The New World Of Global Cinema

Hollywood is stronger than ever, according to this excellent article from The Economist. Box office receipts in North America have risen by 20 percent since 2005. Outside North America, sales have increased 35 percent in the same period, and international markets now comprise two-thirds the global share of Cinema. Around the world, multiplexes (theaters with eight or more screens) are blossoming, while theater owners rush to invest in new technologies like 3-D and IMAX. Digital formatting and distribution lowers cost and time, meaning movies can launch simultaneously in more markets than ever before, theater companies can take bigger risks with lower commitment, and the gap between screen and alternative release (cable, DVD, hotel and airplane) can be flexible and quick.

With these new technologies coming together simultaneously, cinema owners now have an opportunity to experiement with alternative pricing structures. Cinema has traditionally been seen as a commodity: most of the time, we pay the same price to watch a $200M blockbuster or a $2M independent release. In the 3-D world, many multiplexes offer three versions of the same film—2-D, 3-D, and IMAX 3-D—at three different price points (say, $10, $15 and $20 respectively). This gives the cinema viewer more choice, which is good.

Where could this lead? Imagine a future where independent films are priced lower than Hollywood blockbusters; where short films and animation are priced lower than full-length features; where newer films are priced higher than older ones. It is easy to imagine special pricing for special screenings, for example, half-price weekday screenings for parents with infants, taking advantage of lower cinema traffic at this time; or premium 25+ screenings for adults who seek to avoid distracting teenagers.

There are many individual cases of theaters who offer special sofa seating and food and alcohol service for a premium price, though these are usually found in independent theaters and small chains. Commodity seating, service and pricing still make up the majority of the cinema business in North America. But these new cinema technologies offer theater operators more options to maximize profitability and create new experiences that benefit the viewer. Which, we think, is something from which everyone involved can benefit.