Will raising ticket prices decrease movie industry profits and increase piracy and illegal downloading of pirated Hollywood films?

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Ticket prices have skyrocketed in the past few years. I remember when tickets were about four dollars a person and now they are even reaching $20 for 3D movie releases such as "Clash of the Titans." With such drastic changes in ticket prices, will the movie industry suffer for short term gain and exploitation of thr 3D phenomenon? What happens when 3D becomes commonplace and all TVs incorporate 3D technology?

Piracy comes in form of P2P networks and in hard copy bootlegs. The main causes for increased piracy is that fact that new movie releases debut globally at different times, the users growing preference to digital and the fact that going to the movies can be expensive, especially when you add in the snacks and beverages.

Eager movie watchers waiting for the movie to be released in their region will likely look into downloading the movie illegally if the debut date in their country late or if they have to wait a long time to see it legally. Another reason is availability. If a specific movie is never released at the local theatres, the likelihood of piracy increases. How about regions that do not have movie theatres?

The reality is that there would likely be less pirated films distributed if the movie lovers overseas had better access to movies at an affordable price. If movies can not be legally accessed or there is no opportunity to perform a legal, financial transaction, the chances of piracy increase. This is lost opportunity for the movie industry. Digital broadcasting can most certainly help this cause in the future.

Another reason why movie lovers pirate films is because they would like to watch it conveniently at their own time. This is how the digital format has helped make piracy so prevalent. In addition, the proliferation of mobile devices and behavioral changes in movie watching have change. Viewers are not limited to watching movies via a TV or using a video player. They are comfortable with watching movies on their laptop and computer, where the digital format rules. Mobility and convenience has created both opportunity for the movie industry but in addition has increased piracy and illegal downloads of copyrighted films. More importantly, with digital there are no physical limitations. That means no more scratched DVDs or damaged VHS tapes.

The advantage of the digital format is one of exact replication and almost zero costs. Also distribution is almost at zero cost. Anyone can download movies easily using P2P networks and through torrent files. Due to bandwidth limitations and size issues, the movie industry has not experienced the full impact that the music industry had endured. When the time comes when a movie can be downloaded as fast as a MP3 download is today, it will be a turning point for the movie industry and the MPAA. However, there is still time to leverage the convenience and lower distribution costs of digital and create opportunities that the music industry had failed to make. The advent of affordable, large-screen, high-definition televisions has elevated the potential for digital viewing at the convenience of your own home in a near theatre-like atmoshpere.

While the recorded music industry has plummeted, the concert industry has enjoyed considerable growth. The advantages that movies have is that they can replicate those experiences across the world in a movie theatre, while in the concert industry, the performer of the show can only be physically present in one location at a time. Even though the experience is not as personal as a concert, the theatre experience is a passtime that enjoys the same elements of success: it is usually a group activity and you share the activity with other movie-goers. Not only that, you can emulate that experience at every theatre.

However, counter arguments can be made in regards to attending movie theatres. Movie watching can be distracting if other movie-goers conduct disturbing behavior that can ruin the overall theatre experience. This includes people standing up and walking, ultimately ruining youe view, mobile text messaging and phones ringing as well as people talking and making noises while they are eating. Let us not forget the ones that bring young kids who love to be loud. Not to mention movie-goers have to endure advertisements before each show and waiting in lines to buy tickets and unreasonably-priced popcorn.

Ultimately though, the greatest reason for why movies are pirated is due to excessively high ticket prices. Ticket prices have doubled  in the last decade, making going to the movies a near-luxury passtime, especially for families. College students are one of the most avid illegal downloaders because of the pricing syndrome. They are usually unemployed and have limited budgets. However, they are one of the most active viewers of movies, whether it is illegal or not. As basic economic theory outlines, lower prices will increase demand and fill more seats at the movie theatres.

However the opposite has occured. AMC, Regal and Cinemark, the three largest theatres, encouraged by the success of the 3D blockbusters such as Avatar and Alice in Wonderland have substantially increased ticket prices. These include a 20% increase for 3D shows, equiting to about $20 per ticket. Furthemore, the cost of 2D movies will also be raised by a lower percentage.

