Premiumisation is a big trend across categories. We are now starting to see this trend becoming stronger in the cinema theatre category, in geographies beyond US (some news from India here). The economics and the principles are the same as “business class” travel i.e less seats, superior and value-added experience, higher margins.
Business class cinemas are being offered via single screen luxury cinemas (akin to all business class flights which started a year ago between London and NY) as well as exclusive sections within the various screens in a multiplex.
The only way for “business class cinema” is up. Ticket pricing is fairly uniform currently and there are hardly any “premium” brands in the category, especially in Europe. Some “premium” private theatres exist but there is no critical mass.
There is room for both-single screen all luxury class theatres as well as luxury sections within each of theatres of a multiplex. The latter is easy and more applicable for developed countries where multiplexes dominate. Theatre chains like Cineworld, Odeon (in UK) should be pushing this more aggressively (besides pushing -watch as many as you can in a month for 10.99 pounds) .
The former (single screen premium theatres) is perhaps easier in developing countries like India which have an extensive network of independent cinema theatres. These can be bought over (or made franchisees) and converted into more upscale theatres. PVR is doing that in New Delhi already. In developing countries the task actually is less about “luxury” and more about bringing the average cinema theatre experience on par with the developed world. Objective is the same in both cases- higher revenue per visit i.e premiumisation.
In the early phase of this category’s growth, content i.e the movie will be a hygiene factor (as every cinema theatre has access to the same movies). However overtime one might see theatre owners working with studios to create special editions/cuts for exclusive release in their theatres. This is same as grocery chains asking FMCG brand owners for exclusive listing of new products for some period.
As the category matures, it will not be surprising to see somebody offering the “premium” experience at “value” pricing ( like TARGET stores). However cracking the economics ( i.e making money at value pricing) will not be as easy here as Grocery products. Private label will be tough, distribution reach is unlikely to reach WALMART levels and hence brand owners ie the studios will still have significant power, as can be seen from Easy Cinema’s experience.
Easy group (of Easy Jet fame) tried Easy Cinema in UK in 2003 – “No frills cinema showing a range of new releases and classics. Online advance booking is possible, the earlier you book, the cheaper the ticket. You can bring your own food”. Same business model as EasyJet but different category. It is no longer in business and is now a cinema listings site with links to other theatre chains like ODEON and VUE. The big studios just refused to give them the right to show the block-busters. More on that here.
The classic principle of win-win, for brand owners (movie studio) as well as channel (theatre) owners, holds true even here. If they work at cross-purposes nobody wins in the long term.
Three cheers to watching the latest blockbuster on the big screen in a wide leather recliner with a footstool and on demand food and beverage service at the seat.