Problem-

"Higher Prices Make Box-Office Debut"

Tickets Get Costlier as Movie Chains Seek to Capitalize on Consumers' Willingness to Pay More for 3-D By LAUREN A.E. SCHUKER And ETHAN SMITH

Major U.S. movie-theater chains, seeking to capitalize on the surge in revenues fueled by such 3- D hits as "Avatar" and "Alice in Wonderland," are imposing some ofthe steepest increases in ticket prices in at least a decade.

The new prices take effect Friday in many markets across the country in theaters owned by such major exhibitors as Regal Entertainment Group, Cinemark Holdings Inc. and AMC Entertainment Inc. The increases, in one case as much as 26%, vary from theater to theater, but many cinemas are raising prices most-or even solely-for 3-D showings, which accounted for the vast majority of last year's 10% jump in domestic box-office sales. 3-D movies accounted for 11%of domestic ticket sales in 2009, up from just 2% in 2008. At an AMC theater in Danvers, Mass., a Boston suburb, 3-D ticket prices are jumping more than 20% to $17.50 from $14.50, while the adult admission price for a conventional film will remain at $10.50. At one Seattle multiplex, adult admission is rising to $11 from $10 for a conventional film, to $15 from $13.50 for a regular 3-D showing and to $17 from $15 for Imax 3-D.

A 3-D Imax movie at New York City's AMC Loews Kips Bay will cost $19.50, up from $16.5

The increases weren't officially announced by the theater operators, but were reflected in prices posted Wednesday on movie-ticketing Web sites, such as Fandango.com.

AMC and Cinemark declined to comment. Comment from Regal wasn't immediately available.

Their moves come on the heels of a record-setting year at the domestic box office, with revenue surpassing $10 billion for the first time. Movie attendance in the U.S. and Canada grew 5.5% in 2009, to 1.42 billion, the highest level since 2004. Ticket sales so far this year are up nearly 10% from a year earlier.

Movie theaters typically had charged $2 to $3 extra for 3-D tickets. But the brisk demand for those premium-priced tickets led many exhibitors to believe that they were underpriced. About 83% of the record $2.6 billion in ticket sales for "Avatar" came from 3-D and Imax screens. And Walt Disney Co.'s "Alice in Wonderland" also set records when it hit 3-D screens earlier this month.

While the price increases could boost theater owners' already buoyant revenues, some industry watchers think the could also spark a consumer backlash. Studios, theater operators and trade groups have long touted films as a bargain, compared with other forms of entertainment, intensifying their pitch during the recession.

A decade ago, the average ticket at a multiplex was $5.39, but prices have edged up between 2.7% to 6.1% a year since then, according to the Motion Picture Association of America. "The U.S. economy isn't in the greatest shape, and there is definitely risk here in pushing price too far in a weak economy," said Richard Greenfield, a media analyst at BTIG LLC, who issued a research report Wednesday on the price hikes.
Mr. Greenfield said the next month will serve as a test of the strategy. "We'll have a sense if there is any pushback" from moviegoers, he said.

Some movie-studio executives expressed concern that the price increases might be too much too soon. "The risk we run is that we will no longer be the value proposition that we as an industry have prided ourselves on," said a distribution executive at one major studio, who added that he was worried movies would become "a luxury item."

Other studio executives agreed that the move was risky, but some, like Dan Fellman, president of domestic distribution for Time Warner Inc.'s Warner Bros., expressed support. "The exhibitors are trying to push the needle on ticket prices and see where it ends up," he said in an interview. "Sure, it's a risky move, but so far charging a $3 or $4 premium has had no effect on consumers whatsoever, so I'm in favor of this experiment to raise prices even more. There may be additional revenue to earn here."

Studios are also in a bind. While many are wary of appearing to gouge consumers beset by a weak economy, they are also facing higher costs as they produce more movies in the technology-heavy 3- D format. Though ticket prices are set by theater operators, the proceeds are split roughly 50-50 with movie studios.

Five major 3-D films are opening in theaters over the next three months, starting this weekend with Dream Works Animation SKG Inc. 's "How to Train Your Dragon." That rich selection is one reason theater owners chose to raise 3-D ticket prices now. It may also help set consumers' expectations for future 3-D films.

Imax 3-D tickets to "Dragon" are expected to cost an average $1, or 7%, more than Imax tickets to Disney's "A Christmas Carol", the last children's film to open in the format, just a few months ago. In his report Wednesday, Mr. Greenfield said one of the biggest price increases was at an AMC theater in Boston, where the price of a child's 3-D Imax ticket is rising to $14.5 from $11.5. In the 10 markets surveyed by Mr. Greenfield, adult tickets to conventional 2-D films were set to rise by an average of 4%, beginning this weekend. Price increases on 3-D movies are at least twice as steep, he said, with adult admission prices rising an average 8% for 3-D movies and nearly 10% for movies on Imax screens. "This is a truly unique event for the movie industry", said Mr. Greenfield. "I can't remember the last time I saw such a major change in ticket pricing."

Additional Information-

The article belongs to economics and it is deals with the sharp increase in the price of 3-D tickets in the year 2010. As more and more movies were being released in 3-D, the price of the tickets had also increased. Some of the important reasons behind this price rise have been discussed and explained in the answer.

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