Both Oppenheimer and Barbie are so popular that tickets are selling out days or even weeks in advance. That’s great for Hollywood, but it raises a question for economists: Why don’t ticket prices rise to clear the market and eliminate any waiting period? Those willing to pay more to see the movie sooner would be able to, and the theaters and studios might be able to make more money.
As it turns out, however, there are good explanations for why ticket prices don’t go up.
Before I get to them, allow me to clear up a few misconceptions. First, there is the idea that theaters don’t mind long lines, because they can sell you a ticket to your second-choice movie if your first choice is sold out. With the advent of online ticket sales, that reasoning no longer applies: You aren’t physically present at the cineplex, and if you see online that Barbie is sold out, you may just stay home. Also less compelling is the argument that long lines help a movie, as they do a restaurant, by increasing its “buzz.” The notion that either Barbie or Oppenheimer needs more buzz is suspect, to say the least.
A more relevant factor behind the static pricing has to do with social networks. Both the movie theater and the studio want to attract customers who will talk about the movie afterwards, whether directly to their friends or on social media. They also want customers who will want to see the movie multiple times, and generate a kind of cult following.
For the most part, younger audiences better serve these functions than do older audiences. Younger people have on average more friends and see them on a more regular basis, and are more likely to text friends or post on TikTok. They generally have greater enthusiasms. Older people are more likely to have more limited social networks, filled with other older people, and if they have children at home, less likely to go out.
In other words, in terms of publicity at least, a younger moviegoer is more valuable than an older moviegoer. (It is a painful admission for an older moviegoer like myself.) So if theaters raised their prices, the audience would skew older and wealthier. It would be harder for the movie to generate much buzz, and what buzz it did generate would have less impact.
Keeping the price low, on the other hand, favors those willing to scour the internet for tickets, or those who can commit to a scheduled movie date and time in advance. This is typically a younger group.
A second reason for keeping prices low is that moviegoers might feel ripped off if they had to pay a higher price for every movie they really wanted to see. In the short run, the theater would pull in more money, but over time moviegoing could become less popular. Customer goodwill matters.
A third reason that the price does not rise is concession income. A movie theater earns much of its income — it can be almost one-third of revenue for some chains — from selling soda, popcorn and other items, and typically it does not share that money with the studios. That makes revenue from ticket sales a smaller share of the overall profit.
Of course none of this serves as a complete explanation for why ticket prices aren’t higher for Barbie. But it helps explain why the desire to capture more profit through higher short-run ticket prices could be less important to the overall profit calculus. If one of the main goals is to foster customer goodwill, for example — as it surely is the movie business — then price may not be the main business instrument.
Usually prices clear markets — but not always. A market price serves many functions, and when it has something else to do, usually it is keeping people happy. So if you have to wait a while to see that movie you have been looking forward to for so long, rest assured that your patience is serving a good social cause.
In the meantime, while you await your showing of Barbie or Oppenheimer, how about watching a match of bullet chess? No waiting necessary, not even for the end of the game.
Tyler Cowen is a Bloomberg Opinion columnist. Views are personal and do not represent the stand of this publication.
Credit: Bloomberg
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