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Despite a boom in multiplex movie theaters’ growth in emerging economies like India, a new research by Chicago Booth School of Business professor says small screens with many show times do not always appeal audiences, nor does it help in business growth, a point often missed by business owners.
Chicago Booth Assistant Professor of Marketing Anita Rao and Stanford University Professor Wesley R. Hartmann said in their research paper published last month that movie house owners could benefit from considering the demographics of local audiences. The reason they made the conclusion was that while adding one more show time has a greater impact on boosting ticket sales than increasing screen size, it is not true across both urban and suburban markets.
When researchers broke down the data by demographics, they discovered urban markets with a large percentage of highly educated consumers showed a preference for wider screens while other regions favored a greater variety of show times.
“The idea (behind the research) was to understand consumers’ preferences and to understand if they prefer larger screens or more showings of a given movie. Ultimately, these preferences will have implications for the multiplex owners. This study is a first step in understanding how screen size can affect revenue,” Rao told Desi Talk .
“Coming to any conclusion about the revenue-side question will require more study as there are many variables, such as which movies are screened, how many different titles are playing and things like competitive considerations. I anticipate that these findings will lead to future research,” Rao said in response to a question.
The researchers asked the question: Do local moviegoers prefer the quality of the big screen or the convenience of a variety of show times? And the answer, according to the study, is that it depends on where one lives.
In the research paper Quality vs. Variety published in Quantitative Marketing Economics, Rao noted that the study has implications for theater chain owners expanding into international markets. “Using demographic data to isolate which markets prefer the quality of a bigger screen to the convenience of more show times can help marketers attract more customers and sell more tickets,” she said.
The study said that digital technology reduces the costs of additional screenings for a given movie because a digital copy of a movie can run on multiple screens at the same time. “While additional shows are generally worth the screen-size tradeoffs, theater owners need to be aware of the exceptions to maximize ticket sales,” it said.
The researchers conducted the study in the densely populated cities of India where recent economic growth has led to a boom in cinema construction, particularly of multiplexes showing the same film on several small screens. They collected data from 14 markets and seven theater chains across India, examining consumer choices made for about 600 film screenings over the course of 44 weeks.
Rao declined to identify either the move theaters, or even in which cities the study was conducted. “Due to confidentiality agreements, we cannot disclose the cities and theatres,” she said in response to a question.
“Demand for a given movie in a given week will likely drive the number of admits a given theater gets. Similarly, the theatre owner’s choice of which movie to screen plays a role here. So, directly using these numbers will not give right apples-to-apples comparison. Instead, the study is designed so that we control for all these factors in our demand estimation – which movie, which week, and things like which chain and look at the remaining variation and use that to infer preferences,” Rao said.
Asked what could be the ideal situation in India, Rao said that movie theater owners can use these findings as an input into their decision-making when they are considering expanding into a new market or renovating an existing theater.
“India was an ideal location for the study because the space constraints make this tradeoff a very relevant question. It is costly to add more screens when space is at a premium. You have to think about the most effective use for that space and screen size is one very important element,’ Rao said.
The post India’s Multiplexes Not Always A Good Business Plan: Chicago Booth Study appeared first on News India Times.