GOING TO THE MOVIES - BUT WHERE?

Are Concessions Too High?

Affordability should be the new mantra for cinemas.  Americans are finding it harder and harder to justify a trip to the "movies" given other options on how to spend their "viewing" time and money.  And cinemas aren't the only ones, cable/satellite TV subscriptions are in a downward trajectory as well (see post - "Cutting The Cord", Nov. 27, '11).

Sales in most markets is a zero sum game. So, how do cinemas give their current and potential customers a clear and compelling reason to continue their patronage?  Consumers are beginning to perceive the cinema as just another "place" to view a movie - and not necessarily "the place". High admission and concession pricing, (not to mention aging buildings and infrastructure)  force the perception that cinemas are "not giving best value for cost".

Most cinemas don't sell on perceived value because they haven't taken the time to define it.  They don't understand it. So how could they possibly relay this to customers?  They can not.  When competition increases, weaker (less valued) companies lose market share and this is what is happening at U.S. cinemas.
The music industry should be a great cautionary tale for the cinema.  Cinemas need to get ahead of what they will be competing against in the future.  The tech Kings, such as Apple, Amazon, Google, Microsoft and many others have already entered the media and cinema industries.  These tech giants are in the business of disruption and they are going to have a profound impact on the cinema.
There are essentially two ways of building a business.  One is to work very hard at convincing customers to pay high margins for your product or service; the other, is to work very hard to offer customers low margins - both work.  Cinemas, by their nature are in the second camp but are currently operating as though they were in the first.

A perfect illustration of this is: www.studios.amazon.com . What this represents is Amazon's new way of making movies!  How it works is that Amazon crowdsources (sourcing tasks normally performed by specific individuals to a group of people (crowd) through open call) the production of a "test movie" until it reaches the point where a real studio takes over.  Warner Bros. has a first-look agreement with Amazon.  Whether or not this concept of movie making will fly is anyone's guess - but Amazon certainly thinks it will, and Amazon is all about low margin.  More importantly, it gets Amazon's nose under the movie content tent and all of the complications this presents to the current modus operandi of the cinema industry - and the studios are powerless to stop it.

I believe anyone in the cinema industry is blind if they do not recognize the toll that higher admission and concession pricing and the disruptive nature of the digital domain is manifesting on the cinema. If you are a cinema owner/operator and are not in conversation and not sensitized to these realities in the business decisions you are making - you will probably not survive in the cinema industry of the future.
Cheers,
Jim Lavorato
Cinema/Media Consultant