Blog post by Ky Swift

I was thirteen, and I was waiting in line at the theatre to see one of my all-time favourite movies, Wedding Crashers. To avoid sitting in the front two rows, my friends and I spent over an hour in line waiting to get a good seat for the movie. As teenagers, we had a lot of time on our hands and didn’t mind waiting. Realistically, had we not been waiting we would have been trying to sneak in one last game of NHL 2005.

A month ago, I headed out to see The Revenant. I still wasn’t up for cranking my head vertically for two hours in the two front rows, but I couldn’t afford the time to go early. What I could afford, was the extra $2 it cost for Prime Seats that allowed me to pop into my reserved seat 5 minutes before show time. The Revenant wasn’t nearly as good as Wedding Crashers but it is a great example of how Cineplex successfully captured an extra $2 from me by saving in my perspective, our most valuable resource, time.

Companies often try to maximize profits by determining their customers’ willingness to pay for their product and charging customers differential prices accordingly. One way that companies are able to do this, without a lot of customer backlash is fencing. Companies ‘fence’ off customers willing to pay a higher price for a similar product by adding subtle benefits that add minimal incremental costs, like reserved movie seating. Toll routes like the 407 and VIP passes for amusement parks are other examples of how companies have used time fences as a way to add value to a subset of customers and generate incremental profits.

For Cineplex, Prime Seating seems like a no brainer. They give customers more options to improve their movie going experience and make more money. There are only two, in my mind, low probability scenarios where Cineplex potentially foregoes revenues. The first scenario is when the theatre would have been sold out with regular seats but because of the $2 incremental charge for Prime Seats, Prime Seats are left empty. If a movie has that much demand I have a hard time believing that someone doesn’t pay the extra $2. The second scenario is when the entire theatre is sold out including the Prime Seats. Cineplex could lose potential revenue in this scenario if they cut too many non-Prime Seats to accommodate larger Prime Seats. I haven’t done an actual seat count in a theatre but as long as Cineplex doesn’t cut more than two seats in a row of 12 prime seats they would still break even.

There are however growing pains when introducing a new pricing scheme and Cineplex is no exception to the rule. Customer education, especially when the program is fully implemented will be necessary so that nobody who buys a Prime Seat has to kick the innocent elderly lady out of their Prime Seat two minutes before the movie starts (I actually saw someone do this). Iteration is also important. Testing various price points and seat quantities can help optimize long-term profit potential and gauge consumer reaction.

There is a certain percentage of the population who is willing to pay a premium to save time. It’s up to companies to find ways to allow these customers to enjoy the benefits of time saving and while doing so make more money. As a consumer I welcome it.