The closure of movie theaters around the globe means that studios are reinventing at least the back half of their business models in real-time, out of necessity. Some films that had recently opened wide, or were about to, are now playing on television screens instead. Others have been pushed back to the fall, or even 2021, and some have been removed from the schedule altogether. Those deemed good fits for VOD are charging customers around twenty bucks for a rental, but it’s incredibly early in Hollywood’s direct-to-consumer experiment. Dynamic pricing for VOD will almost definitely come into play sooner rather than later, and it may extend to tickets once cinemas are open for business again, which would be a significant shift for the industry.
Dynamic pricing is already common practice for most of the entertainment business. When fans want to see a sporting event, a live concert, or a Broadway show, they pay more or less not only based upon the time and day of the engagement, but also the quality of the seat and the popularity of the ticket itself. Movie theaters have dipped their toes into variable pricing structures with add-ons like 3D or high frame rate, surcharges for luxury recliners, and reduced prices for matinees. But generally speaking, the price of a movie ticket (approximately 10 dollars) fluctuates because of the metro area in which the movie is playing, and not because of the movie itself. In other words, it didn’t cost more to see Avengers: End Game than Cats. The way the previous business model worked is that Avengers: Endgame made infinitely more money than Cats because it was infinitely more popular. People voted with their attendance, not their willingness to pay a premium for a better experience.
“Movie theaters have dipped their toes into variable pricing structures with add-ons like 3D or high frame rate, surcharges for luxury”Tweet
For all the love lost between theater owners and Netflix, the streaming titan operates according to a similar philosophy. You might feel like you’re getting The Irishman or Roma for free as you watch from your couch, but big-budget prestige drama is baked into the price of your subscription, as are cheaper guilty pleasure shows like Love is Blind and Tiger King: Murder, Mayhem and Madness. Though Netflix has undoubtedly changed who gets to make what movies, and for how much, it doesn’t cost the home viewer any more or less based on what they choose to consume.
That’s likely to change in the coming months, at least for films that aren’t already outside of a 90-day exclusivity window. Trolls World Tour was set to premiere April 6th, but Universal announced that it’ll be making the super saccharine sequel available through VOD the same day. This will be the first true straight-to-VOD release of a new movie in the COVID-19 era, and as it’s intended to appeal to young kids who are all home from school, bored, and probably driving their parents nuts, it’s a savvy move. Universal is planning to charge $19.99 for a virtual ticket that lasts 48 hours, the same as their other films. But with a budget of around 90 million, many more homes will have to rent Trolls World Tour than did The Hunt or The Invisible Man, which were produced for 15 and 7 million dollars respectively.
Eventually, a new release somewhere in between the ambitions of a Trolls and a Bond movie is going to choose VOD over the possibility of further postponement. At that point, we’ll see whether the $19.99 price tag holds, or if VOD rentals will climb to 30 or even 50 dollars. Of course, independent films may drive prices in the opposite direction, especially since they’re competing with what people perceive as free content via Netflix, Hulu, Disney+, and HBO. Once audiences get used to paying based on how badly they want to see a particular title, will Hollywood ever be able to go back?
The conventional wisdom (and hope of theater chains) is that when stay-at-home orders are lifted, Americans starved for communal experiences will want to flock to public spaces like their local movie houses. But social distancing measures may remain in place for months after the peak of the pandemic. The public may be hesitant to return to the cinema, or they may be prevented from doing so with restrictions like the regulation of crowd size. If that happens, the audience won’t be able to vote with their attendance anymore. And if they’re already conditioned to pay more for must-see content, they might not object to doing the same thing at the marquee window. It doesn’t stretch the imagination too much to envision a world in which Avatar 2 (when, at long last, it comes out) costs double whatever low-budget horror sequel is also premiering that weekend. In fact, this happened in reverse, just last winter. The Playmobil Movie, having received pretty terrible reviews, reduced its first run ticket price to just five dollars.
No one knows how the coronavirus will affect movies and movie theaters in the long run, but the industry was facing challenges as society kept pace with changing technology regardless. Dynamic pricing is just one way that the industry could evolve and ensure its survival.
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