Why we pay $12 to go to the movies

Over at the Atlantic, writer Derek Thompson asks a very good question: "Why do all movie tickets cost the same?"

It's a question I often think about when I go to the movies. I tend to see low budget, independent films from small theaters, but the $12 movie ticket is the same price I'd pay if I were to see a big budget thriller at a large cineplex.

For example, at the massive AMC movie theater in New York's Times Square, our data shows that the typical movie-goer spends around $19 per visit — just about the cost of a movie ticket and a medium size tub of popcorn. In the much less touristy AMC movie theater near my parents' house in Southern California, movie-goers typically spend about $16 per visit — just a few dollars off, but very close in cost. Tickets are about a dollar cheaper, but comparable considering the lower cost of living. I'm sure if you were to do a search for what people in your city are typically spending to go to the movies, it would be fairly close to these figures as well.

So why does a blockbuster film starring Tom Cruise ("Mission Impossible: Ghost Protocol") cost the same as an independent film starring Charlize Theron ("Young Adult")? Shouldn't the tiny indie movie cost less to see? Shouldn't a movie that's been out for a few weeks cost less for theater-goers since it's been sitting on the film reel shelf for a while?

You can blame "The Godfather" for modern day movie ticket pricing. Thompson points out a Washington Post story by Steven Pearlstein that gives a rundown of the history of movie theater ticket prices.

It goes like this: Once upon a time, during the golden years of Hollywood, films were given "A," "B," or "C" rankings depending on the how much star power the films had. An A-list movie starring Clark Gable would cost more to see than a C-list movie starring an unknown actor. Theaters would also charge more for "event" movies like "Gone With the Wind" (these days, event movies would be the ones in the "Harry Potter" series or "The Lord of the Rings").When "The Godfather" made its cinematic debut in 1972, every movie theater in the U.S. suddenly dropped its event pricing, and charged everyone the same price.

Pearlstein also argues that movie studios have no incentives to lower the price of movie tickets or experiment with variable prices. If someone thinks it's too expensive to watch a movie in the theater, they might make the decision to later rent or buy the movie when it comes out on DVD. If that person were to be provided with a discounted ticket, that's one less potential movie rental or purchase the studio may see over the long run.

In addition, we all tend to value movies differently. A well-written and acted independent movie is worth much more to me than a star-studded blockbuster film with a silly premise. Others may love big budget films, but find indie films a bore. So we all pay our $12, watch our respective movies, and hope to be entertained in our own way.

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