Digging Deeper Into Theater Attendence

Contrary to what you may be hearing, movie theater attendance is not responsible for the box office’s strength.  Rather it is increasing ticket prices that account for record box office revenues.  Movie theater attendance is often falsely labeled as a reflection of the industry’s health.  As the LA Times’ Richard Verrier said in an article last Saturday, “theater admissions have generally remained flat, between 1.2 billion and 1.4 billion admissions annually since 1994.

So what is responsible for the box offices current strength?  The answer, ticket prices.  Because ticket prices are far cheaper than other forms of entertainment (click chart on left) they have a greater degree of price elasticity.  The MPAA pegged the average cost per ticket at $7.18 in 2008, up 19% over the past 5 years.  This statistic tells the true story of the box office’s health.  Movies are an elective expenditure, and in the midst of an economic recession ticket prices are still going up.

The chart below demonstrates the disparity between theater attendance and ticket sales.  The figures foreshadow a bullish future for the box office.  As we emerge from the economic recession, more disposable income will likely increase theater attendance while ticket prices continue to escalate.