Would you see more movies in the movie theater if it cost nothing?
You might not know who Chris Anderson is. Some people know him as the editor-in-chief of Wired Magazine. Others know him as some sort of tech futurist, having coined the term The Long Tail in an acclaimed Wired article, which he expanded upon in the 2006 book The Long Tail: Why the Future of Business Is Selling Less of More. His newest book, due out in early 2009, is called Free. It examines the rise of pricing models which give products and services to customers for free.
So you’re probably asking yourself, “What does this have to do with movies?” I say, everything. More to the point in a second. Let me first give you a brief explanation of why Anderson believes that “$0.00 is the future of business”:
“The rise of “freeconomics” is being driven by the underlying technologies that power the Web. Just as Moore’s law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero.”
Remember when you had to pay for digital services? Remember when you had to pay to read the New York Times? Remember when you had to pay for e-mail? Now Google and Yahoo have options giving you almost unlimited storage… for free. I watched the whole Season 3 of LOST for free on ABC.com. And I’m not talking about on a little youtube player, we watched the whole season in High Definition, connected to a 61 inch television, and you could barely see a quality difference compared to our Comcast HD cable channels. And guess what, they offer all four seasons of LOST in HD for free. Free is taking over the world.
Now to the future of movies possibly being free. In a preview article, Chris brings up the following scenario:
“Low-cost digital distribution will make the summer blockbuster free. Theaters will make their money from concessions – and by selling the premium moviegoing experience at a high price.”
Now is this really a possibility?
Let’s say I owned a movie theater that has 5 shows a day on one screen, 7 days a week. The theater has 300 seats, and only sells out 7 of the 35 screenings. I sell movie tickets for $10, and give roughly half to the movie studio (during the film’s opening week, the studio might take 70 to 80 percent of gross box office sales, but by the fifth or sixth week, the percentage the studio takes usually shrinks to about 35 percent. The end figure is usually around 50% split), the rest I make in concessions. Popcorn reportedly makes 90 cents on the dollar, a $4 Soda costs around 10 cents. Concessions is almost 90% profit. A movie theater usually makes $2.85 per moviegoer on concessions. For the sake of arguments, lets say the gross profit is on average $1.50 per person. With the numbers given above, I should have roughly 3000 paying ticket holders per week in today’s way of doing business. I can make probably $1 per head through in theater advertising, and Movie studios pay theaters to show trailers based on how many people saw them (but I don’t have those figures)
Now if I start giving away tickets for free, could that help me sell out 15 more screenings? Probably… Let’s say that I could sell 9000 free tickets. I’m guessing that since the ticket price is free, moviegoers would probably be twice as likely to spend money on concessions. Would my movie studio be able to make money based on free entertainment, run by digital distribution?
But looks what happen when you merge the free model with a pay premium service. By that I mean that the middle 5 rows are $20 a ticket and include comfortable leather seats, unlimited popcorn and soda. In my little imaginary movie theater, those five rows would equate to 80 seats of the 300. Now look at the numbers if you add in the premium option:
Now I understand that I might be missing 100 different other factors involved like leasing the space, paying more employees to handle more people, reserved seating, and more concession traffic. Would 2000 people a week pay for the premium option? maybe not… My point is not to show you a set of numbers and say “This is how it WOULD BE”. Please instead take my work as a broad estimation of what instead COULD BE.
The fact of the matter is, Chris Anderson is onto something here, and it may change not only the way you watch movies, but the rest of your life as well. But for the sake of this little movie blog with its imaginary little movie theater, lets bring the discussion back to the future of the moviegoing experience. As we become more engulfed in the on demand world where you can watch anything, anytime, anywhere, movie theater attendance will no likely fall. But what if they were free?
Discuss: What do you think of the idea of Free movie tickets? Could this be the answer?