The New York times asks if variable pricing is the future of movie theatres (found via Johanna). While I can see the potential in the concept, most of the article left me shaking my head.

VARIABLE pricing has been around as long as outdoor markets, but the modern version of it really began at American Airlines more than 20 years ago. Robert Crandall, the chief executive, was trying to beat back a discount airline named People Express, and he devised a computerized system he called "yield management" to adjust prices constantly.

American sold cheap tickets to vacation travelers who were willing to fly when planes weren’t full and expensive ones to last-minute business travelers who were never going to choose People Express anyway. The goal was figuring out exactly how much somebody was willing to pay to fill a seat and then selling the person a ticket at that price. It worked.

I’m left wondering how much room there is for variable ticket pricing with movies. Matinee pricing is nice, as is after-work discounts, but are opening weekends enough of an "event" nowadays that people would be willing to pay extra? Looking at box office trends (where franchises typically draw fewer and fewer dollars with every sequel) are there any blockbusters (the Lord of the Rings trilogy excepted) that would be worth a premium price? The only way I can see consumers accepting premium movie ticket prices is if the discounts were introduced first and then all prices were raised. Still, any sort of higher admission cost gives the customer a moment to rethink the value equation, a losing prospect considering the path home theatres have taken.

As for premium services, while I can see the promise of reserved seating, I remind myself that I’m the only person I know who ever uses Fandango to purchase movie tickets online. For the movie goers I know, Fandango’s fifty-cent surcharge is just unacceptable.

Too often, variable pricing ends up feeling like a vendor acting like they’re entitled to charge much higher prices when demand is only slightly raised:

You may recall that Coca-Cola announced in 1999 that it was thinking about installing thermometers in its vending machines and charging more on a hot day. Economically, it makes perfect sense that a cold soda is worth more when the temperature hits 90. But consumers thought they were being gouged, and the ensuing uproar caused Coke’s executives to insist that the plan was never serious.

Movie theatres have previously thrived on increasing convenience (most notably with multiplexes that minimized the need to plan ahead with multiple films and multiple screenings) and one of the risks of premium ticket pricing would be to discover that the premium service is something customers expect from you in the first place.

Then again, movie theatre industry often perplexes me. I wonder what’s the point of raising ticket prices if the theatres end up paying back so much of admissions to the movie studios — the ratio of additional revenue raised against lost customer goodwill never strikes me as an acceptable trade (particularly when some of the more outrageous demands made by blockbuster films are mentioned). The biggest puzzle to me is why the snack bars at movie theatres suck so badly.

According to the lore, the true profit center of a mainstream theatre (one that does most of its business screening blockbuster films) is the snack bar. That leaves me wondering why every time I go to a theatre chain the snack bar feels like an afterthought. I would think that a well-run business would give their most profitable segments the most attention, in order to maximize profit… and yet, the menu is often terrible, there’s little selection and the service is usually awful.

The choices I see at most movie theatres are full of starch and/or sugar. I’m not going to say that theatres should offer healthier foods for the greater good of society, but I suspect there are a decent amount of movie goers who are trying to avoid excessive starch, sugar or fat consumption and those are customers who are learning to just ignore the snack bar. If a theatre chain wants to maintain operational simplicity, packs of beef jerky will satisfy the low-carb dieters and pre-packaged baby carrots will easily offer something to attract those customers’ money.

Worse than the limited menu, the snack bars I’ve patronized are so poorly run and the food is terrible (usually mediocre frozen food badly reheated). If that’s where your profits come from (justifying the high prices) why further deter customers? Most multiplexes these days are a short walk away from some sort of food court, making it easy to find food much cheaper and better than what’s at the snack bar, so why are the theatres’ (supposed) biggest source of profits so damn uncompetitive?

I’m curious if any major theatre chain has tried out a concept similar to the local Parkway Theatre, that strikes me as a concept that could bear premium ticket prices. I know the Parkway isn’t the only theatre of its kind (with tables and a menu offering pizza and salads) but the other efforts I’ve seen were small movie-loving independents. The concept seems like one way to offer a premium experience that struggling theatres aren’t offering.