With so much money invested in their most promising projects, Hollywood executives will understandably do everything in their power to make their products a success in the marketplace. Therefore, the most expensive films often also get the highest marketing budgets,and are slotted into the most favorable opening weekends. Now the need to score big with a next project becomes more pressing, and the need to find another foolproof idea becomes essential. For those on the receiving end, the rewards can be extremely lucrative.
For instance, in the years before Disney acquired the company, Marvel Entertainment saw studios go to great lengths to secure the rights to its characters, offering the comic-book giant more favorable deal terms in search of a piece of its unparalleled run at the box office.
But for the studio executives who have to pay those high fees, the blockbuster trap can lead them to risk the very future of their studio on just a few big bets. The Blockbuster Strategy Works. It may be partly a self-fulfilling prophecy, but it is working. In my forthcoming book, Blockbusters: Hit-making, Risk-taking, and the Big Business of Entertainment , I present evidence of the payoff of such a blockbuster strategy for film studios and other entertainment companies.
Anyone who analyzes the business results of Warner Bros. Sure, they can fail, and any executive knows that major flops will lead to a flood of negative publicity. But in parsing the data, I found that smaller films fail at a much higher rate. Bigger bets may seem riskier, but they are in fact more consistent moneymakers.
Winning the battle for attention is critical in Hollywood, and that is precisely what the blockbuster strategy is designed to do. With the recent high-profile failures in mind, studio executives will undoubtedly be more cautious.
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In fact, it is their intent to reduce risk that drives the reliance on blockbuster bets. Already a subscriber? Log in or link your magazine subscription. Account Profile. Sign Out. Tags: how to make a movie movies the lone ranger the avengers.
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By charging high prices on concessions, exhibition houses are able to keep ticket prices lower, which allows more people to enjoy the silver-screen experience. The findings empirically answer the age-old question of whether it's better to charge more for a primary product in this case, the movie ticket or a secondary product the popcorn.
Putting the premium on the "frill" items, it turns out, indeed opens up the possibility for price-sensitive people to see films.
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That means more customers coming to theaters in general, and a nice profit from those who are willing to fork it over for the Gummy Bears. Indeed, movie exhibition houses rely on concession sales to keep their businesses viable. Although concessions account for only about 20 percent of gross revenues, they represent some 40 percent of theaters' profits.
That's because while ticket revenues must be shared with movie distributors, percent of concessions go straight into an exhibitor's coffers. Looking at detailed revenue data for a chain of movie theaters in Spain, Wesley Hartmann , associate professor of marketing at Stanford GSB, and Ricard Gil, assistant professor in economics at University of California, Santa Cruz, proved that pricing concessions on the high side in relation to admission tickets makes sense.
The fact that concession sales were proportionately higher during low-attendance periods suggested the presence of "die-hard" moviegoers willing to see any kind of film, good or bad—and willing to purchase high-priced popcorn to boot.
So for the times they're in the theater seeing good or popular movies, they're actually getting more quality than they would have needed to show up. That means that, essentially, you could have charged them a higher price for the ticket. Should theaters flirt with raising their ticket prices then?
No, says Hartmann. The die-hard group does not represent the average movie viewer. If you want to bring more consumers into the market, you need to keep ticket prices lower to attract them. The work of Hartmann and Gil substantiates what movie exhibitors have intuited all along. In another study examining Spanish theaters, the researchers discovered: Moviegoers who purchase their tickets over the internet also tend to buy more concession items than those who purchase them at the door, by phone, at kiosks, or at ATMs the latter option has not yet hit the United States.
More research is needed to figure out why, but for now this suggests that theaters may want to be sure to partner with an internet service to make such ticketing available—or even take the function in-house.
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People who come to the movies in groups also tend to buy more popcorn, soda, and candy, Hartmann and Gil found. While this, too, merits more investigation, it may be that such groups comprise families or teenagers. Analyzing data along the lines suggested by Hartmann and Gil can also support other pricing schemes for businesses that sell concessions, such as baseball parks.
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Taking the kids to a ball game can be a pricey proposition for many families, once you take into account all the hotdogs and memorabilia. Skip to main content. The Experience Overview of Experience. About Our Degree Programs. All Programs. See All Programs.