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Popular movies may soon cost more at box office

Popular movies may soon cost more at box office

In an era of binge-watching and cord-cutting, cinemas are looking for new ways to get Canadians off the couch and into the theatres. For Cineplex, dynamic pricing – the process of charging more or less depending on what days movie-goers visit and what they’re seeing – might be the way of the future.

“Dynamic pricing is basically when you increase your price based on demand,” chief executive Ellis Jacob, told The Canadian Press, surrounding Cineplex’s first quarter earning call on Tuesday. “Say you’re busy on a Friday or Saturday night (so) you charge more, and when you’re not busy on Monday nights you charge less. It’s kind of what the airlines do, in a way. We look at all different models.”

Jacob said that the company, which owns 79 per cent of the national movie theatre market, has been “very conservative” when it comes to ticket prices.

“There come points where you have to look at the overall situation – when minimum wage keeps increasing and cost of procuring concession items come up – then we have to re-look at things, but we don’t want to use (general ticket price increases) front and centre,” Jacob told CP.

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In a sense, dynamic pricing is already familiar to the movie-going crowd. Toonie Tuesdays were a mainstay for many theatres in the early days of the awkward coin.

While that’s transitioned to cheap Tuesdays, the Cineplex model would likely be a fixture across the board.

Dynamic pricing already used by many industries

“From the sports standpoint, it was instituted as an answer back to the secondary (ticket sale) market, which has become quite lucrative,” says Vijay Setlur, a sports marketing professor at York University’s Schulich School of Business.

Both the Toronto Blue Jays and the Raptors have tested out the pricing model.

European discount carrier easyJet was one of the first to adopt it in the airline industry, flipping the former model of waiting until the last minute to slash prices, on its head. With easyJet’s model, over time the price of a ticket rises, giving customers a financial incentive to buy sooner rather than later.

Ride-sharing giant Uber has its own variation of the model called surge pricing where prices rise as demand increases. The company has faced some flack for the practice. On New Year’s Eve, an Edmonton man was charged $1,115 for a 60-minute, 63 kilometre ride, as a result of a “surge pricing” multiplier of 8.9 times added to the $125 base fare. Although the company refunded the passenger for half the amount, Uber has recently said it plans to stand by the model.

“Uber is always looking for ways to better predict supply and demand in a city,” a representative for the brand told Marketwatch. “While we understand that no-one likes to pay more for the same trip, it’s the only way to ensure that passengers can always get a ride when they need one.”

Big data needed to make dynamic pricing work

Setlur points out that introducing the dynamic pricing model requires collecting a large amount of data, which can be put into an algorithm to set prices. In other words, Cineplex will need to dig into big data if it wants to pursue this model.

“It also has to be an event where there’s a finite limit of inventory and an ongoing demand for it,” he says.

But for sports events, concerts and films, Setlur believes they’re ripe for the model.

“I’m surprised someone like TIFF [Toronto International Film Festival] hasn’t done this yet,” he says. “They just keep upping prices year over year but the (film industry) could apply dynamic pricing easily.”