Why Excuses For High Australian Movie Ticket Prices Don't Cut It

In the last fortnight, senior executives from cinema operators in Australia, including Village Roadshow and Palace Cinemas, have come out defending their decision to raise movie ticket prices. But do their arguments hold water?

Cinema picture from Shutterstock

Already Australians pay a relatively high fee to see films on the big screen. A global analysis of the price of cinema tickets relative to GDP has found Australia's most affordable city for seeing movies is Brisbane (ranked 31st in the world) with most other Australian cities hovering around the mid-50s (Melbourne, 52; Adelaide, 53; Perth, 54; Sydney, 55).

The justification put forward by the exhibition industry for ticket price increases essentially boils down to three key factors, the last two of which are connected:

1) Higher labour costs involved in operating a cinema in Australia compared to other countries

2) The impact of illegal downloading

3) Lower attendance

Each of these arguments bears closer scrutiny.

Higher labour costs

The argument that Australia's comparatively higher labour costs are influencing ticket prices is made by Graham Burke from Village Roadshow, who points out that:

in Australia we pay approximately $23 an hour for our people; in America, where we operate cinemas, it's $8 an hour.

But are we seriously to believe that the recent reduction to skeletal staffing at most mainstream movie theatres is somehow cause for increases in ticket prices? It's true that in the US many people are paid very low wages; but these wage differentials are not new, so why are they now being mounted as a case for inflating movie ticket prices?

Illegal downloading

We then come to the vexed issue of piracy. Benjamin Zeccola of Palace Cinemas directly links downloading and file sharing to the need for increased ticket prices.

Certainly the ease at which the latest titles can be downloaded and viewed online is bearing on the industry and contributing to diminished box office returns. But it's not a straightforward equation.

In terms of quantifying the cost of piracy the industry cites figures from the commissioned report by Ipos and Oxford Economics that estimates piracy costs the Australian economy $1.37 billion in revenue and that 6100 jobs are lost from movie theft.

But as Jordi McKenzie and W.D. Wallis found in their empirical investigation into the impact of file sharing on film revenues in Australia, over the course of 2010 and 2011, the effect illegal downloading had on revenues was actually far less than claimed.

Furthermore, as the ABC's Nick Ross pointed out earlier this month, there is some evidence to suggest that illegal downloading often contributes positively to a film's (or television series') fortunes.

Avatar (2009), which is one of the most successful films at the box office in recent years, also tops the list as the most pirated film of all time, with in excess of 21 million downloads according to Torrent Freak.

Low attendance

Certainly attendance figures from the most recent IBISWorld Report on Cinemas in Australia reveal that less people opt for a night out at the movies than previously. Between 2012 and 2013 cinema admissions in Australia fell by 0.7 per cent to around 85.3 million.

Over this same time the Motion Picture Distributors Association of Australia (MPDAA) estimated that box office takings had fallen by 2.3 per cent to $1.1 billion. Yet despite these falls, key operators have managed to return healthy profits through increased ticket pricing, especially in relation to "premium" screenings such as 3D movies, which are charged to consumers at a higher rate.

Simply blaming piracy for low cinema attendances ignores the multitude of factors that contribute to piracy as well as the multitude of reasons that prompt cinema attendance in the first place, and assumes that the sole motivation for going to the cinema is the film itself (content consumption).

But this is not borne out by the evidence which suggests instead that movie audience motivation is highly differentiated and is becoming increasingly so. A 2012 survey by Screen Australia found that, when asked to identify the single most important reason for attending a cinema, "socialising" topped the list, followed by "tagged along with others".

And although "cinema ambience" was further down the list of factors it was mentioned by more than 60 per cent of respondents. This also underscores the importance of food and beverage offerings (rather than just ticket sales) to cinema sustainability.

By elevating the impact that piracy has on cinema attendance, other factors that also contribute to lower attendance and diminishing revenues are being ignored at the industry's longer-term peril.

As many insiders suggest, piracy is also a response to the consumer's desire for immediate access, as well as a growing perception that much screen based content, including film, is more enjoyable when viewed in the comfort of one's own home.

As such, the increasing size and affordability of large television screens in the home can also help explain why less people are going to the cinema.

Holding on to old business models and failing to recognise the needs and expectations of today's content consumer is a fraught path. Digitalisation is here to stay.

The technology that makes piracy possible equally represents part of the changed landscape in which the film industry now operates. Rather than bemoaning piracy and ramping up rhetoric in support of harsher penalties the industry needs to be more open to changing its distribution model.

In terms of exhibition it needs to take stock and look at how it can offer a superior or distinguishable experience to attract audiences, and particularly younger audiences back into the cinema.

