It should be a shock to no one who has ventured inside a movie theater within the last year: Movie ticket prices reached an all time high in 2011. According to the National Association of Theatre Owners, the price of admission rose last year to $7.93, up from $7.89 in 2010. (This reflects a fairly big jump from 1992, when the average ticket cost just $4.15.) Though such an increase is not surprising, it’s interesting to note the reasons behind the hike, and the implications it is having on the movie business.
According to this New York Times article, the rise in movie ticket prices has outpaced inflation by more than half since 1999. While inflation accounts for some of the price increase, it is not the only factor.
A recent Hollywood Reporter article outlines several other reasons, one of which is the theater industry’s costly switch to digital projection and sound. It costs about $75,000 per screen to convert to digital projection. Another cause is the proliferation of 3D movies. Most theaters include a surcharge of about $3 per ticket for a 3D film, and tickets to movies screened in the third dimension are expected to cost even more in 2012.
And while exhibitors alone set ticket prices, these companies (such as Regal Entertainment and AMC Entertainment) usually split the proceeds from each sale with the studios (such as Warner Bros. and Twentieth Century Fox) that have been producing more and more blockbuster tentpole movies. The average cost of a movie produced by a major studio increased to $78 million in 2011 from about $42 million in 1995. (Reports of the price tag for one particularly costly production, Avatar, range from $230 million to $500 million, with marketing costs representing a large chunk of its budget.)
So why is Hollywood fixated on producing such expensive movies? One theory is that as consumers have an increasing array of entertainment options at home (thanks to content providers such as Netflix and HBO and Redbox and iTunes, to name a few), what draws them out of their living rooms and in to movie theaters are fancy special effects that are better viewed on the big screen.
In retrospect, the answers to why going to the movies now costs more than ever seem rather obvious. However, in light of the movie industry’s disappointing year at the box office, the fact that ticket prices increased and total revenues still declined should be a cause for concern to studio executives. Perhaps the theory that Hollywood’s love affair with big budget movies is coming to an end will soon ring true.