Wednesday, March 8, 2017

Movie Theaters vs. Netflix

Movie Theaters vs. Netflix
Written by: Jenna S.
With the invention of Netflix and other streaming services, movie theaters around the country were apprehensive as to how consumers would react to their increasing popularity. After all, Netflix alone has over 75 million subscribers, and the low price of $7.99 per month is more attractive than the increasing cost of movie tickets, especially since those only have a one time use (“Number”). The movie theaters wasted no time fighting against this, implementing promotions such as the $5 movie Tuesday in an attempt to compete with the competition. In reality though, Netflix and other streaming services are not competitors to movie theaters, and movie theaters are also better for the economy.
This actually makes a lot of sense in regards to the big picture. If a consumer was trying to weigh the opportunity cost of attending a movie theater, they would not compare it to watching one on Netflix, they would compare it to other forms of entertainment such as bowling or going out for dinner. Most consumers don’t see watching a movie on Netflix as an alternative for going to the movies. According to Tim Richards, a leading movie theater chain CEO, movie theaters “are one of the few growing channels the studios have for their products right now" (Gibbs). The movie theaters don’t compete with Netflix because they don’t offer the same product. While they do both show films, the movies are the only place that releases new movies with the big screen and sound experience, so they continue to have a high demand.
Movie theaters are such a presence in the economy, it is a good thing that streaming services aren’t taking over. They are an industry with $17 billion in revenue (“Movie”). Netflix pales in comparison to that number with only $8.83 billion in revenue (“Number”). This means that movie theaters bring a lot more money into circulation than Netflix does. Especially since they don’t save all their money, but spend it on things such as food, drink, and other supplies, the spending multiplier takes effect and much more than $17 billion is injected into the economy. Although it is the goal of for companies to make money, economists are aware that raising prices too much can cause the demand for tickets to decrease, and that it is important to find the equilibrium between supply and demand. As seen in Figure 1, movie ticket prices rise so much that attendance starts to decline. As a result, they had to lower the prices again. In the long run, the supply and demand of movie tickets should settle back to equilibrium because of this change.
Figure 1
(“Declining Cinema Attendance”)

Overall, it is clear that the traditional movie theater brings in more money than Netflix does. There is no other way to experience watching a newly released movie on the “big screen” with traditional movie popcorn and booming surround sound. Because of that, theater attendance will continue to have no correlation with the popularity of Netflix, and the economy can continue to benefit from them.


Works Cited
Gibbs, Alexandra. “Netflix and Kill: Is Streaming Hurting Movie Theaters?” CNBC, CNBC, 15 Sept. 2016, www.cnbc.com/2016/09/15/netflix-and-kill-is-streaming-hurting-movie-theaters.html. Accessed 8 Mar. 2017.
“Is Declining Cinema Attendance a Bellwether for All Location-Based Entertainment Venues?” White Hutchinson - Leisure & Learning Group, White Hutchinson Leisure & Learning Group, www.whitehutchinson.com/leisure/articles/DecliningCinemaAttendance.shtml. Accessed 8 Mar. 2017.
“Movie Theaters in the US: Market Research Report.” IBISWorld, IBISWorld, www.ibisworld.com/industry/default.aspx?indid=1244. Accessed 8 Mar. 2017.

“Number of Netflix Subscribers, Users 2016.” Statista, Statista, www.statista.com/statistics/250934/quarterly-number-of-netflix-streaming-subscribers-worldwide/. Accessed 8 Mar. 2017.

26 comments:

  1. I definitely agree that movies are becoming less and less popular to certain demographics. Netflix is also about convenience which you stated, you can be in your pajamas in the comfort of your own house rather than sitting surrounded by strangers in a germ-infested chair. There have been promotions such as $5 Tuesdays and $5 student Thursdays which has increased demand for movie tickets and increased the flow of movie-goers.

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  2. It's true that movie theaters and Netflix pose no competition to one another because they show different content. As of the time being, theaters show brand new movies and Netflix can generally only show a movie once it gets the licensing deal. Which is at least a few months down the line. However, Netflix will pose a threat in the near future as they produce more and more of their own original content. In fact, Netflix was one of the top spenders at this year's Sundance film festival. Which means that they snagged the licensing agreements for movies that otherwise would have been in theaters. So, while Netflix and theaters provide no direct competition, Netflix can still reduce the theater's revenues by gaining the exclusivity rights to various movies.

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  3. I agree that Netflix and movie theaters offer a lot of different features. The movie theater is more of an experience (with Big screen and Bistro, for example) and through advertisements, they can build up suspense and demand for new releases. And while it is undeniable that movie ticket prices are increasing, I will admit that I will splurge for the more expensive tickets every so often on Friday nights out or for on opening nights of movies I really want to see. Their demand is also pretty consistent in the winter because people are limited in what they can do on a night out. However, Netflix offers some old favorites and television shows you wouldn't be able to ever watch in theaters. I think that the two are just too different to conclude that Netflix has a significant effect on the demand for movie theater tickets.

