A Cinema Pricing Followup

An alert reader sent in a link to this article in the NYTimes (free registration required), called Liked the Movie, Loved the Megaplex. The article discusses how some theater chains are trying to differentiate themselves by offering fancier food (and drink), day care, valet parking and so on. Naturally, these offerings are upsells, but they also attract older, wealthier patrons. Folks who are going to get away from their kids, not to hang out with them. One theatre managed to charge $18 per tickets for The Dukes of Hazzard (!!!) by throwing in valet parking, free popcorn, a separate entrance, and reserved seats.

The real upsell is in the food, however. Some chains now have real restaurants instead of popcorn and candy. The piece mentions the Alamo Drafthouse here in Austin, which has to be my favorite place to see a movie. They offer food and beverage service during the movie– pizzas, sandwiches, beer, wine, ice cream, and so on. They started with a single theater downtown and now have a number of “multiplexes” around town. It’s a lot easier to see a movie when you can do dinner and a movie at the same time. (Plus, Zoolander is even funnier after a beer or two.) The revenue per seat equation is a bit like the economy/business class breakdown for airlines. Because of the room for plates and servers, the rows are further apart at the Alamo, meaning less seats per theater. However, almost everyone gets some form of food service, often 100%-200% of the ticket price. The Alamo has another advantage, though, since all revenue is not created equal for a movie theater. A portion of ticket proceeds goes back to the studio, but concession profits belong to the theater. Differentiation in a direction where the economics are in your favor– it seems to be working well for the Alamo, which is expanding.