Cinemas have notoriously low attendance rates, indicating that the pricing of movie tickets is significantly under-optimized. Indeed, the overwhelming majority of cinema operators applies static pricing (i.e. ticket prices are not adjusted according to demand) and, furthermore, most of them have the very same price tag on all seats in all positions. At the same time, however, some operators have started to pioneer dynamic pricing in the sector which resulted in a significant rise in both their revenue and attendance rates.
Cinema seats are strikingly underutilized. This holds true to the European, American, and Austrian markets as well, but for specific numbers consider Hungary as an example. The average attendance per screening in Hungary does not reach 30 visitors – we estimate that this corresponds to an attendance rate somewhere between 15% and 25%. Consequently, ticket sales constitute only 58% of the largest Hungarian operator Cinema City’s revenue – in comparison, 30% of their income is generated at the snack bar. These numbers imply that ticket prices are severely under-optimized. Indeed, the overwhelming majority of cinemas follows a static pricing strategy that does not consider the demand-supply relationship in any way. Even more remarkably, seats that obviously offer a quite different cinema experience in regards of view, sound, and comfort are also offered at the very same price – there are only but a few exemptions worldwide where the cinema halls are split up to differently priced sectors. Accordingly, it comes as no surprise then that demand is extremely wobbling from screening to screening: tickets are practically instantaneously sold out for a Saturday evening premiere of a blockbuster, while hardly anyone buys a ticket for a Tuesday morning screening of a less known movie. But there is a proven cure for all this: dynamic pricing.
Dynamic pricing is a pricing strategy in which prices are constantly adjusted according to demand and supply in order to maximize profits. Such a pricing strategy is nowadays well established in e.g. transportation, e-commerce, and accommodation booking services. In the cinema sector, dynamic pricing is a relatively new endeavor practiced by only a handful of early adapters (e.g. In the German, Italian, Australian, as US-markets). Initial reports already indicate the large potential dynamic pricing offers: it can boost attendance in off-peak periods by 5-15%, and the overall revenue by 5-10%. What is more, we at DynamO believe that dynamic pricing benefits not only operators but all parties: it brings more balanced demand, increased ticket sales and more revenue for cinemas; larger revenue for the distributors; and better, fairer value for money. All this together benefits the film industry itself.
Admittedly, the introduction of dynamic pricing has its own challenges. In early 2018, Australian Village Cinemas was compelled by public uproar to end its dynamic pricing trial. Importantly, what they were doing was not real dynamic pricing, but instead a pre-determined uplift in prices – an ill-conceived, poorly executed and badly timed change in their pricing.
DynamO’s team of experts can help you to get the most out of dynamic pricing. DynamO has been established in the recognition that the service sector’s increasing interest in dynamic pricing is now coupled with an increasing acceptance among end customers. Our vision is to make dynamic pricing as widespread and common in the service sector as credit cards and online shopping are in everyday life.
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