Why have movie ticket prices and more so popcorn prices vastly outstripped inflation.
In: Economics
Very few items are directly pegged to inflation, I’m not sure why you’ve singled out movies and popcorn specifically, it doesn’t really make much sense.
Most movie budgets have outstripped inflation too (for a lot of reasons, but largely because of demand for big-budget CGI). At the same time, fewer people are going to movie theaters. So stakeholders in all steps of the supply chain are trying to extract more revenue from a shrinking consumer base.
Fewer people are going to the movies and movie studies are taking bigger cuts of the box office on the first few weeks of releases. All while people have always had a fixed portion of their budget for entertainment.
So basically, no matter what, people will only spend the same fraction of their budget on entertainment. When cost of living rises and wages don’t match it, that means the proportion of money they can spend on entertainment goes down.
At the same time, entertainment has been really cheap, what with streaming services offering basically endless content at lower prices. Cordcutting is a big influence on this, but so is changes in the consumption of culture with more money going to live streaming and gaming. All of that is entertainment.
So the theaters have a conundrum. They want to grow at the same rate and meet their expectations as they always have, typically 5-10% revenue growth per year. But they don’t make content, they just are the endpoint for distribution. The only thing they can control is the ticket price and concessions.
TL;DR the theater is a slowly dying business model.
They are segmenting the market into higher-paying customers who’ll pay plenty for a first-run film in a theater, and lower-paying customers who’ll pay under $10 a person to see the film a bit later on video, and then still lower-paying customers who’ll watch it on HBO, Netflix, on-demand, etc.
The biggest reason is that where theaters make majority of their money. The big box office numbers are not going to the theaters but the people who make the movies. Most movies make majority of their money in the first two weeks after release and take into between 40 – 55% of a ticket sale.
A cinema near me recently dropped it’s prices from £11-13 per ticket (insane) to £5 per ticket (great price). I expect they’ll soon be out of business because you don’t make a drastic change like that unless you’re really struggling. Unfortunately it probably isn’t possible for most cinemas to charge what customers would consider reasonable unless they have a very high local population.
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