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By Tim McMahon
March 2009
On March 4th 2009 the New York Times ran
an article entitled, "Theater Chain Begins Recession Special:
$1 Popcorn and Sodas" talking about Carmike Cinemas
instituting their own "stimulus plan".
In an effort to help flagging weekday sales the
theater chain is cutting those outrageous concession stand
prices.
Normally during tough times people will cut back
on discretionary spending perhaps opting for a night at home
with Netflix rather than a night out at the theater. And
this is what seems to be happening during weekday nights.
However, during weekends quite the
opposite is happening. It seems that receipts on weekends are
actually up 17% so far in 2009 over the same period in 2008
(Carmike isn't cutting concession prices on weekends).
So from an economic standpoint what does that
mean?
Obviously, there is still some discretionary
income still available... perhaps among teenagers who still want
to have a weekend date.
Or maybe couples are going to the movies instead
of more expensive activities like clubs etc.
Historically during recessions when funds are
tight diversionary escapes are still well attended,
perhaps in an effort to forget the misery for a little while.
But at the same time they might forego the
concession stand to reduce the overall cost of the outing, while
still enjoying the movie.
But back to Carmike... to boost flagging
sales during the week Carmike has reduced concession stand
prices for 16-ounce sodas and 46 ounce popcorns to only $1
each.
As anyone who has visited a theater lately knows
these are usually just as expensive as the tickets themselves.
In fact, concession stand sales are the primary profit center
for most theaters. And for that reason according to the NY
Times article- "Drastic cuts in concession prices are rare
because the snack bar is where movie theater companies make the
most profit".
Obviously, it is unprofitable to open the
theater and pay for heat or A/C, employee salaries etc and only
have one person sitting in the seats.
So here we see a perfect example of deflation in
action. Theaters are willing to cut prices in an effort to
get more people in on weekdays so they can cover their fixed
costs of keeping the doors open.
As deflation takes hold expect to see more price
cuts like these.
According to Dale Hurst, Carmike’s director of marketing.
“prices like these have not been seen since the 1970s.”
For more information see:
Can the Government Stop Another Great Depression?
The Primary Precondition of Deflation --What
must happen for Deflation to take over.
What Causes Deflation?
……….
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