Tuesday, November 17, 2009

Will the Internet Undermine Movie Pricing?

Movie pricing has been a classic example of price discrimination. Get the most money from those willing to go to theaters. Get a little less later from DVD sales. Drop the price a bit more from viewing it on HBO. Finally, get what you can from "free TV" advertising.

So where does Internet delivery fit into the mix? There will be piracy, but this does not appear to be as big a problem as with music. This Morning Edition story claims that Internet delivery combined with HDTV is beginning to upset the whole deal.

1 comment:

  1. This is a relevant topic and something that I actually think about often. I am going to write off the cuff here, based on my own opinion. To me it’s about the relevance I have towards the movie. I often see a movie trailer that makes me want to run out to the theater but I never really do, maybe once every other year. I don’t have the time to see a movie these days and I can’t seem to ever schedule a theater visit around the offered times. I can’t seem to ever make an exception either, unless of course the movie is relevant to me. For example as a life-long Star Wars fan I will certainly make it to a theater for the new movie. I will absolutely not miss it and will pay whatever I have to in order to see it; it is relevant to me. When I see this movie I will almost certainly see an appealing trailer for another movie and vow to go no matter what, but the truth is that I won’t. This movie, unless it is another Star Wars film, will not be relevant to me for too long. This movie will end its theater run and I won’t see it. I won’t buy the DVD, I won’t pay to watch it on demand and by the time it is on cable or free TV the thought of seeing it will not be relevant to me. It’s the timing of the chain of events that happens after the movies’ initial theater run. When I see the trailer the thought of going becomes relevant to me, but this relevancy goes away in time and the studio loses any opportunity of gaining my dollars.
    Ok, here is what I think should happen. To me the movie is relevant when I get excited after seeing the trailer. By the time the movie is available to me to view in my home at a price, it is no longer relevant. I am not willing to pay, the relevance came and went. I am no longer interested in paying to see this movie. There is a window of opportunity for the studios to still get my dollars though. It is the time right after the movie ends it theater run; that is about the last time the movie has any chance of being relevant to me. I would absolutely pay to see the movie on demand over the internet, a week after it left the theater. I believe that the movie would still be relevant to me, which makes it valuable. I would pay a higher price to watch the movie in this period, compared to what I would not pay several months later for the DVD launch or the on demand premier. The movie only has to be available for a couple of days, then it could run its regular course. I bet the studio would tap into a good market here, especially for the buzz worthy movies.