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 2018,” 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.
She added, “Continuously elevating the theater experience in a capital efficient manner allows us to offer a compelling value proposition for consumers, while solidifying our position as a highly valued element in the distribution model for filmed entertainment.”
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.
Currently, Regal allows admission to customers with Moviepass, the service that offers unlimted access to movies in exchange for a $10 monthly pass. But the chain has no partnership with Moviepass and does not endorse the service.
In response to an analyst question about Moviepass on Tuesday, Miles said, “As we previously said, we will take a wait and see approach.”
She also said Regal will not entertain a discounted ticket arrangement or any participation in concession sales as part of such an arrangement.
“We have many long standing, and these are great relationships, with several third parties, they’ve promoted, marketed and sold our tickets,” she added. “And some of those, keep in mind, they represent a significant piece of our customer base. None of those arrangements, and these are partners, we consider these partnerships provide for any third party participation in either our ticket sales or our concession sales and in our mind MoviePass is no different.”
(Pictured: Regal Entertainment Group CEO Amy Miles.)