Raising ticket prices is certainly not the solution the industry, or its patrons, deserve.The Conversation

Bronwyn Coate is a Researcher Fellow (Cultural economics) at Deakin University. Deb Verhoeven is Professor and Chair of Media and Communication at Deakin University. Bronwyn Coate has received funding from the Australian Research Council (ARC) to investigate contemporary film distribution in Australia. Deb Verhoeven has received funding from the Australian Research Council (ARC) specifically to study contemporary film distribution in Australia.

This article was originally published on The Conversation. Read the original article.

WATCH MORE: Entertainment News


Comments

    The only time I will pay to go to the movies is for something like Vmax where it's a really good experience (visually and sound wise). The standard Cinema's are a waste of time and I would rather my home setup over them.

    Our local multiplex cinema has five or six employees and they all look like they are still at school. I can't see how their wages would have an impact. Last time the cinemas were suffering smaller audience numbers they LOWERED their prices to attract more people.

    I'd like to know where the profits are going from the money they're saving on digital distribution. The fact that distributors now don't have to print film anymore, they must be saving a fortune!

    Of course it's a win-win situation for the distributors. On one hand they only have to spend a fraction (I assume) on handling and distribution itself, but not only that, they get to slug moviegoers extra cash per ticket under the guise of Digital projection and a better picture quality - which I assume although the cinemas have to wear the initial setup and install of said projectors - actually costs a lot less to run because there's very little (I assume again) upkeep of the projectors. And less projection staff at the multiplexes because the whole operation would be automated. (I assume, again!)

    Other things like snack bar are always gonna be high because it's a cornered market, and a big earner for the cinema itself.

    Perhaps if the distributors weren't squandering the extra profits they're making due to cheaper costs, they'd be able to pass the savings onto movie ticket prices - in turn generating greater attendance and eventually a healthier industry.

    Cinema attendance is dropping. Why? It's too expensive.

    Solution?

    Charge more!

    Genius.

      You have a bright future in the cinema business.

    The real reason they put prices is up is because they want to. Why wouldn't you want to make more money? I don't see why there is always a need to try and justify these increases. Though they do have the luxury of blaming it on easy targets like piracy.

    I like to go to the cinema. If it's a movie that I want to see then I'll always want to see it in the cinema first. I'm not interested in cam jobs and other poor quality rips. I'd rather pay to see it properly than sit through something dark, shaky, and sometimes interrupted.

    I remember going to super cheap Tuesdays for $5. Huge crowds. Slowly the price increased and increased again until it was nearly the cost of a normal night. No crowds. All of a sudden they dropped it back down to something you could class as 'super cheap' and the crowds were back! A full cinema at a cheaper price would have to be better than an empty one at a greater price.

    What's next? Charging based on how many people attend? Oh wow I have the cinema to myself! (ticket $10,000).

      Yeah it's weird that cinema industry comes out on the front foot with bizarre justifications on how to extend profit. They should just say this is how we see fit to make the most money...

      Thats it, piracy has been around for ages sure it cuts into our profit margin but probably not as much as other forms of more accessible legal entertainment do. I would love to see an info graphic on profit ratio vs attendance. I really like your idea but perhaps in reverse.

      If there is a 11pm session midweek of an obscure art house film, that might get 10 people, offer highly discounted tickets for the first say twenty customers to get them into the cinema. Then incrementally increase the price till the cinema gets half full. That way you incentify cinema patronage not the other way around.

    Once again they're looking at it completely backwards.

    Once upon a time, movies were an exciting treat, home entertainment was minimal and tv's were small. Movies offered gigantic screens and booming stereos. People wanted to go out and watch something amazing.

    These days, lots of people have the booming stereos and the large HD tv's.

    The only thing that the cinemas have over the average household, quality films. Oh..... wait a minute, no, sorry. They don't, because it's the same, regurgitated, mutilated bullcrap story with the same regurgitated actors. Why would I want to spend money on a movie that is going to disappoint me?

    If I want to go to the movies, I get 10 dollar tickets, from Telstra, Bupa, RACQ or any of the other various providers of cheap tickets. But I rarely want to go, there are massive crowds of people, the food and drink are overpriced and I miss bits of the movie if I need to pee. In reality though, I go about 6 times a year. And that's because I rarely think a movie is worth paying money to see.

    Last edited 02/05/14 1:18 pm

      Massive crowds of people ... hang on, didn't they say attendance was falling ? :) We're all working longer hours at the office so for most of us the occasional 'meet partner after work for a movie date-night' is largely not doable during the week. So if we go, we go on weekends. Along with everyone else (the crowds). The food and drink is too pricey (although 99% of the time the popcorn these days is old, cold, and crap), you miss bits of the movie if you need to pee, and you forgot to mention the fekkin teenagers up the back who talk and message on their mobiles like they're watching in their loungerooom, and laugh like morons at bits of the movie that aren't remotely funny. That's why I *used* to love going to the movies when I was a younger lad, but don't anymore. It's just gotten sh%t ...

