Estimating the Demand Elasticity of

Cinema Attendance
Paul N. Willis
Introduction and Overview
The film industry is a market that is characterised by a relatively large amount of
monopolistic power, where cinemas have the freedom to set prices to maximise revenue.
This income is distributed between cinemas and the companies that produce the films,
typically the studios. Very little published research has been carried out on measuring the
demand elasticity of cinema-goers. This is perhaps due to the vast level of heterogeneity
and innate subjectivity involved in these transactions. The last notable study that
attempted to do so was conducted by S. Cameron in 1985, who concluded that cinema
attendance was relatively inelastic to price and that cinemas were not maximising revenue
as their ticket prices were too low.1
This conclusion is supported by subsequent data that shows that between 1987 and 2010,
the inflation adjusted price of a cinema ticket rose from $5.8 to $8, whilst during the same
period attendance per capita decreased only slightly from 4.5 to 4.42,3.

During this time, there are periods where price and attendance show a negative
relationship, such as between 2002 and 2010. However, there are also times when the
data shows a positive relationship, such as between 1995 and 1998 where attendance
increased despite a simultaneous increase in price. The value of using a traditional
regression analysis to account for external factors would be close to null with data of this
type as there are many significant factors involved that are simply immeasurable. In order
to reach any kind of accurate conclusion on consumer behaviour, a more innovative
methodology is needed.
1. Cameron, S, The Supply and Demand For Cinema Tickets: Some U.K. Evidence
2. Statista. Number of Movie Tickets Sold & Ticket Prices in the U.S. and Canada from 1980 to 2012
3. The World Bank. Inflation, GDP deflator (annual %) & Population, Total

The Orange Wednesday campaign was introduced in 2003 and allowed anyone who used
the mobile network Orange a buy one get one free offer to use at the cinema on
Wednesdays. Since 2003, Wednesdays have gone from the least popular weekday to
attend the cinema to the most popular. 4 This offer is not entirely restricted to Orange
customers, as the buy one get one free voucher can be forwarded and shared between
peers, and so in order for someone to get a half price cinema ticket, a consumer simply
needs to know someone who uses the Orange network. Due to this drastic decrease in the
price of cinema tickets, a relatively accurate portrait of consumer demand can be obtained
by identifying the consumption patterns before and after 2003.
From this data, conclusions on the behaviour of specific types of consumers can be
identified. For example, are younger audiences more or less willing to pay for a cinema
ticket than older audiences? Is a consumer more or less willing to pay to see a film in its
first week of release compared to its 6 th week? These questions have significant strategic
implications for the cinemas and the studios and it is in answering these questions that is
the primary focus of this study.

Methodology
The data used consisted of grosses of films in the UK top 20 from 2000 to 2010. This
sample identified how much each film took on each day of the week. The source was the
Rentrak Company, who are industry leaders in collecting film market data.
For every week in the time period, the ratio was calculated of what each film grossed on
the Wednesday compared to what it grossed on the Tuesday, and then the median of each
year was plotted.
The offer was introduced in late 2003, but given the time it would take for this information
to diffuse to consumers, the effects would be increasing year on year from 2004.
As such, we would expect the data to look flat or downward sloping if the consumer group
was inelastic to the price change, as people would have not reacted significantly to the
price decrease. The data would show an upward slope if the consumer group were price
elastic as more people would have decided to visit the cinema on this day compared to
before the price reduction;

4. Orange Company Website. Orange Wednesdays Data.



Weeks where films had previews, (when the film has a limited release prior to its official
release) were excluded from the data set as these weeks are characterised by vast
fluctuations of grosses between days. The top 5% and bottom 5% of ratios were omitted
from the sample set also, so as to further reduce inaccurate anomalies.
Films were categorised in terms of what age certificate they had received (U, PG, 12, 15,
18) and what week of release they were in. This was to identify how the consumer patterns
of different groups varied towards different films.

