Tuesday, November 1, 2011

Using Marketing to offset level ticket prices

When it comes to pricing goods outside of the cinema industry, price discriminating is a huge factor in determining the cost to consumers. If you are selling a superior product or luxury item, you can increase the price because people will be will to pay more for the quality. If you are selling a cheaply made good, you have to change less because it not worth the money to consumers. When it comes to the movie industry all ticket prices are equal. Whether a films budget was over 200 million dollars with an Oscar winning scrip and big name actors or a simply shot on a camcorder and edited using an ipad, the cost at the box office is the same.

The article uses Spider-Man as an example often as a big blockbuster with a massive marketing budget. This film had high price actors, digitally laborious special effects, and needed filming permits in NYC which are not inexpensive. These are high sunk costs. Thus to turn a profit it was necessary to have a large marketing budget to ensure the films success (i.e. you need to spend money to make money). By launching a wide scale marketing approach that encompassed TV, print media, food industries, press appearances, ect. Producers were able to get the word out about the film. The article points out that a strong showing at the box office makes up only 15% of the films total revenue, that 15% sets the tone for the ancillary profits. Spider-Man dominated at the box office and thus kids wanted the DVD’s and merchandise that came with it. Also, due to it’s success sequels were put into production, which are producers safest bets for profits. After reading this article it is clear why some super heroes get sequels and it is because they are simply more marketable.

On the flip side a movie like My Big Fat Greek Wedding the chances of a net loss were slim. They had little to no marketing budget to speak of. Their distribution costs were low because it slowly spread across the country. Advertisement for the film was through word of mouth. Since the film was mostly unknown at the start, moviegoers may have been apprehensive about spending the nine dollars for a ticket; but if their friend recommends the movie that is better advertisement that any TV spot. A consumer is much more likely to trust their friend opinion than a flashy trailer. My Big Fat Greek Wedding is the largest grossing independent film of all time. To conclude, a movie does not need a ton of marketing to be successful, but if a significant investment has been made towards a film a marketing plan is necessary to protect those investments.

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