    My local cinema has bad screens, half painted ceilings, crackly sound in some of them, uncomfortable shitty seats that you can't sit in for more than 30 minutes without having a sore ass and no leg room unless you sit on an angle.
    Why would I pay $20 for that experience?

    I haven't been to a cinema in many years. It's just not that exciting for me anymore and as the commenter said above... regurgitated, mutilated bullcrap story with the same regurgitated actors. Why would I want to spend money on a movie that is going to disappoint me? Money is just too tight when there are far cheaper and satisfactory entertainment choices these days I think.

    Stuff em - doesn't affect me anyway I'll just continue downloading 1080p versions to my NAS!

    What?? Number of patrons falling?? What do we do?
    Raise prices! That'll surely get them into the door!

    Idiots. The only industry where they believe that increasing their prices will help fill their empty rooms. How about they just drop prices so people can afford to go more often?

    Wages are around $23 an hour?! Where did they pull that number from? I know people who work in village and Hoyts and they are not making $23 an hour. They are all on min wage.

      My guess: weekend wage for an adult. Not that many cinemas employ adults on the weekends...

      Yes and Tony wants to lower the min wage -- will the cinemas drop prices then?

    Save money, pay actors and actresses an average wage, they are not brain surgeons or rocket scientists.

    who downloads cam rips or TS rips most wait for 720 or 1080 versions and by the time they are available online they are no longer on at the movies, i could see this as a reason for DVD\blueray sales to suffer maybe. i believe the cinemas high price cost has influenced the lower attendance rates and they are trying to shift blame andthey think downloaders are an easy target. maybe they should see how well it went for the music and games industry, they both saw the light at the end of the tunnel and hopped onboard the train instead of letting it run them down. you cant fight progress!

      Exactly. I only download good copies of movies and by that time. The movie isn't showing at the cinemas anymore. I don't go to the cinema because I don't know if I'm going to like the movie. Sometimes the movie I pirate is so good that I want to see it at the cinema but it's not there anymore.
      Maybe if they released the movies early to pirates, they might actually get more people going to the cinemas.
      Another thing they didn't take into account is the quality of the movies nowadays. Most films are just crap so why would you go to a cinema to see them.

    In the US, if all the cinema operators got together to collectively raise prices, they would be charged with price fixing and ran through the legal system.

    Almost all cinemas in Australia employee teenagers so they wont be making $23/hr unless its on a weekend or public holiday, so this argument is just null and void of any truth. If labour costs are so high as they say, why dont they replace the ticket sellers with machines where we can select our movie and session time and ticket type (adult, concession, etc)? Self service seems to be all the rage these days.

    The reason why attendance is dropping is because of the prices in the first place. Reduce the prices, and the unnecessary high prices for cinema junk food and you'll see a difference in attendance. Otherwise keep complaining, raising your prices and see yourself become irrelevant into non-existence.

    Did they ever think there is more entertainment around these days? Not only dvds and tv shows, but more sport, concerts, social functions. So yes people will spend less time going to the cinema, when there is more variety of entertainment.

    The part I like is how they are punishing those who do not pirate. I am not sure that punishing them is the best incentive to continue attending cinemas.

    Must of been a great meeting. "People stopped coming to our movies, they say it's too expensive". "I know! Lets put the prices up to cover our losses. It worked for Foxtel!".

    Why would I spend $3000 on 7.1 surround sound and a 60 inch plasma to then pay $50 for me and my wife to attend a movie when I can buy the BluRay for $15-20 a couple of months later, then invite all my friends around, sit in a comfy couch, eat unlimited munchies, pause when I need to go to the bathroom, not deal with other people talking during a film, and have the ability to watch that BluRay over and over and over again!

    Piracy has nothing to do with it. Its economics, convenience but mainly because the cinema "experience" isn't isolated to going out to the movies any more. If they want to blame someone, blame Sony, LG and Samsung for making affordable Plasma and LCD TVs!

    Last edited 03/05/14 11:35 am

    Even though i get my tickets from Tel$tra for $10, i barely go becuase of the crap atmosphere in those cinemas. I came to the cinemas to watch a movie, not to be disturbed by inconsiderate a-holes on their phones to talking to one another!

    Necastle must have the cheapest tickets in all of australia! We have Reading, Event, and Hoyts the most expensive is Hoyts at $9.90 and the rest are $8.50

    Why cant all of Australia be at this price??

Join the discussion!