In Case of Rain

(Photo: Media Pete)

In the town where we stay on the New Jersey shore the local movie theater advertises: In case of rain, we will have an extra show at 1PM on weekdays. Pretty clever. If it’s rainy, the demand curve for going to the movies shifts rightward—who wants to go to the beach in the rain. Accordingly, the theater increases the amount of showings supplied to the market. But why don’t they raise the price of tickets on bad-weather days? Presumably because it would create bad will among customers who might feel exploited, but perhaps there are other reasons. (I can’t imagine that it is difficult to alter prices on a daily basis.)


Jack

I always wondered why they charged the same prices for all movies. All movies are not the same cost or quality or target audience. A small independent film would have a chance to make more money if the prices were lower because the lower price could spark interest. Big blockbusters would make more money if prices were higher.

Kevin

You don't say whether this is a "first run" or "second run" type of movie theater, but in either case, the answer probably has something to do with the pricing model of theaters. Theaters basically make no money on the ticket price. First run theaters usually pay obscenely high fractions of the "gate receipts" to the distributor - up to 95%. Incidentally, that's why refreshments cost so much ... a modern movie theater is actually a concession operation that happens to use movie projection as enticement to buy popcorn and soda. Second run theaters usually pay a fixed cost for a given rental period, regardless of ticket sales, unless they sell too many tickets, at which point they pay a high fraction of gate receipts above the trigger level. Neither have ANY incentive to raise prices to generate more revenue ... they won't see any of it anyway.

David

No benefit from raising ticket prices. The theater makes its money on concession sales, not admissions.

Anything that might deter people from choosing a movie as opposed to a different rainy-day activity is a disadvantage.

Phil

"Regular price, $15. But we offer a $5 discount on sunny days!"

mhenner

Remembering all of the articles discussing how movie ticket price are a loss leader, so theatre owners can make their profits at the refreshment stands, it may be in their interest not to raise prices, but to encourage bigger attendance.

Ray

Who says they don't? If they did, it certainly wouldn't behoove them to make a big deal about it by putting it on the sign. As for the loss of good will, the extra showing for rainy days is designed to bring in tourists, not locals.

Steve Nations

I would be upset if the movie theater tried to gouge me on a rainy day. Bad will indeed.

Also -- and I don't pretend to understand the finances of movie theaters -- but I think that most of the ticket price goes to the movie distributer, and the theater makes most of its money on concessions. So they have an incentive to keep the ticket price down so that movie-goers have more money for popcorn and soda.

Ray

In other words, raise the prices on the concessions, not the tickets. As a bonus, this is probably more difficult for the consumer to detect although I still think it doesn't matter if you are catering to tourists.

Rajat

Changing prices is easy. Managing the customer service issues with angry customers is not. It also would not be profitable. For one, getting a reputation for exploiting customers would lose business. Second, ticket sales don't generate most of the profit; the concession stand does. By having another showtime, they get more people coming in to buy overpriced snacks.

Aaron

Here is why they don't raise ticket prices when it rains, or (an even better question) why the newly release blockbuster isn't priced higher than the movie that has been running for 4 weeks, and is on it's way out:

Exhibitors (Theaters) sign contracts with Studios (The Devil.)

They agree to a certain number of showings per week, in an auditorium of a certain size, at certain hours for a certain price. The exhibitor then pays the studio a fee just to lease the movie, to get it in the door.

On top of that, the exhibitor pays a sliding scale to the studio based on the time in release. Typically the studio takes 90% of the first week's box office, 80% the second, etc etc.

So there are your two good reasons. 1. Increasing the ticket price by $1 only nets the theater $.10 and 2. Studios would completely freak out and refuse to contract with this chain in the future.

Rob Stevens

The economics of the movie business is absurd. Most theaters are basically "renting" the movies from the distributors. What you pay is based almost entirely on ticket receipts, usually as a percentage. For example, a movie may be "sold" to a theater for 85% ... meaning the distributor takes 85% of the money from ticket sales.

That example may seem ludicrous, as a 15% profit margin seems absurd. So when you imagine that it's usually far worse. Most of the time, it's closer to 90%, and for massive blockbusters, it may even be 105-110%! (This is where the idea that they make it up on concessions comes into play.)

On top of that, the split changes week to week. The longer the theater keeps the movie, the more profit they can make from it as demand starts to die down. By week 3, a theater might be getting a more reasonable 50/50 split.

There are even more variables at play, when you consider 3D (and the surcharge for the glasses), package deals (more favorable rates on blockbusters in order to carry smaller films), and such. Can you imagine how difficult the math would get for a theater if they wanted to price discriminate? There's a reason why it's hard to find matinee pricing any more. Adding more showings is far easier to handle.

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Dave

Prices are included in contracts between theaters and movie distributors. Can't change them.

Zinadine

It is really easy to alter prices on the day for most of the IT systems which the Major cinema chains use, I work in one in the UK and we have discussed doing exactly this for many years but feel as though the ill will from the customers would be a PR nightmare, even though all the other chains would 100% follow the week after the fuss died down.
It is not too different in principle than charging more for the time of day or day of the week, or charging by age or status which all chains in the UK already do (Students discounts, childrens discounts weekend peak pricing, cheaper during the week days). A similar model to the one which hotel chains and ariline companies has been discussed at great length......

Zinadine

Most large chains will be paying on average about 50-60% rental on the films across the circuit each year, so the big percentages average out against the small ones. When revenues for box office in the uk chains are £100 million pounds, a net profit of £40-£50m is quite nice. Cinemas make a profit on the distributors on the 3d glasses they recycle, buy them back once cleaned for half the price and pass on the full amount to the film owners, add in revenues from online bookings, phone calls and massive marketing revenues and you will see some tidy numbers. Plus an average profit of 70% on all food and drink, there is money to be made. Cineworld UK is a publicly traded company and a summary of their accounts is easily available. Mr Weiner and his crew are doing very well indeed.
As a generally rule, cinemas in the UK are built in highly populated "rainy areas" so in a way they are already making more money when it rains. There is a high concentration of cinemas in London, Manchester which have a lot of rain and a lot of potential customers, that is why there is not many cinemas in Devon & Cornwall and along the south coast in general. The same reason why deserts don't have multiplexes. As a side note, no-one in the UK goes to the cinema when the sun shines...........

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RGJ

Make your money selling umbrellas outside doing the seinfeld twirl. Who brings their umbrellas on a beach vacation??

pawnman

Bad will and competition. I can't imagine this is the only theater within driving distance of the beach.

Ian M

Could this rain model be applied to other entertainment? Do prostitutes do better in poorer weather? I would think not.

pawnman

But strip clubs might.

Enter your name...

I think that making the ticket price unpredictable or complicated would discourage customers. Imagine if the price of a hamburger changed hourly at the fast food restaurant on the grounds that demand is higher at noon than at 2:30 p.m. You'd never know how much money to bring with you. Teenagers, who often pay cash and who are a major market sector for rainy-afternoon movies, would be particularly affected.

greg

What I dont get is why summer is the big time for movie releases? Surely the cold dark and rainy winter would garner higher box offices.

Is it just cause the kids are on holiday?