4 ms·

But cinemas are hardly a monopoly-- so there really is no room for the price to go down. They are presumably already operating at long run minimum average cost,

But cinemas are hardly a monopoly-- so there really is no room for the price to go down. They are presumably already operating at long run minimum average cost, which is equal to price, and there's zero economic profit being made. I would guess that if a service like MoviePass can exist it's because it's increasing efficiency in some non-obvious way, like reducing transaction costs or enhancing advertising.

xivzgrev 8y ago
In 2017 AMC made 5 billion in revenue and took home 500M in cash. I would say they are doing just fine. https://www.nasdaq.com/symbol/amc/financials?query=cash-flow https://www.nasdaq.com/symbol/amc/financials?query=cash-flow I would disagree that movie theaters are hardly a monopoly. You usually only have one in a given geographical area. In a major metro you may have more options within a short distance but even then they are usually not walking distance from one another. And even if there are multiple options in same locale they may be same company and still a local monopoly. For example in Chicago, there are 4 movie theaters in downtown area, 3 of them AMC.
- savanaly 8y ago
  >In 2017 AMC made 5 billion in revenue and took home 500M in cash. I would say they are doing just fine. That's why I was careful to say "economic profit". On the books numbers are all well and good. But the only indicator I'll take as a sure sign that an industry is profitable in the economic sense is if the number of firms in the market is climbing (i.e. new people are scrambling to get in on whatever benefits they perceive there are to being on the supply side of the market). And movie theaters seem to be more or less in an equilibrium to me.
  - hunter23 8y ago
    Isn't that definition a bit flawed? By this logic, wouldn't Google's search product and their industry be economically unprofitable? The number of search firms is not climbing (in fact its dropping) but Google's search business makes lots of profit (and growing).
    - mmt 8y ago
      Your counter-example describes profit/growth due to monopoly. Perhaps the parent meant a distinct defintion, for a competitive industry.
eloff 8y ago
In a world of perfect competition you'd be correct. The airline business is close enough to that ideal, that little profits are made. But the reality of the Cinema business in the US is they make healthy profits.
- gamblor956 8y ago
  On concessions, not on the movie tickets. Most of the price of a movie ticket goes to the studio/distributor for the first month. By the time the theater takes >50% of the price of the ticket, the audience has dropped to the low single-digits per showing. The MoviePass customers that most used the service (aka >3 movies a month) were also the ones least likely to buy concessions. Thus, theaters had no incentive to give MoviePass a share of their gross (meaning total) concessions revenue in lieu for increased ticket revenue.
  - compsciphd 8y ago
    yes/no. I used to never buy concessions. spending an additional $5-$10 on top of my $15 ticket wasn't something i was willing to do. However, if my marginal cost to see the movie is $0, it turns out I was willing to spend $5 or so every so often to get something to munch on during the movie. While I haven't spent a huge amount on concessions, I've probably spent more on concessions in the 6 months I've had moviepass than in the combined 30+ years preceding it.
    - gamblor956 8y ago
      The theaters have access to lots of data on their moviegoers, especially through their rewards programs. Way more than what MoviePass has. If the data showed that MoviePass members were more likely to buy concessions to the extent that it affected the bottom line in a material way, right now we would all be feting MoviePass for its daring-do and forward thinking as it announces yet another theater partnership, instead of discussing its impending demise.
      - compsciphd 8y ago
whatswrongwitu 8y ago
They were planning a synergistic business model to market other businesses when you go to the movies. We hope you enjoyed your movie. Stop by Paulys Pizza next door for $2 slices.
- dragonwriter 8y ago
  Movie theaters already have that, it's called in-theater advertising, which nearby synergistic businesses have the greatest incentive to participate in (and create movie patron offers, sometimes in partnership with the theater, to promote in the ads), and do. There's no need for the middle man.

xivzgrev 8y ago

In 2017 AMC made 5 billion in revenue and took home 500M in cash. I would say they are doing just fine. https://www.nasdaq.com/symbol/amc/financials?query=cash-flow https://www.nasdaq.com/symbol/amc/financials?query=cash-flow I would disagree that movie theaters are hardly a monopoly. You usually only have one in a given geographical area. In a major metro you may have more options within a short distance but even then they are usually not walking distance from one another. And even if there are multiple options in same locale they may be same company and still a local monopoly. For example in Chicago, there are 4 movie theaters in downtown area, 3 of them AMC.

savanaly 8y ago
>In 2017 AMC made 5 billion in revenue and took home 500M in cash. I would say they are doing just fine. That's why I was careful to say "economic profit". On the books numbers are all well and good. But the only indicator I'll take as a sure sign that an industry is profitable in the economic sense is if the number of firms in the market is climbing (i.e. new people are scrambling to get in on whatever benefits they perceive there are to being on the supply side of the market). And movie theaters seem to be more or less in an equilibrium to me.
- hunter23 8y ago
  Isn't that definition a bit flawed? By this logic, wouldn't Google's search product and their industry be economically unprofitable? The number of search firms is not climbing (in fact its dropping) but Google's search business makes lots of profit (and growing).
  - mmt 8y ago
    Your counter-example describes profit/growth due to monopoly. Perhaps the parent meant a distinct defintion, for a competitive industry.

eloff 8y ago

In a world of perfect competition you'd be correct. The airline business is close enough to that ideal, that little profits are made. But the reality of the Cinema business in the US is they make healthy profits.

gamblor956 8y ago
On concessions, not on the movie tickets. Most of the price of a movie ticket goes to the studio/distributor for the first month. By the time the theater takes >50% of the price of the ticket, the audience has dropped to the low single-digits per showing. The MoviePass customers that most used the service (aka >3 movies a month) were also the ones least likely to buy concessions. Thus, theaters had no incentive to give MoviePass a share of their gross (meaning total) concessions revenue in lieu for increased ticket revenue.
- compsciphd 8y ago
  yes/no. I used to never buy concessions. spending an additional $5-$10 on top of my $15 ticket wasn't something i was willing to do. However, if my marginal cost to see the movie is $0, it turns out I was willing to spend $5 or so every so often to get something to munch on during the movie. While I haven't spent a huge amount on concessions, I've probably spent more on concessions in the 6 months I've had moviepass than in the combined 30+ years preceding it.
  - gamblor956 8y ago
    The theaters have access to lots of data on their moviegoers, especially through their rewards programs. Way more than what MoviePass has. If the data showed that MoviePass members were more likely to buy concessions to the extent that it affected the bottom line in a material way, right now we would all be feting MoviePass for its daring-do and forward thinking as it announces yet another theater partnership, instead of discussing its impending demise.
    - compsciphd 8y ago

whatswrongwitu 8y ago

They were planning a synergistic business model to market other businesses when you go to the movies. We hope you enjoyed your movie. Stop by Paulys Pizza next door for $2 slices.

dragonwriter 8y ago
Movie theaters already have that, it's called in-theater advertising, which nearby synergistic businesses have the greatest incentive to participate in (and create movie patron offers, sometimes in partnership with the theater, to promote in the ads), and do. There's no need for the middle man.