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Movie Price:
A Marketing Attitude for Digital Cinema (Part 2 of 4)

Your daddy's day of pricing a product on cost plus a profit is long gone. In the digitial world of entertainment, we see a wide range of pricing structures such as theatrical tickets, group 4-wall rentals, title rentals, title sales, special releases, subscription services, festivals, downloads, delayed broadcasts, pay-per-view, licenses, bundled deals, cable channels and now we have movies and games on cell phones, on iPods -- on electronic billboards.

One aspect to pricing is that the marketing channel is a long one. It's like a bucket brigade carrying the payload to the blazing fire. Each provider sells (and prices) for the next person in the chain, while keeping an eye on the end user.

Screenwriters sell to producers. Producers sell to investors and distributors. Distributors sell to exhibitors and chain stores and Internet dealers. Retail stores sell to communities (groups) and individuals and families. Families "sell" to friends and more family. Even word of mouth has a price.

Price can make or break a product launch--or even hasten the demise of a mature product. It can be priced to high. Too low. Too piecemeal. Not modular enough. Again, the marketing attitude about Price is mostly about people. Your people. Your customers, your dealers, your reviewers, your prospects, even your employees.

At first glance, pricing in the movie industry seems very standardized. But in the pre-consumer stages, prices fluctuate widely. A distribution contract can be structured in many ways that result in very different returns for the producer, the key creative talent, and even the distributor. Elements that are negotiated include:

  • Theatrical release schedules
  • Territories and market segments
  • Revenue splits, percentages and order of payment
  • Promotion budgets (P&A)

A marketing attitude about pricing looks at the end user's needs and prices accordingly. Bundles. Quantity discounts. Subscriptions. Warranties. Special offers. Bonuses. Referrals. There are endless new ways to price products and services -- and relationships -- to meet the customers' needs.

The marketing attitude for pricing strategy involves

  • Priority of the problem to be solved
  • Perception of the value of the product or service to each purchaser in the marketing chain
  • Options for purchasing a mix of products and services

All these negotiations are marketing functions. Salespeople across business are the frontline negotiators who balance deliverables with service contracts, quantities, extras, and basic pricing strategies. Movies are no different. Producers reps, agents, managers and sales reps negotiate with distributors, and distributors negotiate with theatrical exhibitors, cataloguers, retailers, buyers groups, and non-traditional buyers.

They all bring intangibles to the table along with the movie in the box. Intangibles make a big difference in the pricing that is refined in a deal. Perception is king, but deliverables are the queen of the negotiation realm.

Perception impacts negotiation strength. The image of the company helps a prospect judge whether a product will likely be delivered on time and in marketable condition. The image of the key stars and the appeal of the story affect the amount of word of mouth and media publicity that can be attracted to the launch. The quality of the product packaging can make a product fly off the shelf or languish. Research results such as exit polls, genre trends and market sales trends affect the longevity of a product life cycle and value to a company's library.

A bidding war of hot properties occasionally happens at film festivals, markets and distributor screenings. Again, perception plays a big role in the negotiations. In a field that is driven by emotions all along the product creation and production stages, it is no wonder that at the sales stage, emotional impact again plays a significant role.

Pricing has become a global issue. The release of a DVD has always been timed to protect the theatrical revenue model. But with piracy at record levels globally, a variety of pricing -- and timing -- strategies are being tested. By pricing DVDs quite low in China, many studios are hoping to stop the lure of big bargains through pirated copy sales. Legitimate pricing based on what the market will bear isn't always about raking in obscene profits -- we're seeing now that market-pricing can be about pricing down to the perceived value of the solution.

Observing "perceived value" is a marketing attitude. Pricing strategy follows. A high-perceived value in your packaging can give you an edge over your competitors. A marketing attitude also includes more than your product and your customers. It includes the universe in which you and your product cavort. Competitors. Marketplace buddies. Product lines. Reviewers and analysts. Wholesalers and their catalogs and sales reps and databases. Advertising vehicles like television and magazines and directories and Web pages and Google searches. Perceived value is earned the old fashioned way--one relationship at a time. And that's about marketing communications.

How does marketing affect price? Perception. Pure and simple.

MARKETING TO-DO

Producers market to investors, distributors, exhibitors and end-users for some niches. can increase their perceived product value by incorporating high production values into the product, crafting a well-tested pitch, and providing the distribution channel with the deliverables that will help maximize profitability of the product. By building a reputation as well as a product, producers attract the best array of distributors, media attention and loyal consumers.

Distributors' due-diligence includes mining market segments with their in-house list of prospective exhibitors, sales reps and buyers, attendance at film markets and daily sales system, to attract the best producers and sales outlets.

Technical and creative teams impact the price, the negotiation power for a project by participating in the media promotional efforts, by making the set a vibrant, creative beehive of positive buzz, and by delivering the emotion on screen that the audience looks to movies to provide.

For a basic look at product marketing strategies, take a look at the Cliff Allen's marketing content website: Allen.com Marketing Articles

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