Get Smart! About Ticketing: UCI Kinowelt counts on dynamic pricing

Cinemas Features

“The cinema market in Germany is very open to the subject of pricing,” says Claas Eimer, commercial director of UCI Kinowelt, a leading circuit in the country and subsidiary of AMC Entertainment’s United Kingdom-based Odeon Cinemas Group. “And, as an innovative exhibitor, we are equally open to new ideas and opportunities.”

As our industry is expanding on ever-so-new and differentiating options, ticket pricing has become the latest frontier, and possibly one of the greatest points of debate going forward. With food and beverage, upgraded seating and a variety of premium offerings all moving along nicely, and ticket surcharges growing, attention is once again focused on how much it all costs for the consumer. MoviePass and Dealflicks are making waves, as is every official announcement of average ticket prices across North America when issued by NATO. We also keep hearing doomsday declarations on declining—or at least plateauing—attendance numbers.

Addressing Regal Entertainment Group’s numbers during their third-quarter earnings call in November, chief executive officer Amy Miles also broached the subject of pricing. “With the help of our partner Atom Tickets, we expect to conduct a ticket-pricing test in several markets in early 2018. If an alternative pricing model is going to be successful, we believe that, one, it must provide a clear economic benefit to both exhibitors and our studio partners, and two, it should provide a compelling value proposition for our consumers. This test could be the first step towards a pricing model that drives incremental revenue in peak periods and incremental attendance in non-peak periods. Changes to the historical pricing structure have often been discussed but rarely tested in our industry and we are excited to learn even more about how pricing changes impact customer behavior.”

The cinema business is entering the age of dynamic pricing, based on actual and varying demand, as we know it from the airline and hospitality industries, to name but two of the pioneers. As with all changes and new ideas, exhibitors are mulling over a variety of options, many of which are not that new at all in different countries: pricing according to a film’s length, popularity and/or budget; based where you sit inside the auditorium, in a preferred place or up front, and how comfortably—all the while allocating ticket discounts during off-hours and extending bargain matinee/basement options. There is even talk about “surge pricing for movies,” based on the policies used by ride-sharing services.

For this month’s exclusive roundup of ticketing technology and services, Film Journal International had the opportunity to speak with a very early adopter of and now leader in applying dynamic pricing, even though UCI Kinowelt’s Claas Eimer prefers the term smart pricing. More to that later. UCI Kinowelt is the first chain to establish a model of ticket prices changing according to demand and constantly updated in real time.

Eimer explains how UCI Kinowelt first connected with Berlin, Germany-based Smart Pricer, a company that has enjoyed much success in dynamically pricing airline and event tickets. “We were brainstorming about how to come up with a new and more dynamic pricing model for cinemas in general, and for UCI Kinowelt in particular. Already in 2015, we embarked on a pilot phase at our Kinowelt Potsdam, in close collaboration with Smart Pricer. The results were positive and we added two more locations in the fall of 2016. Currently, we offer dynamic pricing in ten locations and continue to roll out this offer over the next five months.”

Just this January, the partners confirmed that Smart Pricer’s airfare-style pricing software will, in fact, be deployed to all 23 multiplexes and 203 screens across the circuit. “After observing overproportional revenue uplifts and good customer acceptance at our test sites,” Eimer noted on the occasion, “there is no doubt that our choice to partner with Smart Pricer and [POS provider] Compeso has been the right decision.” Added Jens Heinze, UCI’s managing director, “It is a ‘plug and play’ solution that allows us to set the pricing rules in the web interface, while the system optimizes the ‘price mix’ of all shows automatically based on our settings.”

As Heinze describes the essential mechanics of price optimization, Smart Pricer’s “mission is to help cinemas get pricing right,” the company promises. Before applying its “revolutionary pricing software” to the cinema space, company founders and executives Christian Kluge and Franz Blechschmidt worked in the areas of airline ticketing and events. Their biggest client in the latter realm is German Bundesliga team Hertha BSC. (Whether Smart Pricer had anything to do with the Berlin soccer club extending an offer of a lifetime ticket tattoo could not be established by press time. Whether that is a smart decision by the wearer remains to be seen.)

Smart Pricer first uses algorithms to understand patterns of demand and to segment customers. External elements that affect forecasting such as weather and overall interest are in a beta trial. The software then adjusts the size and extent of seating categories to optimize the “price mix” in real time.

“Guests have the option, both online and at the cinema, to choose between different categories of seating and prices,” Eimer says of the system, which applies only to assigned seats. The term “reserved seating’ is not used here, as many exhibitors in Germany and other countries still offer a way of securing seats—making reservations—without payment in advance. Because seats have not been purchased in this case, to faciliate selling all availableinventory, unclaimed reservations and corresponding seats are released a certain amount of time before the show begins.

“Auditorium segmentation into regular and loge seats, as well as VIP seating at some of our locations, has been in place before,” Eimer continues. “In the dynamic model, these catgeories are differentiated further so that moviegoers can chose between four or five prices, including VIP. Dynamic adjusting does not happen to the ticket prices, but the number of available tickets in each category is adjusted automatically.”