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  4. I agree that movie theaters are much different than Netflix as they have much more to offer in terms of overall experience. However, I disagree with the statement that Netflix and movie theaters aren't competitors, once movie ticket prices get so high, eventually you're just going to decide to stay in and watch Finding Dory on Netflix. If I am in the mood to just watch a movie then theaters and Netflix are direct competitors because I weigh the pros and cons of each and decide what works best right now. However, I will partially agree with you on the fact that if I am just in the mood to go out and do something, then the theater competes with other entertainment businesses and not Netflix.

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  5. Although it would make sense that Netflix would cause a decline in those who attend movie theaters, it actually doesn't. Whenever I pass the Majestic on a weekend the whole parking lot is packed, and when I go to see a movie the line is always out the door, parking lot is completely full, and most movies become sold out. Movie theaters bring in an insane revenue with the price of tickets, concessions, the bar, and the bistro. I don't think Netflix will ever replace movie theaters because it doesn't have brand new movies, and it's not the same experience as going to a theater.

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  6. It's very interesting to see that Netflix and the Movie Theaters don't really have competition with each other. As a person who generally prefers Netflix, there's usually a self-discussion on whether or not it's even worth going to the movies or just waiting for it to come out on Netflix. The opportunity cost is even greater when you're not even paying for the service, being that my parents are the one who own it, so there's a more likely chance that I'll end up waiting it out. Sausage Party for example. It seems like it was only a few weeks ago that it came out in theaters but it's just become available on Netflix. I really wanted to see the movie as soon as it came out, work restricted me from doing so. However, with it now being on Netflix I have paid nothing in order to see the movie.

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  7. Due to this post I agree with the fact that netfilx has no effect on movie theaters. Also Netflix might not be able to get the rights to air these new movies thus adding to the fact that netflix does not effect movie ticket sales.

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  8. I’m actually really surprised that Netflix has so many subscribers. Since it’s a subscription that most people do in families, or houses. I didn’t know that the $5 movie nights are from Netflix. I do believe that they are very different because Netflix doesn’t have brand new movies, or food and drink available. I do think that watching netflix in the comfort of your own home is a fun activity, however, actually going out and going to the movie theatre with some friends can also be really fun and can be a good way to spend your day.

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  9. I agree that movies theaters are more successful. When going to an actual movie theater you have the ability to weigh the opportunity costs of whether or not to purchase the high priced food, and drinks. With Netflix you have a larger set of options when it comes to movies, but there aren't any new releases. With movie theaters it is all the newest movies at your fingertips, food and beverages, and a fun time.

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  10. I think that this was a great topic to bring up especially since Netflix is becoming increasingly more popular. I thought that It was crazy though how something as popular as Netflix could still only be making half as much more per year as movie theaters. I think that one thing that you could also consider in the argument that movie theaters are still popular is because Netflix isn't really known for newer movies. Most of their selection are movies from a few years ago rather than the current year at least. Overall I though you did a great job of explaining the impact that both of them have on the economy when it comes to the amount of money that they both bring in.

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  11. I think that this was a super interesting topic to talk about because more streaming sites are becoming more accessible. Things like netflix, hulu and amazon prime allow customers to get movies and shows almost instantly. Waiting a month or a few isn't a big deal to people because they can watch it whenever, wherever, and comfortably of their home. I think you did a really nice job explaining and researching how it has affected movie theater business.

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  12. It is hard to disagree with what you are arguing here. It can clearly be seen that movie theatres aspire to provide a whole entertainment night rather than just Netflix, which is there for the long run. I think because tickets are scarce, the demand for them is higher. Anyone can subscribe to netflix and watch it as the same time as anybody else. I do think it would be interesting to see if Netflix, or a different streaming service, partnered with filmmakers, and put new releases on their services at a higher price than the regular movies. This would be incentive for higher competition, and lower prices in both Netflix and the Movie theatre industry, which would benefit us consumers but have a hardship on filmmaking companies, as their revenue is not as high. Overall, I agree that both Netflix and Movie theatres have a lot of impact on the economy, and both being different is good for the consumers.

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  13. I have always enjoyed both the services of Netflix and movie theaters. However, I can most certainly agree that experiences at a movie theater have absolutely no correlation to the experiences provided by Netflix. Though they both show new and popular movies, one is meant to be something you go out and do with friends and family alike for a night, while the other is meant to be something you can relax with at home. Personally, I know that nothing compares to going to the movies. To this day, my siblings and I still visit the movie theaters every time we're all in town to catch the latest and greatest in the cinematic world. No service is going to compete with that feeling you get when you sit back with people you love, eat some popcorn and candy, and enjoy a great new movie -- not even a service as popular as Netflix.

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  14. This article relates to me so much i watch Netflix all the time and go to the movies. The only time i ever go is if someone is paying for me or it is 5 dollar movie day. I do the five dollar movie day. To save my money because the price in movies is half the cost it normally is.

