Smart Pricer has offered three steps for how cinemas can react to MoviePass’ disruptive cheap subscription model, along with other third-party subscriptions.
Cinema subscription models are on the rise in the US after the introduction of MoviePass in 2011, with the company having been present in Europe for more than a decade.
Launch own subscription
Smart Pricer’s first tip is that movie theatres should consider launching their own subscription service, as AMC has recently done with its $19.95 per month pass that allows guests to visit the cinema up to three times per week, including multiple films per day and repeat visits to already seen movies.
Smart Pricer says: “The positive response of customers using cinema subscription services and the success of those unlimited movie cards show that the model is well accepted by visitors and can fill theatres also for less popular movies.”
It is mostly the younger generation that is revelling in the benefits of using a service without having to worry about unexpected costs and high charges, according to research on the subject by Deloitte. More than 70 per cent of millennials (born 1980-1999) own a product subscription and almost 90 per cent own a service subscription.
Dynamic Pricing
The next step that Smart Pricer suggests cinemas should begin looking into is introducing dynamic pricing.
It notes that subscriptions negatively affect the average ticket price (ATP) as visitors are spending less money for more movies. With this in mind, the firm suggests that the remaining 85-95 per cent of regularly priced tickets should be price-optimised in order to offset the ATP loss from subscription admissions.
Smart Pricer says: “When applying dynamic pricing for cinemas, the ticket price is depending on many different factors, such as attendance forecast, movie life cycle, purchase channel, time until the movie starts, etc. In general, movies with a high demand on prime-time can be priced higher than average movies at off-peak times. When booking the tickets in advance and using an online booking tool, the tickets can be even lower. Buying the ticket at the box office right before the movie starts will increase the price slightly.
“Using dynamic pricing in cinemas, the average price of movie tickets is normally higher than using a static model with the same or even better attendance rate. Hence, dynamic pricing is the ideal tool to combine with a subscription model, because the average ticket price will be balanced out while the benefits of both enhance customer experience.”
Communication
The final step in counteracting the disruptive MoviePass subscription model involves establishing “open and transparent” customer communication.
Smart Pricer gives the example of MoviePass’ move to add an additional fee to “high-demand” movies, which inspired a fierce reaction from the public. People were reportedly posting photos of nearly empty theatres in the “high demand” film that they paid extra for. The reason for the price increase was not clear or understandable.
“It is very important to communicate open and transparent with all customers when implementing a new pricing system, to explain the benefits and avoid surprised customers with unexpected rising prices. Customer communication is the key to success.
“The best way to achieve customer acceptance is by showing the price structure clearly on the different points of sale. Every visitor can choose the best fitting offer for their needs. This includes the website, the box office, and other sales channels that are being used.”
Image: Leo Hidalgo