E-commerce: the hidden troublemaker?

Source:Beijing Daily - Global Times Published: 2015-3-3 21:18:01

How the online movie ticket price war is shaking up the industry


A poster for the movie Wolf Totem hangs at a cinema in Yichang city, Hubei Province on February 23. Photo: IC

How would you feel about seeing a movie for 19.9 yuan ($3.17) or even just 9.9 yuan? No, I'm not kidding you.

During the recent Spring Festival, a number of e-commerce companies in China were offering movie tickets at extremely low prices. With prices like these, spending less than 20 yuan a person for a two-hour trip to the cinema became a popular choice for entertainment for many moviegoers in China during the Spring Festival holidays. 

However, while these low prices managed to get more people into seats, some insiders point out that these promotions carry a number of hidden dangers that may throw the film industry into chaos. 

Price war casualties

With the ever increasing number of theaters in China, going to the cinema with family and friends has become a popular form of entertainment for people in China during the holidays. However, one of the biggest differences this year compared to last year's Spring Festival was the huge price war that was going online between e-commerce companies.

This price war first started around March of last year with some e-commerce companies offering sales promotions that dropped ticket prices down to 3.8 yuan in some cases. The second round of this battle came again during the recent holidays with a number of popular films such as Dragon Blade, Wolf Totem, and Where Are We Going, Dad? 2 taking part in a full scale battle for audience interest.

On maoyan.com, people could buy a ticket for Dragon Blade for 19.9 yuan, while dianping.com provided 9.9 yuan tickets for Wolf Totem. Other online ticket selling platforms like gewara.com and spider.com.cn also offered low priced tickets.

According to a report in the National Business Daily, total Chinese mainland ticket sales reached 363 million yuan on the first day of Lunar New Year (February 18). Meanwhile, maoyan.com claimed it had sold over 100 million yuan worth of tickets that same day - accounting for one third of that day's total box office revenue.

While it seems to be a win-win situation for everybody as moviegoers can spend less money, cinemas have bigger audiences and e-commerce companies are willing to take the hit on cheaper prices, but Liu Hui, general manager of a cinema in Beijing's Zhongguancun area, isn't very happy about the situation.

"The activities of these e-commerce companies where they provide insanely low priced tickets is unfair competition," Liu said, adding that while it may bring in more audiences over the short term, these promotions destroy the normal order of things when it comes to cinema operations, and is therefore not beneficial to the development of the market.

Cinemas held at gunpoint

Liu isn't the only one worrying.

After visiting several popular cinemas in Beijing, Wang Ning, vice general manager of a Huayi Brothers cinema in the city, found his peers in the industry are all experiencing the same problem.

Ever since Christmas, the number of people purchasing tickets at cinemas instead of going through a third party has rapidly reduced. Though this has not affected box office intake all that much, revenue from drinks and snacks, which is often linked with ticket purchases at theaters, have been hit hard.

According to Wang, the worse thing is that due to e-commerce companies' low priced tickets, VIP membership at cinemas has become less attractive to moviegoers. He also feels that these prices undermine the credibility of theaters, "Listed ticket prices in cinemas look high, but since most audiences purchase tickets with membership cards or through groupons, the average ticket price in Beijing is around 30 yuan to 40 yuan."

Wang added that because the prices provided by e-commerce companies are too low, moviegoers, who don't care who makes up the rest of the cost of their ticket, have begun suspect the listed price of tickets at cinemas as price gouging.

The rapid expansion of new cinemas in China has led to fierce competition when it comes to attracting audiences. Dissatisfied with the current situation, cinemas have begun to cooperate with e-commerce companies like maoyan.com and gewara.com. However, once a partnership has been reached, cinemas often find themselves "kidnapped" by e-commerce companies.

E-commerce companies will often demand that cinemas give more screens to a particular film, which is unfair to other works, Liu noted.

Trend goes on

Some wonder just how sustainable these low ticket prices actually are. Normally a ticket for a 2D film usually sells for 30 yuan to 80 yuan. By selling tickets for less than 20 yuan, the rest the cost must be made up by the e-commerce company and the film's production company. 

An industry insider who wishes to remain anonymous revealed that blockbusters that are expected to do well at the box office usually have a more dominant role when it comes to negotiations with e-commerce companies and so in those cases this extra cost of the ticket is made up by the e-commerce company. However, for films that are less "prominent," production companies will usually set aside a budget to take care of online ticket sales, viewing this as a form of promotion.

Of course e-commerce companies aren't willing to take this hit for nothing. For them, the more tickets they sell the more registered users they acquire. So long as they maintain a large user base, it isn't all that difficult for them to establish business deals with other companies.

"E-commerce companies aren't willing to work for others, but they have a hand in the film industry chain," the insider noted, explaining that the advantages of online ticket sales is that they combine distribution, promotion and ticket sales into one tight package. While several companies need to be hired to release a film using traditional means, now a single e-commerce company can do it all. 

"When an e-commerce company gets big and strong enough, it can negotiate with both producers and theaters, and take a portion of box office revenues as well," Wang said.



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