Film Fund-amentals: Tickets to Dreamland

Somebody asked me recently how the cost of movie tickets is determined. I told them “Good question.” Then I realized that they were serious and actually waiting for an answer. After staring blankly for a few minutes, I excused myself to go to the bathroom and never came back.

Truth be told, there is no logic to admission prices. The last time the cost of seeing a movie had any relationship to anything rational was back in the days of the nickelodeon (and that had to do with the cost of the average amusement park vending machine). The rest is simply based on what the public will put up with.

Which is why this person’s second question (I didn’t really flee in time) is also extremely provocative: Would it make sense for theaters to charge less for low-budget independent movies than they do for the big budget boys? To that question I can plant my feet and firmly answer: Yes and no.

So let’s go back for a second to the first question. Unlike many other businesses, there has never been a real relationship between admission price and the cost of manufacturing and presenting a movie. This is a good thing. If admission prices were determined by this cost relationship, no one could ever afford to go to the movies. The industry has always been upfront about keeping ticket prices artificially low. In fact, the price is totally illusory; it’s just a number somebody made up.

But this made-up number is supposed to relate to a few basic economic issues concerning the audience. The key issue is what the audience is willing (and able) to afford. This has always been the magic figure that theater owners try to second guess. They don’t want to cheat themselves any more than they want to price themselves out of business.

Which is exactly why theater owners actually have more flexibility in ticket prices than most seem to realize. In fact, they could charge variable rates depending on the budget, publicity, and audience interest in particular films. They could easily charge $15 to $20 dollars for Transformers Part 35 and $1.50 for an indie film by Hal Hartley.

However, this will not happen. For the most part, theater owners do not do math, and they prefer a single fixed price. Anything beyond that gets complicated, and they don’t do complex accounting (though the modern ticketing system would easily facilitate this process). Besides, most of them still cling to the MPAA myth that movies are the cheapest form of entertainment around. That claim isn’t exactly true, but it is deeply embedded in their psyche.

More importantly, the distributors for major, budget-bloated Hollywood films would not want a bunch of small-budgeted indie movies undercutting the ticket price. This is ironic, because no matter what they charge for Transformers Part 35, millions of teenage boys will still go see it on the opening weekend, while even at a $1.50, only a couple of dozen die-hards will go to anything by Hal Hartley. Yet the average Hollywood producer ends up feeling threatened by this prospect. The threat is obviously irrational. Unfortunately, so is much of the film business, and feeling takes weight over reality.

It would be great to see theaters apply a broader range of variation in their ticket prices. It may or may not make a critical difference to the box office potential of indie movies, but it would make a difference to the theaters. Whether the industry knows it or not, the current pricing system is not sustainable.

Remember what I said about the relationship between ticket prices and what the audience is willing and able to afford. Some months back, I argued that we were already entering an economic depression, and that the real unemployment figure was closer to 16 percent. In a recent study, Leo Hindery, Jr. presents a strong argument that the real unemployment figure is closer to 18.8 percent. In response to this report, the conservative historian Michael Lind argues in a recent op-ed piece that the real figure might easily reach 20 percent. Suddenly, my previous projection of 16 percent looks like a smiley face on an obit notice.

Likewise, movie attendance is already down. Forget the claim that there has been a 5 percent increase this year. As I previously argued, that claim is bogus. If anything, business is off by more than 5 percent and declining. Attendance will continue to drop (and drop sharply) well into the first quarter of 2010. Meanwhile, the mighty heads of Hollywood are totally convinced that the average American is just chomping at the bit to pay $15 dollars or more a pop to see movies in digital 3-D. This thinking is completely irrational. It is even delusional.  In fact, it is utterly insane. But this is the current direction of Hollywood.

So come to think of it, I suspect greater variations in ticket prices would be a truly swell idea. Now, let’s negotiate the prices at the concession stand….