May 22, 2005

NOTHING IS MORE EXPENSIVE THAN IT USED TO BE:

Will 'Star Wars' reverse declining cinema attendance? (Gloria Goodale, 5/19/05, The Christian Science Monitor)

Movie theater owners all over the country are hoping that the new "Star Wars" will be a force to be reckoned with. More specifically, they're hoping the film will turn around a box-office slump that has gone on now for nearly three months, the longest straight decline in movie attendance on record. Analysts are predicting a galactic hit ($300 million to $400 million worldwide on opening weekend alone) that will fill theater lobbies.


They're also hoping that the rising tide of "Star Wars" hype will lift all boats, the theory being that a great night out at the cinema will encourage patrons to come back to see other summer blockbusters.

But several trends in consumer habits suggest that it will take more than Yoda and Darth to stem the waning attendance at movie houses across America. Not only are there more entertainment options competing with cinema, but the introduction of DVDs - with their crystal-clear picture and lucrative bonus features - make for a cheap alternative to the cinema in the comfort of one's home.

"People have their DVDs, their video games, their iPods - it just takes a whole lot more than before to get people to come out to the movie theater," says Paul Degarabedian of Exhibitor Relations, a firm that tracks the box office.

The number of households with at least one DVD player is rising and projected to be 80 percent by year's end. Revenue from DVD sales and rentals, which is $21.2 billion per year according to the Digital Entertainment Group, has now surpassed box-office receipts, which stands at a little more than $9 billion a year.

If Americans went to the movies every week, as they did during cinema's heyday in the 1940s, "the national box office would be running about $2 billion a week, which it's not even close to," says analyst Christopher Lanier.


Yet when the government sets out to measure inflation it does things (though I don't know if this is actually part of the market basket) like not consider movie rentals and sales at all and instead track rising ticket costs. Thus do they find inflation in a deflationary world.

Posted by Orrin Judd at May 22, 2005 12:01 AM
Comments

They've done a pretty good job of improving the calculation of the CPI over the last 15 years. This criticism is outdated.

Posted by: pj at May 22, 2005 3:29 PM

http://minneapolisfed.org/Research/data/us/calc/index.cfm


Let's say your parents told you that in 1950 a movie cost 25 cents. How could you tell if movies have increased in price faster or slower than most goods and services? To convert that price into today's dollars, use the CPI.

The CPI for 1950 = 24.1
The CPI for 2005 = 195.3
A movie in 1950 = $0.25
Use the following formula to compute the calculation:
2005 Price = 1950 Price x (2005 CPI / 1950 CPI)
$2.02 = $0.25 x (195.3 / 24.1)

A full-price movie at a Minneapolis theater costs between $5.50 and $8.50. Looks like movies have increased in price faster than most other goods and services.

Posted by: oj at May 22, 2005 3:36 PM

It costs $8 for a ticket to a local suburban theatre. The AMC-30 costs $9.50. So that's $16 to $19 for the two of us. Plus another $10-$12 if we want popcorn and soda. And they don't even use butter on this gold-plate-priced popcorn, but that crappy oil.

$30!!
Not to mention that if you have to go potty, you miss part of the action. And you have to put up with noisy teens and crying babies.

Or....wait a few months and rent the DVD for $4 and keep it for 5 days. Add maybe $1 for a couple of cans of pop, and another $1 for some home-popped Orvill Redenbacher popcorn with REAL butter.

Or pay $15-$25 and just buy the danged DVD, and watch it whenever we feel like, as many times as we like.

Posted by: ray at May 22, 2005 9:21 PM

Sorry about the extended rant, but.....

They put out cr*p like "Lost in Translation" and "Sideways", and they expect to keep customers coming to the theatre??

Posted by: ray at May 22, 2005 9:23 PM

Just don't tell the Fed...

Posted by: oj at May 22, 2005 9:59 PM

Ray - add 4 or 5 kids to the mix and the price of going to the movies exceeds a nice dinner out.

Agree completely with the DVD thing - few movies are worth seeing right away in the theater now. And there are a few discount theaters near us where if you can wait a few weeks you can see it dirt cheap ($3 ticket).

Posted by: AWW at May 22, 2005 11:31 PM

If it's a special-effects-laden action/sci-fi movie, you'd be crazy to miss it in the theater, where the image is a gazillion feet wide and the sound system peels the skin off your face. Oh, right, you old people probably think that's a bad thing.

OJ - You argue your point about rising real ticket prices well, but you thereby disprove your own header for this piece.

Posted by: Tom at May 23, 2005 8:35 AM

Ticket prices rise. The cost of seeing a movie falls. Thus is deflation seen to be inflation.

Posted by: oj at May 23, 2005 9:14 AM

Seeing a movie in a theater is a "thing." Therefore, it's "something" the cost of which has risen.
Theater viewing is a substitute, but not a perfect substitiute, for home viewing.

Posted by: Tom at May 23, 2005 11:50 AM

Seeing a movie in a theater is a "thing." Therefore, it's "something" the cost of which has risen.
Theater viewing is a substitute, but not a perfect substitiute, for home viewing.

Posted by: Tom at May 23, 2005 11:51 AM

Tom:

Yes, in order to get inflation they have to measure things in the abstract rather than take into account normal human behavior. For instance, items have to be purchased at the same outlet every time, rather than shopping for lower prices and the same item every time rather than substituting.

Posted by: oj at May 23, 2005 2:27 PM

Actually, when you talk about the cost of seeing a movie you're being more abstract than when the Fed (BEA, Dept. of Commerce, whomever) breaks it down into the specifics of seeing it in theater or in the home.
Regarding substitutability, this is a phenomenon that has been known for a long time and they've been attempting to take it into account for a long time.

Posted by: Tom at May 23, 2005 3:44 PM

badly.

Posted by: oj at May 23, 2005 3:52 PM
« PUTIN'S NO KARPOV: | Main | IT'S GOOD TO BE THE KING: »