Despite the success of a few major releases with premium 3D ticket pricing, this price hike may be a short-sighted move for the theater business and the movie industry in general, with long term implications. This action can risk alienating movie-goers and will encourage illegal downloading. As mediocre 3D pictures flock the market, chances are movie consumers will respond by not opening their wallets any more. The most recent example of the 3D release of Clash of the Titans is worrisome. Fans have complained that the 3D version of the film is not up to par with previous movie releases and this can be the beginning of a industry-wide negative response by movie-goers whose initial willingness to pay for 3D releases subsides. Only time will tell. The question is whether exploiting the novelty and hype surrounding the 3D experience will ultimately alienate audiences out of the theaters, especially with the advent of 3D televisions and subpar 3D releases. Why do the extra costs of 3D technology be paid by the consumer? 3D movies were priced higher before the decision was made to raise the prices even more. Where is the line between a reasonable entertainment cost for watching movies and pure exploitation of today's consumers willingness to pay for new movie experience? Pricing can have long term repercussions if the movie industry is viewed as too greedy and trying to rip off movie lovers.

The movie industry though is enjoying the moment and are quoted to say that things have never been better for Hollywood and business in general. TheMotion Picture Association of America (MPAA)  issued its annual report on the movie business. In a MPAA press release, the Washington-DC lobbying group revealed the findings via its Theatrical Market Statistics Report:

  • Global box office receipts reached an all time high of $29.9 billion, an increase of 7.6% over 2008 and almost 30% from 2005.
  • The U.S./Canada market reached $10.6 billion, an increase of more than 10%, and International receipts increased 6.3% to $19.3 billion in 2009.
  • Ticket sales in the U.S. and Canada rose more than 5.5% from 2008, the first admissions increase in two years.
  • Per capita ticket purchases in the U.S. and Canada also increased 4.6% to 4.3 tickets per person, the first significant increase since 2002.

The MPAA also benefited from major advances in digital technology by outlining that the theater industry now has more than 16,000 digital screens worldwide, up 86 % from last year. Furthermore, the MPAA revealed that there are 8,989 3D screens worldwide or 6% of the total.

This latest announcement is contrary to the the December 2009 MPAA press release in which MPAA chairman Dan Glickman suggested that movie piracy was running the film industry into the ground. Gantman also pointed to a 2009 Adams Media Research Study  that reported a 13 % drop in U.S. DVD and Blu-ray movie sales, to $8.73 billion.  2009 become the first year since 2002 that movie DVD sales fell below box-office revenues.

However it is noteworthy to mention that the Adams media Reasearch Report did not point to  P2P file-sharing or bootleg copies as reasons for the decline. Instead, it pointed to "the rise of low-cost rental options and online subscription services such as Netflix" as the primary reasons.

Do you believe that the increase in movie prices in warranted? What is your willingness to pay for a movie ticket and do you think this will create a backlash for Hollywood in the future? What is the long term implication for the movie studios and will their behavior encourage piracy?


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Comments (1)

Said this on 4-29-2010 At 05:42 am

Funny that I read this article today - just last night  we were discussing this exact issue.

Overly high ticket prices are bound to cause the ultimate demise of the movie theatre. People simply do not have the same disposable income as before.

I've noticed that more and more people are getting "home theatres" installed, finding that it's far more convenient and much more comfortable to view your movies at home (better snacks too - LOL).

It's also possible that all the recent fuss about nasty communicable diseases has put folks off of being in a crowded, in-your-face environment, so that going to a theate is nowhere near as appealing as it used to be.

And of course, the escalating cost to go to a movie makes it difficult to manage (especially during these challenging economic times) for low to mid income familes with two or three kids.

Having said that, I can understand why the theares are charging more: It cost them more to maintain the theatres (running costs) and since crowds have been dwindlling, they feel they have to try to recoup some of the cost.

I've noticed that crowds are really sparse at theatres, even for semi popular films, but at the same time, I also notice that DVDs are flying off the shelves and that our local Chinese mall has at least 5 little outlets that are blatently selling DVDs of first run movies for $4.00, and people pack the place.

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Constantine Roussos - Costa / Constantinos
Fight Piracy - Music, Movies, Games, Software, Internet