The Price of Success: New models are shaking up the movie theatre business
Businesses the world over carve out their own niches by playing around with the four P’s of Marketing. They differentiate themselves from their competition by tweaking any of: their core Product, their distribution/availability (Place), how they Promote their brand and messaging and, of course, their Pricing strategy.
Pricing has typically not been used as much of a differentiator amongst exhibitors. Most cinema operators within a market price themselves comparably to their competitors and only offer variance through loyalty schemes, special offers or seating/3D/PLF upgrades. Even then, the same off-peak offers can usually be found at cinemas across an area. The main ways audiences have chosen between cinemas in the past has been a result of their Place (location and film times) and Product (Is there a bar or just popcorn? Are there comfortable recliners or worn seats? Are they hosting an indie with a Q&A session, or are they playing the latest blockbuster?).
However, this is now changing. Exhibitors have started to play around with their commercial models to drive increased loyalty, visits and revenue. Dynamic pricing encourages lucrative behavior like pre-booking tickets, “all-you-can-watch” memberships cater to a thrifty generation of cord-cutters who are used to paying regular entertainment subscriptions, and affordable family-friendly screenings are helping to fill otherwise empty auditoriums during the day.
Pricing is becoming a key weapon in securing customers, and may yet prove to be the best way to harvest and make use of customer data.
And as we’re seeing more and more in the news, data is all-powerful. Whoever “owns” the customer owns their data, and that can be hugely profitable as an internal resource as well as a resalable asset. Cinemas with loyalty or subscription services will find that the power of the data they capture is essential for their long-term success.
But as exhibitors start proving the viability of new pricing models and implementing new services to keep customers coming back, they find themselves under threat from businesses whose primary focus is on the data, and not the customer. Entrants from completely outside the industry are inciting a value war on them and, for now at least, can use pricing more effectively to attract audiences and entice studios with the lure of better demographic and behavior data.
In China, third-party online ticket providers regularly sell tickets significantly cheaper than cinemas do, and they now have the majority of the market share. In the U.S., MoviePass is happy to lose money day after day, because cinemagoers are now their customers, and not exhibitors’. And this month, the same model is trying to establish itself in the U.K. with the launch of C-Pass.
With third-party companies muscling in on the sale of tickets, the perceived value of tickets could also be slowly eroded. Today, most cinemagoers think that a trip to the cinema is worth, say, $10. But in the new models, $10 is a whole month’s worth of cinema visits. The longer this model is available, the harder it will be to persuade customers to spend $10 to see a single film again.
Whether these newcomers to cinema ticketing and their pricing models are sustainable in the long term is another matter altogether. But what is certain is that pricing is now a significant strategic tactic, and exhibitors are no longer simply competing amongst themselves.
So take heed: You are no longer profiting fully from your customers if the only thing you obtain from transactions is their money. Their data could be just as valuable, if not more so.