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  15. I think this is an interesting and relevant topic to today's society as streaming devices and services grow more popular. The experience of the movies is something that can't compare to watching a movie at home. At the movies, there's a certain excitement that comes along with and it plays movies that you've never seen before. This can't compare with watching an old movie at home, which is why movie theaters are still there. I love that we still have move theaters because of the experience, which is why I think this data remains true, because I'm sure many others feel the same way I do.

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  16. It's interesting that movie theaters only make $17 billion a year. I was expecting them to make much less, because they only make money from the concession stands. They buy the movies to show at their theater. Netflix however, was a stumbling number of $8.83 billion, if you think about it, it's a really high number considering the membership is only $7.99 a month. The Netflix CEO recently said they will be raising their prices to $15 a month, so there is a possibility of Netflix reaching the same revenue as movie theaters. Movie theaters, will never really go away though, or at least we can hope.

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  17. I'd agree that Netflix and movie theaters aren't really competing with each other. I would say that movie theaters now are competing with other online movie networks. Some people would rather wait for the movie to come on Redbox or onDemand in order to watch it for a cheaper. Otherwise there is a something called a firestick where you can watch movies in the theater (only if you illegally hack it) that many purchase so they save money on new movie releases. Other than this illegal process, movie theaters still have the advantage of showing new movies that people don't have access to so they can rise the prices of tickets.

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  18. I agree that movie theaters have no correlation to Netflix. Every time I go see a movie it is always packed with people. Movie theaters show movies that are released right away it take s awhile for a movie to come on to Netflix so you can watch it at home or pretty much anywhere. Many people don't just go to the theater to watch the movie they like to spend time with friends and see it on a much bigger screen. The movie theaters should not be worried about losing business from Netflix because all the new releases of movies will go to the theaters and everyone wants to see new movies and each movie that is released gets millions of dollars in the first week from movie goers. This is a good and relevant topic that is interesting to debate about.

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  19. I agree with the fact that movie theaters do not compare to Netflix. As of right now Hollywood producers prefer to release movies to movie theater because that chain is established. Not that Netflix isn't established however movie theaters have been around for longer. Furthermore if Netflix keeps advancing the way it is right now Hollywood producers may be more inclined to release movie straight to Netflix. Making Netflix a direct competitor of movie theaters.

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  20. Movie Theaters can be effected by Netflix but it still is somewhat of different businesses. The opportunity cost of going to the movie theater than watching Netflix is that you get a better experience with large screens, food/drinks, etc. The experience at the movie theaters is what people keep coming back for. Netflix gives people the opportunity to watch multiple movies anywhere. Movie theaters might lose some consumers to Netflix but it doesn’t make as big as an effect. It is what the consumers want.

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  21. Although, as you described, Netflix and movie theaters are not direct competitors, there certainly is some over lap in terms of what services they provide. As a consumer, I am happy that this competition exists because competition in a free market tends to lead to lower prices and/or a higher quality good or service from both parties.

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  22. I don't think that theaters will ever stop being a thing, because of what you said, about the feeling it gives off with the big screen and such. Also with the commercials for movies coming out, people get hyped and want to see the movie as soon as possible and will pay for the theater experience.

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  23. This is a good point. I agree with what you because people don't ask themselves, should I go to the movies, or should I watch Netflix at home? Instead they ask themselves if they should go to the movies or go bowling. Even though Netflix is movies and shows it is different because it isn't going out and watching new movies like the movie theater provides. The only thing that raises a question in my mind is, how Netflix makes Netflix Original movies and shows that are only available on Netflix which could be considered as competition to movie theaters.

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  24. I agree that movie theaters and netflix are very different types of entertainment, that typically will have little effect on each other. It is very rare that I find myself deciding between watching a movie on netflix versus going to see one at a theater. Although, I do tend to find myself buying a movie on redbox instead of going to see one, just because of the price of the movie. I don't like paying full price for a movie, so their new promotions for $5 movies have made me more likely to go see a movie. I think their prices are still too high, even though they added the promotion days, because when I'm looking for something to do with friends, it is generally on the weekends, and because of the price of a movie we tend to find something cheaper to do, or stay in. If they were to lower their prices just a little, I'd go see more movies. Overall I agree that watching a movie on netflix and going to a theater are very different and don't have the same kinds alternatives to one another.

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  25. I never would've thought that theaters and Netflix are different types of entertainment. I find it to more of common sense that movie theaters are more expensive. They have more expenses to pay being employees, maintenance, and other costs which determine the cost of a ticket. Going to the movies doesn't even compare to watching Netflix experience wise. There still is nothing like going to the movies. The experience of watching a movie in your living room or bedroom is subpar at best compared to a movie theater. Thanks to advertising, people will continue to watch movies in the theater as they want to experience the theater and see it before it could be released on a streaming website.

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