The Regal Entertainment Group exhibition chain will test demand-based pricing for film tickets in several markets early next year through its partnership with mobile ticketing app maker Atom Tickets.
The move could lead to higher prices for blockbusters and lower prices for unsuccessful films. Three-year-old Atom, backed by Disney, Fox, and Lionsgate, has been pushing chains to take such a step. Amy Miles, chief executive officer of Regal Entertainment, made the announcement during an earnings call Tuesday with analysts.
“We expect to conduct a ticket pricing test in several markets in early 2008,” she said. “If an alternative pricing model is going to be successful we believe that one, it must provide a clear economic benefit to both exhibitors and our studio partners, and two, it should provide a compelling value proposition for our consumers. This test could be the first step towards a pricing model that drive incremental revenue in peak periods and incremental attendance in non-peak periods.”
Miles did not identify the specific markets for the test. “Changes to the historical pricing structure have often been discussed but rarely tested in our industry and we’re excited to learn even more about how pricing changes impact customer behavior,” she added.
Tuna Amobi, an equity analyst at CFRA Research, told Variety that he was not surprised by the announcement about dynamic pricing.
“It’s a question of when, not if,” he added. “Dynamic pricing has been proven to work in the airline, hotel, and live entertainment businesses so this is a positive. Movie chains can definitely be much more effective in how they price because the underlying technology has gotten a lot better.”
Regal, the second-largest chain in the U.S., reported third-quarter earnings and revenues that topped Wall Street estimates while attendance fell 14% to 44.69 million customers. Revenue dropped 12% to $716 million, which the company blamed on the unimpressive slate of movies.
“In a challenging third-quarter box office environment, we were pleased that our ongoing focus on customer amenities had a positive impact on our market share and operating metrics,” Miles said.
Shares of Regal, which have declined 21% this year, edged up 6 cents to $16.41 in trading Wednesday. Amobi cut his 12-month target price by $4 to $18 and his earnings estimates for the next two quarters. “We see an ongoing strategic focus on premium amenities and concession initiatives, plus initiatives in online/mobile ticketing, while seeing favorable dynamics for further industry consolidation,” he added.