Movie showings are a lot like airplane flights– revenue comes from putting people in seats, and if you don’t have someone in a seat for the movie, you’ve missed out on that revenue opportunity forever. In other words, it’s a perfect scenario for yield management. Movie theaters do this already with cheaper matinee tickets. Some theaters even have a “before noon” price, a matinee price, and regular price. As a pricing person, it’s hard not to consider some other possibilities, like eliminating matinee prices on weekends, differential pricing for hot new releases vs. shows that will only have 10 people in the audience, price segmentation by seating section, and even offering discounts for significant advance purchase (a week or more in advance) to build buzz and measure demand. I’m not saying that theaters necessarily should do these things, but the possibilities are there.

Against this backdrop, Cinemark and AMC have offered a money-back guarantee for the Russell Crowe movie Cinderella Man. If people don’t like it, they can get their money back. This is an attempt to bring people into a movie the the critics love but audiences have not flocked to see. And while it doesn’t seem like yield management, that’s essentially what it is. The theaters are hardly offering this promotion on every movie (that would change the dynamics of movie making and promotion pretty quickly). They only offer it on a film that they think people will like, that they are already showing, and that plays to a lot of empty seats. Ads have touted the guarantee in an attempt to boost traffic. The promotion itself has generated tremendous press. They even got a friendly AP wire story about how few people had asked for refunds.

I think it’s an interesting promotion, which so far has not resulted in a lot of refunds, but also has not significantly boosted attendence.

Stay posted, if there is good info to support whether the promotion worked, I’ll post a follow-up.

7 Comments

  1. Jon

    Reuben,

    In the UK, easyCinema totally revenue/yield manage their screenings of movies at the Milton-Keynes multiplex.

    Originally, they had great difficulty sourcing new release movies, as the film houses didn’t want them to show new release movies for 50pence (which reflects inefficiencies in the movie pricing market).

    They are now getting some first release movies. The average occupancy (‘load factor’ in airline YM parlance) in a UK cinema was 20%.

    Why anyone would accept this sort of return on a high capital investment as a cinema is beyond me.

    There is also a similar movement occuring in India too.

    Jon

  2. Reuben Swartz

    Jon, thanks for pointing this out. I remembered reading about some cinema yield management pricing in Europe, but I couldn’t remember where.

    On a “small world” note, I actually took my grandmother to see a movie in that theater a few years ago, but there was no yield management at the time. She did a get a senior discount. 😉

  3. Jon

    Reuben,

    You’re welcome. Harvard Law School also did a great paper on Cinema pricing a couple of years ago. Email me if you want a copy.

    Jon

  4. Anthony

    could you email me a copy of the paper you refer to? thanks

  5. Reuben Swartz

    Anothony,

    I am not sure which paper you're seeking.

    Best regarsd,
    R

  6. Florian Jacq

    Hi,

    I am doing a business plan for my school and our concept is a luxury cinema in Paris.
    Is there any chance you have a good reference for revenue/yield management in cinemas??

    Regards,

    Florian

    • Reuben Swartz

      Florian–

      Thanks for asking. Unfortunately, I don’t. Luxury cinemas usually offer fewer, more expensive seats, but rely even more on concession sales to be profitable. Best of luck with your business plan.

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