Results
The collated data of all films in the sample show an upward slope, with the data spiking in
2005, before returning to a gradual increase afterwards. This suggests that audiences are
demand elastic and that consumers are affected by changes in ticket prices.
Year

Median of Wednesday to
Tuesday Ratio

2000

0.9832

2001

1.0021

2002

1.0075

2003

0.9764

2004

1.0692

2005

1.3838

2006

1.1737

2007

1.1869

2008

1.2106

2009

1.2348

2010

1.2505

The year on year change in elasticity can be seen as follows;

1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

The data was then categorised by which week the film was released in. The results show
that the earlier the film is in its release schedule, the more sensitive to price changes
consumers are. As films continue their run, consumers become less sensitive to the price
reduction.
Week 1
1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Weeks 5 and 6
1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Weeks 9 to 15
1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

This shows that when a film is first released, increased prices cause more of a reduction in
the people who will go to the cinema than if a film is later on in its run.
An explanation for this behaviour is that when a film is first released there is a greater
proportion of people who are undecided and are convinced one way or another based
purely on the price of a ticket.
This has significant implications for the pricing strategies in the film business, not only from
the profit maximisation view, but also with regards to inter-business negotiations, as the
percentage of revenue that a cinema will pay to a film studio is much higher in the first few
weeks of a film's release compared to later on in a film's run. Therefore, a decrease in
price would benefit studios more than it would cinemas. This is discussed in more depth
later in the study.
Films were then categorised by what age classification they received. It should be noted
that this method is giving a comparative representation of consumer behaviour. For
example, if a film received a 15 rating compared to an 18 rating, the consumer was not
necessarily aged between 15 to 18. However, due to specialised marketing campaigns,
films in each age bracket are targeted at specific age groups and as such this will increase
the likelihood of each age rating attracting consumers of that age category.
The data showed that consumers for U rated films were the least elastic to the price
change. This suggests that adults taking young children to go and see film's care less
about price than any other consumer group.
1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Consumers for films rated PG were more sensitive to changes in price, with the price
decrease causing a larger proportion of people to buy tickets.

1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Films rated 15 were the most price elastic, followed by films rated 12, suggesting that
teenagers react most to fluctuations in ticket prices.
1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

For films rated 18, consumers reacted less to the price change, showing an upward trend
until 2007 and then decreasing significantly in the three years that followed. This suggests
that the demand elasticity for this consumer group is relatively low.
1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Executive Implications
This heterogeneity in the price elasticity of consumer groups has significant implications
that can be used to shape strategic behaviour within the film industry. For example, the
fact that different age groups had different price elasticities demonstrates that profits could
be increased if a different price were charged to each consumer group. As the data shows
that audiences for films with a U rating were the least elastic, charging this consumer
group more for cinema tickets would result in higher profits. This explains why recent
increases in the cost of a ticket due to 3D cinema have increased the performance of
children's films, with U and PG rated films consistently having successful 3D releases.5
Due to consumers being more demand elastic to films earlier on in their release, offering
discounts and promotions for newly released films would have a positive increase on
revenue also, as the data shows that more people are on the fringe of deciding to go to the
cinema during this time than any other.
The higher demand elasticity of newly released films gives implications on the revenue
split between studios and exhibitors also. As studios take a larger percentage of revenue
from films in their first few weeks of release, an increase in ticket prices would be
disadvantageous to the studios as less people would be inclined to buy a ticket for a newly
released film. This would not have as much of an impact on exhibitors who take a larger
percentage of revenue for films later on in their run. This information would help in
leveraging the bargaining power of the studios in the case of any proposed increase of
ticket prices, ensuring that studios would be compensated with a higher share in revenue
were such an increase to take place.
Perhaps the most significant implication of this study however, is in the fact that the
behaviour of different consumer groups varies to such a large extent. This suggests that
this analysis could be applied to other sectors of the film industry where uniform pricing is
present, such as within Home Distribution. If such differences in the attitude to prices were
found between consumer groups in this sector, this would give massive advantages to the
studios, giving them the ability to adapt pricing strategy and increase revenue significantly.

