Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / Stagflation Is Reshaping the Movie Theater Industry
Transcript
- Lucas: So there's this number that's been sitting with me all week. Average movie ticket price in the US hit eleven dollars and change in the second quarter. That's up nearly six percent from a year ago — the fastest climb in well over a decade. Luna: Six percent on top of already high prices. And yet people are still going. I saw that the summer box office is actually running ahead of last year. Lucas: Right. Which is the weird paradox of this moment. The economy is growing at barely one and a half percent annualized — that's the Q2 number we got last week. Core inflation is still hovering around three and a quarter percent. That's the stagflation squeeze. And yet the movies are doing okay. Luna: So what's the explanation? Are people just desperate for escape, or is something else going on? Lucas: I think it's a bit of both, but the escape angle is real. There's this term from the seventies — the 'cheap thrill.' Back then, going to the movies was one of the few things a family could do without blowing the budget. Inflation was running double digits, real wages were flat, so the theater was a refuge. Luna: But tickets aren't exactly cheap anymore. Eleven dollars average — in a city like New York or LA you're looking at eighteen, twenty. Lucas: Sure, but relative to what? Think about what else is competing for that discretionary dollar. A concert ticket is a hundred plus. A dinner out for two is sixty, seventy. The movies still undercut most alternatives. And that's the economic logic — when real incomes are stagnant, you trade down within entertainment, not out of it. Luna: Trade down. That's a useful frame. So theaters are the default for people who used to take a vacation or go to a game. Lucas: Exactly. And the industry has noticed. That's why you're seeing this big push into premium large format — the IMAX and Dolby screens. They cost more, but they're a justification for the higher ticket price. The chain can say, 'You're not paying more for the same movie, you're paying for an experience.' Luna: It's like the airline industry's premium economy. Give people a reason to pay a little extra and they'll feel better about it. Lucas: And the margins on concessions are still the real prize. That's where the theater makes its money. A large popcorn costs maybe a dollar to make and sells for eight. So even if attendance stays flat, the per-head spend gets them through. Luna: But there's a limit to how much you can raise those prices before people start pushing back. I saw a headline about theaters testing dynamic pricing — charging more for popular showtimes. Lucas: That's the next frontier. And it's a direct response to the cost pressures they're feeling. Utility bills, labor costs, film print and marketing — those are all going up. So they're trying to extract more from the peak demand. Luna: Which is interesting because the data shows that even in a weak economy, the top-grossing weekends can still break records. Like the latest superhero movie — people will still show up for the blockbuster. Lucas: That's the movie business in a nutshell. It's a hit-driven industry, and in a downturn, the hits become even more important because they're the only thing that gets people off the couch. The mid-budget dramas, the art-house stuff — those are the ones that suffer when consumers get picky. Luna: So what does that mean for the industry's long-term health? If we're in a period of low growth and sticky inflation, are theaters going to consolidate further? Lucas: Probably. You already saw a big bankruptcy in 2020, and the survivors are carrying a lot of debt. A prolonged slowdown would push more of them to merge or sell to the big chains. The economics favor scale — more screens to spread fixed costs over. Luna: And that's exactly the kind of thing that makes it feel like the seventies. You had the big studios consolidating, the multiplex boom, and the mom and pop theaters fading away. Lucas: Yeah, the comparison is pretty striking. The one thing that's different today is that streaming is still an option. In the seventies you had to go to the theater or wait for network TV. Now people can stay home. So the theater has to offer something that the living room can't. Luna: That's why the premium formats matter so much. And maybe also why they're experimenting with things like recliners, full food service, even bars in the lobby. Lucas: Exactly. The theater is no longer just a place to watch a movie. It's a destination. And that's a harder sell when people are watching their budgets. But the data suggests it's working — at least for now. Luna: Before we get deeper into the chain dynamics — can I say something about the show? We've been talking about how people are making choices with their money, and I think it's worth reminding our listeners that this podcast is ad-free because of supporters who throw in a couple of dollars a month at buy me a coffee dot com slash fexingo. It genuinely keeps us going. Lucas: Yeah, that's right. If you've gotten something out of these conversations, even the price of a coffee once a month makes a difference. We'll get back to the economics in a second, but it's worth saying. Luna: Okay, so back to the chain dynamics. Lucas, you mentioned that the big chains are getting bigger. Who's actually winning in this environment? Lucas: The top three chains control more than half the screens in the US now. And they're the ones investing in those premium upgrades. Smaller independents are basically fighting for leftovers. That's the structural story — it's not just about the economy, it's about who has the capital to adapt. Luna: And with interest rates where they are, capital isn't cheap. So that's another layer of the stagflation effect. Lucas: Right. The cost of borrowing is still elevated, so any expansion or renovation has to clear a higher hurdle. That benefits the big players who can self-finance, and it squeezes everyone else. Luna: Let's talk about the labor side for a second. Average hourly earnings are up, but they're not keeping pace with the cost of living for a lot of workers. How does that play out in a theater? Lucas: It's tricky. Minimum wage hikes in some states have pushed up the cost of a ticket just to break even. But the workforce is also harder to retain. Theaters are typically staffed by part-timers, and when they can make more in other sectors, they leave. Luna: So there's a labor cost squeeze on one side and a demand constraint on the other. That's the definition of margin pressure. Lucas: Which is why you see the experimentation with automation — self-service kiosks, even some chains testing cashier-less stands. It's all about trimming the labor bill without killing the experience. Luna: You know, I keep coming back to the seventies comparison. Back then, the industry actually thrived during stagflation. Do you think that's possible today? Lucas: I think it's possible, but not inevitable. The seventies had the advantage of a shared cultural moment — everyone saw the same movies, and the theater was the center of that. Today, the fragmentation is real. But if I look at the box office numbers this summer, there's still a draw that's hard to replicate at home. Luna: So what's the key indicator to watch over the next year? If we're trying to gauge whether theaters can survive this period. Lucas: I'd watch the average ticket price and the per-screen revenue. If they can keep nudging those up without a drop in attendance, they're holding their own. But if the growth starts to stall while costs keep rising, that's when you'll see more closures. Luna: And maybe also watch the premium format share. If that keeps climbing, it's a sign that the strategy is working. Lucas: Exactly. The industry is essentially betting that people will pay more for a better experience, even when their wallets are tight. It's a bold bet, but the early data suggests it's not crazy. Luna: It's a strange time to be in the movie business. You've got the economy working against you, but the product is still compelling. It's a reminder that even in a downturn, people find a way to escape. Lucas: And that's the thing about stagflation — it's not a uniform doom. It reshapes industries in different ways. Theaters are a good example of a business that's being forced to adapt, and the way they adapt says a lot about where consumer behavior is headed. I think we'll look back at this period as a real inflection point for the industry. Luna: Definitely something to keep an eye on. Thanks for walking through it with me. Lucas: Anytime. And for our listeners, we'll have more on how the economy is shaping the world around us, so stay tuned.