like dynamic pricing, because simply people weren't going out or allowed to go to the cinema for a long time. [00:01:37] And still, you know, there's that, that knock on effect, on demand levels, you can see they're dropping. Very few people still going. Before we go onto that, let's think about how cinemas really do make money? How are cinemas still open today, considering very few people go? [00:01:52] Well, the sales model really is based around the distributors really funding a lot of cinemas. Cinemas pretty much give way about 20. Well, let's say 80% of ticket sales in the first two weeks to distributors for movies. And after that point, they pretty much keep all their sales. So for them movies like Avatar are great because what they can do, they can bring out the old avatar movie, the first one. [00:02:22] Because they sort of own the rights to that one. Now they don't have to pay the distributors anymore. Well, they don't own the rights of it as well. They've got, they can keep all of the sales revenue from that in preparation and then move on to, you know, forward forecasting for Avatar two. [00:02:41] And that's a great way for the cinemas to make money, at which point they could potentially use dynamic pricing, you know, as they build demand for that movie, however, the customer experience and demand levels have to be optimised to be able to do that, and I really don't [00:03:00] think at this point cinemas will be able to test dynamic pricing. Hence, it's not really been tested. [00:03:08] Aidan: Yeah, like I find there's a lot of interesting pricing things we can look at with cinemas. You know, I think there's been an arms race, at least in Australia with the quality of the cinemas themselves, like the actual rooms, the buildings, not so much the locations because they've probably moved away from of market, red carpet style, CBD areas to, you know, malls on the edge in suburban malls. [00:03:31] But one thing that, you know, we've seen in this Australia Gold class, I don't think there might even be a platinum class, almost like very leather beds. Fully flat seats. It's almost like the peripheral has really invested in that. And usually that's something we really push with or we promote here in Pricing College, talking about the value adds that they offer. [00:03:51] You know, you're gonna have drinks brought to your seat. Some cinemas will have buttons you can press and a waiter will come up and bring you stuff, which all sounds very luxurious. But, you know, [00:04:00] I think almost can we argue that, And I think I'll be the first one to say that, you know, maybe the core of what they're offering has decreased, you know, the quality of movies, I think a lot of people admit that it isn't as good as it used to be. [00:04:11] I think the only movies that are selling out now, there seem to be disney style movies or the never ending stream of Marvel, and DC comic sort of action hero movies. But I think cinema in general, you know, the normal cinema goers, I think that market has decreased. [00:04:26] And to some extent you have to argue that the core value of the cinema, which is the actual movies, you know, there is a real risk there, a real issue there with what's being produced. Obviously the cinema owners don't have an influence on that. So that's the first thing I'll add. Second thing, I just think, we often talk on this podcast about, you know, revenue management and capacity constrained, like, and to a large extent, cinemas are capacity constrained also, ...
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