5. Box Office Mojo. 3D Movies at the Box Office.



References
1. Cameron, S, 1986. The Supply and Demand For Cinema Tickets: Some U.K. Evidence. Journal of
Cultural Economics. 10[1] pp.38-62
2. . Statista. Number of movie tickets sold & Ticket prices in the U.S. and Canada from 1980 to 2012,
www.statista.com/statistics/187073/tickets-sold-at-the-north-american-box-office-since-1980
www.statista.com/statistics/187081/average-ticket-price-at-north-american-movie-theaters-since-1980
3. The World Bank. Inflation, GDP deflator (annual %) & Population, total
www.data.worldbank.org/indicator/NY.GDP.DEFL.KD.ZG
www.data.worldbank.org/indicator/SP.POP.TOTL
4. Orange, 2013. Orange Wednesdays. www.orange.com/en/sponsorship/films/Orange-Wednesdays
5. Box Office Mojo. 3D Movies at the Box Office. www.boxofficemojo.com/genres/chart/?id=3d.htm

Annex
Table 1.1 Collated Data
Year

Median of Wednesday to
Tuesday Ratio

2000

0.9832

2001

1.0021

2002

1.0075

2003

0.9764

2004

1.0692

2005

1.3838

2006

1.1737

2007

1.1869

2008

1.2106

2009

1.2348

2010

1.2505

Table 2.1 Categorised by Week of Release

Week of Release
3
4

5 and 6

7 and 8

9 and 15

2000

0.9563

0.9566

0.9875

0.9922

0.9817

0.9821

1.0495

2001

0.9757

0.9922

0.9739

0.9943

0.9882

1.0045

1.0417

2002

0.9824

0.9881

1.0142

1.0113

1.0009

1.0369

1.0449

2003

0.9458

0.9754

0.9477

0.9885

0.9908

1.0005

0.9943

2004

1.0679

1.0642

1.0776

1.0491

1.0738

1.0603

1.0679

2005

1.1261

1.1349

1.1657

1.1539

1.1637

1.1771

1.1198

2006

1.1681

1.1954

1.1788

1.1779

1.1753

1.1578

1.1556

2007

1.1856

1.2213

1.1794

1.1823

1.1962

1.1495

1.1386

2008

1.2148

1.2415

1.2229

1.1826

1.2205

1.0740

1.0681

2009

1.3032

1.2915

1.2422

1.2294

1.1355

1.0678

1.1562

2010

1.3407

1.3282

1.2252

1.1802

1.1654

1.2428

1.0903

Table 3.1 Categorised by Age

U

Age Rating
PG
12

15

18

2000

0.9828

0.9818

0.9769

0.9891

0.9791

2001

0.9606

0.9531

1.0071

1.0197

0.9896

2002

0.9959

0.9748

1.0002

1.0280

1.0149

2003

0.9448

0.9478

0.9761

0.9793

0.9885

2004

0.9557

0.9787

1.0671

1.0998

1.1177

2005

1.0835

1.0795

1.1694

1.1715

1.1250

2006

1.0877

1.1261

1.1877

1.2038

1.1820

2007

1.1040

1.1340

1.1797

1.2315

1.2396

2008

1.1033

1.1795

1.2053

1.2640

1.0500

2009

1.1928

1.2055

1.2401

1.2538

1.0350

2010

1.1177

1.1881

1.2849

1.3333

1.0566

Graph 1.1 Collated

1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Graph 2.1 Release Week 1

Week 1

1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Graph 2.2 Release Week 2

Week 2
1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Graph 2.3 Release Week 3

1.4

Week 3

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Graph 2.4 Release Week 4

Week 4
1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Graph 2.5 Release Weeks 5 and 6

Weeks 5 and 6
1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Graph 2.6 Release Weeks 7 and 8

1.4

Weeks 7 and 8

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Graph 2.7 Release Weeks 9 to 15

Weeks 9 to 15

1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Graph 3.1 Age Rating U

1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Graph 3.2 Age Rating PG

1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Graph 3.3 Age Rating 12

1.4

Ratio between
Wednesday and Tuesday

1.3

1.2

1.1

0.9

0.8
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Graph 3.4 Age Rating 15

1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000

Graph 3.5 Age Rating 18

1.4

Ratio between
Wednesday and Tuesday

1.3
1.2
1.1
1
0.9
0.8
2000