Both Oppenheimer and Barbie are so popular that tickets are selling out days or even weeks in advance. That is great for Hollywood, but it raises a question for economists: Why do ticket prices not 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, there are good explanations for why ticket prices do not rise. Before I get to them, allow me to clear up a few misconceptions. First, there is the idea that theaters do not mind long lines, because they can sell people a ticket to their second-choice movie if their first choice is sold out. With the advent of online ticket sales, that reasoning no longer applies: People are not physically present at the cineplex, and if they see online that Barbie is sold out, they might 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. The movie theater and the studio want to attract customers who would talk about the movie afterwards, whether directly to their friends or on social media. They also want customers who would want to see the movie multiple times, and generate a kind of cult following.
Younger audiences serve these functions better than do older audiences. Younger people have on average more friends and see them more regularly, and are more likely to text friends or post on TikTok. They generally have greater enthusiasm. Older people are more likely to have more limited social networks, filled with other older people, and if they have children at home, they are 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 me.) 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.
Conversely, keeping the price low 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. In similar fashion, if there is a shortage of a food item, for instance peanut butter, the supermarket does not always raise the price to clear the market.
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 completely explains why ticket prices are not 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 might not be the primary 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 people must wait a while to see that movie they have been looking forward to for so long, rest assured that their patience is serving a good social cause.
In the meantime, while they await their 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. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. He is coauthor of Talent: How to Identify Energizers, Creatives, and Winners Around the World. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
When US budget carrier Southwest Airlines last week announced a new partnership with China Airlines, Southwest’s social media were filled with comments from travelers excited by the new opportunity to visit China. Of course, China Airlines is not based in China, but in Taiwan, and the new partnership connects Taiwan Taoyuan International Airport with 30 cities across the US. At a time when China is increasing efforts on all fronts to falsely label Taiwan as “China” in all arenas, Taiwan does itself no favors by having its flagship carrier named China Airlines. The Ministry of Foreign Affairs is eager to jump at
The muting of the line “I’m from Taiwan” (我台灣來欸), sung in Hoklo (commonly known as Taiwanese), during a performance at the closing ceremony of the World Masters Games in New Taipei City on May 31 has sparked a public outcry. The lyric from the well-known song All Eyes on Me (世界都看見) — originally written and performed by Taiwanese hip-hop group Nine One One (玖壹壹) — was muted twice, while the subtitles on the screen showed an alternate line, “we come here together” (阮作伙來欸), which was not sung. The song, performed at the ceremony by a cheerleading group, was the theme
Secretary of State Marco Rubio raised eyebrows recently when he declared the era of American unipolarity over. He described America’s unrivaled dominance of the international system as an anomaly that was created by the collapse of the Soviet Union at the end of the Cold War. Now, he observed, the United States was returning to a more multipolar world where there are great powers in different parts of the planet. He pointed to China and Russia, as well as “rogue states like Iran and North Korea” as examples of countries the United States must contend with. This all begs the question:
In China, competition is fierce, and in many cases suppliers do not get paid on time. Rather than improving, the situation appears to be deteriorating. BYD Co, the world’s largest electric vehicle manufacturer by production volume, has gained notoriety for its harsh treatment of suppliers, raising concerns about the long-term sustainability. The case also highlights the decline of China’s business environment, and the growing risk of a cascading wave of corporate failures. BYD generally does not follow China’s Negotiable Instruments Law when settling payments with suppliers. Instead the company has created its own proprietary supply chain finance system called the “D-chain,” through which
RSS