Entertaining the American consumer 

This will be a bit different from other posts in this blog in that it isn't about teasing apart some issue that has become buried by rhetoric on two or more sides and is, in fact, an indulgence in punditry. Please bear with me.

The issue here is why, as discussed in this NYTimes article, overall movie attendance has been declining. The article suggests a few possible causes, including lack of high quality movies (very subjective), gas prices, alternate entertainment options (e.g. video games), and the declining quality of the experience (e.g. commercials). I'd suggest that, while these individual factors are part of it, what we are seeing is two fundamental but gradual shifts in consumer behavior.

The first shift is an increased expectation of convenience in one's entertainment. This comes from services like TiVo and NetFlix that make "There's nothing worth watching on TV right now" a thing of the past. There is always something that is not only worth watching but, with TiVo or NetFlix, is also something that we decided beforehand we wanted to watch. Contrast the convenience and comfort of one's own den and the (relative) certainty that we will be entertained with the moviegoing experience of finding parking, lines, commercials, and rude theater patrons (with their loudly whispered conversations, cellphones, seat-kicking ways, and crying/screaming children). The benefits of a theater at its best include a large, high resolution (yes, even film has a resolution) picture, high fidelity sound, seeing a feature sooner rather than later, and a shared experience (particularly relevant for comedy and horror/thriller). Of course, the home theater at its best is sufficient picture and sound quality for many people.

The second shift is the invisible elephant in the previous paragraph: economic factors. We'll look at several example entertainment-seeking couples and compare their entertainment choices and costs, using plausible but unscientific numbers. We'll assume that all of them have a decent television and stereo and some kind of television service (i.e. cable or satellite).

Consider a frugal and lucky moviegoing couple, whom we'll call the Smiths. Through one discount program or another (e.g. AAA), they can buy discount movie tickets for $6 each. They are lucky in that their local movie theater, which is a five minute walk away, doesn't enforce discount ticket restrictions like not being allowed for a movie's opening weekend. They also don't feel the need to buy popcorn, drinks, or anything else at the theater, so they just walk in, buy their tickets, and watch the movie. Total cost of the Smiths' movie entertainment for the evening: $12.

We'll also consider the Sullivans, who drive their 15mpg SUV five miles to the cinema, pay the full $9.50 ticket price, and typically spend $5 on snacks for the movie. At $3 per gallon of gas (not yet around here, but it's coming), their moviegoing experience costs them $25.

Another couple, whom we'll call the Parkers, have the cheapest NetFlix subscription ($9.99/month, 1 DVD out at a time). If they only watch one DVD a month, the cost of the Parkers' movie entertainment for the evening is still cheaper than the Smiths', at $9.99.

The Jacksons, on the other hand, prefer to own movies. They don't insist on buying a movie right when it comes out and they watch for deals, so they pay an average of $17 per DVD.

The Hendersons have a TiVo and some premium cable movie channel(s) (e.g. HBO, Showtime, Starz). Their monthly TiVo service costs $12.95, and their premium cable service is anywhere from $10 to $30 or more per month depending on which channels and how many of them. (Their friends, the Walkers, are happy to watch the older movies on TCM and AMC or plain old TV shows on their TiVo.) If they watch only one movie a month and they have a $32.05 (to make the numbers easy) premium channel package, their evening's movie-watching costs $45. In summary (rounded up to the nearest dollar):

EntertainmentCost per movieCost per month

SmithsCinema (frugal)$12
ParkersNetFlix $10
JacksonsDVD purchase$17
HendersonsTiVo + premium channels $45
WalkersTiVo $13

We see that the Parkers are saving the most money here, but it's more interesting than that. Let us assume that our entertainment-seeking couples are interested in taking in a movie every weekend rather than just once a month. Conservatively, there are four weekends in a month, so the Smiths spend $48 for their monthly movie-watching. Of course, the Parkers' and Hendersons' costs haven't changed. The Hendersons are spending $3 less than the Smiths, and the Parkers are spending a whopping $38 less every month. The Jacksons are paying $80 per month, but at the end of the month they own four DVDs. The benighted Sullivans, however, are spending $100 a month on movies. Is the moviegoing experience, with its big screen, high fidelity sound, and arguably positive shared experience, worth 5 or 9 times more than watching a DVD in the comfort of one's home? Is it worth almost 50% more to see a movie a single time in a theater than it costs to own it on DVD? The cost differences get even wider when we add another family member; only the Smiths and Sullivans pay more, and they are already paying more per month than the other couples (except the Jacksons).

Of course, there are some things missing from these comparisons. There are differences in timeliness, for example, in that the Smiths and Sullivans will have access to movies before the Parkers and Jacksons, who may or may not have access to them before the Hendersons.

There is also the matter of breadth of available choice. The Smiths and Sullivans choose from a fairly narrow array of movies currently playing at their local theater. The Hendersons choose from a less narrow array of movies playing on their premium channels, depending on how many of them they have. The Walkers choose from a wide range of old films, plus television programs, but they will never have uncut access to anything rated higher than PG or maybe PG-13 (exceptions include Comedy Central's Secret Stash). The Parkers and the Jacksons have the broadest array of choices, including recent and older movies and TV series that have been released on DVD.

Probably the biggest missing consideration is the difference in quality. The Smiths and Sullivans will experience a higher quality picture and higher quality sound than the Parkers and Jacksons, who will experience higher quality than the Hendersons and Walkers (though the Hendersons might get better quality with HDTV premium channels and a PVR capable of recording HDTV quality).

The point isn't that going to the movies costs too much, though it does. It isn't that NetFlix is cost-effective and appealing, though it is. The point is that the perceived benefits of going out to see a movie no longer outweigh the costs (monetary, opportunity, and inconvenience) for many people. Many people's perception of the benefits of going to the movies has dwindled, largely due to annoyances like commercials and an arguably greater share of lousy films. Ticket and snack prices, not to mention gas prices, have driven up the cost of going to the movies. The opportunity cost of skipping the movie theater in favor of watching something at home has been lowered by the availability of high-quality home theater systems, thus raising the opportunity cost of going to the theater. The inconvenience of leaving one's home, not to mention dealing with lines and other patrons' rudeness, hasn't changed much; many people's perception of inconvenience, however, has increased as they become more used to being entertained at home by television they actually want to watch (thanks to TiVo), DVDs, and video games.

I don't think the movie industry is doomed, nor do I think the movie theater market is drying up. Hollywood and movie theaters face greater competition than they ever have, however, and they will have to rise to the occasion and start improving the moviegoing experience. Being able to purchase tickets online and at kiosks helps. Improving the quality of movies and cutting down on boringly formulaic (Stealth, perhaps?) or ill-conceived (Deuce Bigalow, anyone?) films will help. Getting rid of those infuriating commercials will help. Going to the movies can compete with home entertainment again, but it will require some changes.

This page is powered by Blogger. Isn't yours?