Film Prices put Economics on its Head

As Drake discusses in the article, the price to see a film in movie theaters is set at the same price for all individual films. This is a very interesting point that is made by Drake because economics in a capitalistic market would say that the individual films should be able to control their prices for viewership. In terms of  the risk it is pretty obvious that these movies released at the same time have up to hundreds of millions of dollars invested that are at risk. In the modern age of film making there is a struggle to decide on whether the studio should spend this large amount, or make it a smaller budget and risk making a movie with less quality.
With this becomes the important part of the consumer. With an industry that offers heterogeneous products for the same price, that also have different sunk costs, it will be driven by the consumer. There is no other market, other than in the media, that sets up their pricing model this way. This leads to a lot of risk where a few films can essentially have an oligopoly over the entire market. Investopedia.com describes an oligopoly as two or more "firms" controlling the market. In this case the firms are films but I truly believe that is what we are seeing in today's movie market. Go here to see what the box office numbers are for the past weekend along with their total gross revenue on the right side. As you look at the numbers you can see that, as movies are not allowed to price discriminate based on their demand it creates an equal opportunity for consumers to choose which film they want to see.
Although there is this peculiarity in the film industry, marketing can play a very large role in reducing this risk of a film "flopping" in an oligopolistic market. One example that I can think of comes from a few years ago when Will Ferrell made a string of movies that were questionable to say the least. When he made the films Land of the Lost and Super Pro there were a lot of skeptics that said these films would not do well. Just by putting Will Ferrell in these films and marketing them for countless times on TV and in the media they were able to have successful box office revenue. A more recent movie that I can think of tailored more towards the younger college aged generation that did this was well was Project X. They created a movie with a small budget, and marketed it to our demographic to the extreme. With this model they were able to see quite a lot of success as well in the box office. So, although the economics of the box office film industry are upside down to an extent, it allows it to be a true market run by the largest movie critic that is the consumer.

Utilizing Hugh Jackman for Publicity

Drake defines publicity as media coverage for which no payment by the studio is made. While a member of the marketing department essentially, it functions at a very different frequency. Instead of being handed budgets and creating campaigns, publicity looks to utilize the talent of their movie through media use. Interestingly, Drake notes that reviews, television appearances, and interviews do not usually involve a direct payment to the media, and therefore may be more trusted by audiences. Trailers, and ads for movies are clearly attempting to spin and sell something to the consumer, but a late night interview with the star in which the movie is not the sole topic can spark peoples interest in a unique way.

Real Steel starring Hugh Jackman, took full advantage of its ability to utilize film publicity. With an estimated budget of eighty million dollars, turning a profit for this action oriented film based around the simplistic theme of robot boxing seemed imperative. While the marketing campaign was certainly high budget, a similarly strong publicity campaign was happening. Hugh Jackman was pushed as the loveable character who brought depth and importance to a movie revolving around robots boxing. Jackman appeared on most late night television shows, including The Daily Show with Jon Stewart, Jay Leno, and Conan O’brien. During interviews Jackman clearly was attempting to show that this film had heart, and while very Hollywood in its nature, it contained some layers. His attempts seemed valiant, he was charming, friendly, and very optimistic about the movie.

Despite excellent differential promotion efforts from Jackson and the publicity team to create a dichotomy of messages from the trailers, the film still has not grossed enough to make a profit. Currently at approximately 66 million dollars, the film had a strong opening weekend but has cooled off sense. Much of this may be due to mixed reviews and not the strong publicity campaign which utilized the television media incredibly well.