Latest / Pricing Power Podcast with Fexingo: How Businesses Set Prices, Raise Margins, and Win Customers / How Movie Theaters Price the Cinema Experience
Transcript
- Lucas: AMC theaters tried something unusual last year: they started charging more for the best seats in the house. Center rows, prime sightlines — those got a surcharge. They called it Sightline. And within a few weeks, it became universally hated. Luna: Yeah, I remember seeing the backlash. But honestly, if you think about how airlines and concert venues price seats, it doesn't seem crazy on paper. Why did it flop so hard? Lucas: Before we get into that — and I promise we will — I just want to say something really quick. If this show has ever helped you think differently about a pricing decision at work, or even just made you a smarter consumer, there's a simple way to keep it ad-free and independent. Luna: We talk about pricing all the time, but the show itself runs without sponsors, which means listener support is what makes it work. Lucas: Exactly. So if today's episode felt worth a coffee to you, the link is buy me a coffee dot com slash fexingo. That's it. No pressure, just a tiny way to say it mattered. Luna: And I think it's fitting — we're about to talk about how movie theaters price their product. Their model is pretty similar: a small ask upfront, then the real value comes later. Lucas: Right. So back to Sightline. The core problem was perception. Going to the movies is still a leisure experience, not a utility. When you charge more for the center, you're telling the customer that the standard seat is worse. And people don't want to feel like they got the bad seat — even if they did. Luna: It also created a weird social dynamic. You're sitting next to someone who paid two dollars less for the same movie. That feels off. Lucas: Exactly. And here's the irony: AMC already had a form of dynamic pricing that works beautifully — discount Tuesday. They've been doing that for years. Tuesday tickets can be half price. It fills theaters on a slow night, builds habit, and the concessions margin covers the discount. That's smart. Luna: So why didn't they just lean harder into Tuesday? Why add a surcharge on the popular night? Lucas: Because the real problem for theaters isn't seat allocation — it's declining attendance. Since 2000, US box office admissions have fallen by about 40 percent. The average person goes maybe three times a year. So theaters are desperate to extract more revenue per visit. Luna: And that's where the subscription model comes in. AMC Stubs A-List launched in 2018 — three movies a week for a monthly fee. Regal Unlimited followed. It's basically a gym membership for movies. Lucas: Right. And it changes the pricing psychology completely. Instead of paying per ticket, you pay a lump sum and then each visit feels free. That drives frequency. AMC has said A-List members visit three to four times as often as non-members. Luna: But the margins on subscriptions are tight. You're capping revenue per heavy user. So how do they make it work? Lucas: Concessions. The average ticket price at AMC is about $11. The average concession spend is between $6 and $8, and the margin on popcorn and soda is over 80 percent. So a subscriber who comes more often buys more popcorn. That's where the profit lives. Luna: It's basically the printer and ink model. Give away the razor, sell the blades. Or in this case, the ticket is the razor and the popcorn is the blade. Lucas: Exactly. And the subscription also smooths out demand. Theaters have huge fixed costs — real estate, projection, staff — but wildly variable attendance. A predictable monthly revenue stream helps them plan staffing and programming. Luna: But there's a tension with studios. When a subscriber sees three movies a week, the theater has to pay the studio a slice of that ticket. Typically the studio gets about 50 percent of box office revenue. So if you're paying $25 a month and see twelve movies, the theater is losing money on the ticket split. Lucas: That's why AMC and Regal have renegotiated studio terms for subscribers. They've pushed for lower per-ticket fees or revenue-sharing deals. And they've also leaned into premium formats — IMAX, Dolby, 3D — where the surcharge isn't tied to seat location but to the experience itself. That's a much easier sell. Luna: So Sightline failed because it penalized you for buying a standard ticket. But premium screens succeed because they offer a genuinely better product — and you opt in. Lucas: Right. And that's a lesson that applies way beyond movies. If you're going to price discriminate, do it by adding value, not by subtracting it. The customer should feel like they're choosing the upgrade, not being punished for avoiding it. Luna: So where does the industry go from here? Ticket prices have been rising about 3 percent a year, but attendance isn't rebounding. Do we eventually see full dynamic pricing, like Uber surges on a Saturday night? Lucas: Maybe, but I think the bigger shift is toward experiential pricing. More theaters are adding dining-in, bars, lounges. Alamo Drafthouse is a great example — you pay a premium ticket price but you get a full restaurant experience. The average Alamo Drafthouse revenue per customer is nearly double a traditional theater. Luna: So it's not just about the movie. It's about the whole evening. And that changes what you're willing to pay. Lucas: Exactly. The product isn't a two-hour film anymore. It's a night out. And pricing that experience is a lot more flexible than pricing a seat. Luna: Alright, next time we talk pricing, I'm buying the large popcorn. Just to prove a point. Lucas: You'll be supporting the theater's profit margin — and that's worth every kernel.