This is the reason why Eimer and UCI prefer to use the term smart pricing. “In the classic model of dynamic pricing, as we know it from booking airfare, the difference is much more dramatic. With smart pricing, there are always seats that are cheaper than before. In the up direction, the top admission price remains in place, essentially. Thanks to smart pricing functionality, there are simply more categories whose availabilties adjust based on supply and demand.” In other words, he says, “it is not more expensive overall but ‘smarter,’ and offers more choices to guests where they want to sit and at what price.”

How does UCI Kinowelt effectively communicate both the many already established and the decidely advanced newer choices? “We explain all the options to our guests at the time of their ticket purchase,” Eimer replies. “All the different categories are displayed online along with the corresponding ticket prices. We installed an additional display at almostevery one of our ticket-selling stations. They show the auditorium layout, prices and seating chart with categories changing in real time. This way, moviegoers can easily see where they can sit and at what price.” This has all been working well, “and we did not launch any special marketing campaign for smart pricing,” Eimer assures.

Another possible misconception about smart pricing is that early buying and booking yields a discount. Although that option makes sense as well, by rewarding fans and frequent moviegoers, it does take away from the upside with film hits and those high-demand titles. Discount days and extending rebates for attending off-peak showtimes are other instances of incentivized pricing that the cinema business has been and still is offering. Not so with smart pricing, Eimer contends. “There are no rebates and reductions with smart pricing. It is more like you can sit better and cheaper when you book early. After all, ticket prices remain fixed for each category of seats. With that, any given special film does not get more expensive. The number of seats associated with each category changes, but not the overall pricing structure.” So, with smart picing, there is no need for surge pricing and/or the decidely negative perception that comes with it—one of “jacking up tickets” for films that “I, the moviegoer actually want to see.”

As always, proof is in the numbers, and Smart Pricer confirms that “cinemas using our dynamic pricing software experience a significant revenue increase.” White papers and other documents issued by Smart Pricer speak of expected increases in ticketing revenue, ranging anywhere from five to ten percent as “moviegoers accept the price model.”

Even before beginning to work with five exhibitors, Smart Pricer spent time analyzing the market specifics in Germany and moviegoers’ willingness to pay. In the country’s capital, Smart Pricer found CineStar CUBIX to have the largest price spread of nearly 200 percent to see the same film in the same theatre—ranging from €6.50 to €13.30—depending on day of the week, seat quality and the booking channel a customer chooses.

Smart Pricer goes on to predict that “recent pricing innovations that are likely to spread throughout the German market over the coming years are discounts for online purchases, bundling of ticket and concession sales, installation of premium seats, offering up to four price categories for the same show and switching to true-demand-based dynamic pricing.” While “various price surcharges and discounts give customers more choice in what they are willing to pay,” company research further suggests “not all techniques are beneficial to customers and exhibitors.”

UCI Kinowelt, for one, has observed a higher utilization of online ticketing. “This behavior is based on several external factors as well,” Eimer elaborates, “of which smart pricing is one of them.” As for revenue development, he remains upbeat. “The effects on our average ticket price cannot be fully determined yet and they vary by location. Overall, however, we do see and expect a generally positive impact on the average ticket price. We do need some more time to analyze and evaluate all the details.”

Another vital element to the success has already been fully established. “The integration with our POS system from Compeso was indeed a key to the successful implementation of smart pricing. Changing did require a lot of work and investments. Our collaboration did work very smoothly, so that we have a solid basis for the rollout. Manual adjustments to the system at the cinema level were reduced to virtually none, and that was one of the main criteria to begin our coverage across the country.” Smart Pricer adds that while its optimization software has been integrated with several POS offers, even without such integration the effort merely involves “five to ten minutes per day for daily price updates done by the local theatre or central pricing team.”

While Eimer says UCI Kinowelt is now concentrating on the operational aspects of the ongoing rollout, he is still excited about seeing the results come in. And, of course, there is always more to get excited about. “For us, smart pricing represents a new model in our general pricing tools. We see other offerings, such as subscriptions and discounted days, as independent from smart pricing. Our UCI Unlimited Card has been successully established for guests to watch all films at a flat monthy rate. And we still maintain that offer for film fans who are very loyal.”

No matter how many pricing opportunities and options are available and still to come, Claas Eimer knows that growing revenue and attendance is not about the ticket price alone. “In our view, general reductions do not have the potential to significantly change the marketplace for moviegoing. For that to happen, the guest experience needs to continue to improve. We have to upgrade our cinemas and make them even more modern and attractive. Going forward, UCI Kinowelt will continue to deploy premium concepts such as IMAX and our very own iSens or UCI Luxe brands. Very soon, we will open the first UCI Luxe Kino in Germany, fully equipped with recliner seating. Just like smart pricing, this will be something entirely new in Germany.”

Smart move, all around.