On Saturday night my wife and I went to see the latest Luc Besson film, 'Lucy'. We went to a local cinema complex, which happens to be the same one I frequented as a teen back in the 1990's. We were going to a late session, so we decided to arrive early and have a coffee before the movie.

Sitting in the coffee shop, we noticed how different the place felt. We were there on a Saturday night, and there were hardly any people around. We did not expect it to be this quiet over the weekend. This is quite a contrast from the days when the place was full of people moving in and out of movie sessions.

The night got me thinking about movie cinemas in general. Is it possible that they are slowly fading away? I decided to do some quick research Finance Guy style, to see how busy this particular cinema complex is. First I looked at their screening schedule for next Saturday, which is shown below:

As we can see, they are showing a total of 20 screenings across 7 films. Based on our assumptions of running times, no more than 4 screens are in use at any time. At any time, 75% of the screens are switched off with empty theaters.

This complex was built in a day where we went to the movies more. It was time when a summer blockbuster like the Ninja Turtles would screen every 30 minutes to a near capacity audience. Times are changing, and cinemas are losing their appeal.

Then and Now

In the 1990's we used to get excited about the prospect of seeing a film on 'the big screen'. The cinema offered a superior audio visual experience which gave the film an added element of enjoyment.

The cinema experience today is fairly similar to what it was 20 years ago. This is not a bad thing, it's still the best way to see a film, but the 'big screen' advantage is not what it used to be. Advances in home entertainment systems has meant that we can now have a big screen, hi definition, surround sound experience from the comfort of our own couches.

In the past if we liked a film, we'd recommend it to our friends as 'worth seeing at the movies'. This was when the alternate was to wait almost a year and see it on VHS. Today the film is simply 'worth seeing'. There is no urgency to see it at the cinema because it will be on Blu Ray soon.

An Unofficial Recommendation

A night in with a movie is replacing a night out to the movies. We believe that a major reason, is the cost. Adult tickets are $20 each, while a new release Blu Ray is $30. Our trip to Lucy cost us $40. If we waited a couple of months, we'd save $10 and have our own copy to watch over and over again.

Having people over for a home movie is way cheaper than going out. The more people you invite, the better it gets, as shown below:

When we want to see a movie, we have the choice of either going to the cinema or waiting for the Blu Ray release. The cinema wins when it comes to the viewing experience, but loses on cost. The difference in viewing quality, does not justify the higher price.

The Finance Guy believes in the Economics of Supply and Demand. If cinemas want to bring back the crowds, they should consider a drop in ticket price. At $20 per adult ticket, people are choosing home video. If the price were to drop to $15 per ticket, I know I'd go to more movies, and I'm sure so would several others.

My wife and I discussed how often we'd go to the movies at various hypothetical ticket prices (buying two adult tickets per visit). The table below shows how often we think we'd go in a year:

How often we think we'd go the movies per year at different ticket prices

From the above table, we can see that at the price falls, we are willing to go to the cinema more frequently. For us the cinema makes the most money by charging $15 per ticket. This table represents our personal decision curve which is shown in the graph below

Cinemas need to understand that they are in competition with home video, and they are losing the contest. We believe that a drop in ticket prices would help make them more competitive and increase their profits.

Our assumptions have not taken into account the cost of showing films but we assume that the benefits increased revenue would more than offset the costs involved with servicing more people and perhaps having to show more screenings.

What do you think? Would a drop in ticket prices get you to the cinema more often?