Should Movie Theaters Charge Less For Flops?

Would a variable admission price change Hollywood's fortunes?

Movies always cost the same. There are some variations in pricing - matinees may cost less, for instance, or a theater may do a cheaper Tuesday - but a movie costs what a movie costs. There are no sales on movie tickets. Movie theaters don't have dynamic pricing that responds to supply and demand in the way that airlines or book stores do. Should they?

From the LA Times:

"Movie exhibitors are operating with the largest amount of excess capacity of any industry we could find in the free world," wrote Todd Juenger, a senior analyst at Bernstein Research. Nearly 93% of theater seats go unfilled, he said, including 99% between Monday and Thursday.

That seems pretty nuts. Juenger went on to say that variable pricing could have made Hunger Games a bigger hit and might have made John Carter more money. In this scenario the hit movie would see its ticket prices rise, while the flop would get cheaper.

The analyst claimed that with higher pricing "The Hunger Games" could have grossed $250 million worldwide on its opening weekend, compared withthe $219 million that the Lionsgate release actually collected. "I also submit that [the costly flop] 'John Carter' could have eked out more total revenue, especially post-opening weekend, by lowering prices," he added.

It's interesting. I know people who happily wait for bad/flopping movies to hit the local discount theater - would they be enticed to come to a regular (better) theater if it cost less to see these movies? If theaters are mostly empty wouldn't some variable pricing make sense - there would be no actual loss, as any admission is better than an empty seat.

Luckily I have access to an expert of my own, so I fired off an email to Tim League, owner of the Alamo Drafthouse theaters. Here's what he had to say:

"Although we haven't ever experimented with a variable ticket pricing model, we have discussed the idea numerous times. I am intrigued by the idea for sure.  There is a bar in Austin called The Beer Exchange that is trying a supply/demand on their beer pricing.  We are watching their efforts with keen interest.  I do believe, however, that using supply/demand pricing to increase prices on the opening weekend of Hunger Games may lead to a fan mutiny."