Why Skyrocketing Movie Ticket Costs Are Good Business for Disney

By Markets Fool.com

The past year was one the movie industry would like to forget.

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Overall box office revenue is estimated to have fallen to $10.35 billion, down more than 5% from 2013's record $10.9 billion, according to The Hollywood Reporter.Declining revenue was coupled with falling attendance as the industry magazine also reported that attendance hit a two-decade low, dropping to 1.27 billion people going to the movies compared to 1.34 billion in 2013.

Domestically, summer revenues declined by 21%, according to Deadline,and a new study from research firm PwC suggests that the price of tickets and the lack of perceived value may be driving the decline.

"High ticket prices are, by far, the number onereason for dissatisfaction across age demos andby movie-going frequency," according to the study. PwC also showed that consumers will pay for a film if they are interested in the genre/type. That was a driving factor for 80% of frequent moviegoers and 76% of 18-24-year-olds, the study reported.

While prices are keeping people away from theaters and making them more selective about when they do go, audiences will still flock to event movies, and that means that while the industry crumbles around it,The Walt Disney Co., which has an impressive slate of near-sure-thing blockbusters lined up for 2015, looks poised to succeed.

People are getting picky
The PwC data based on an online survey of 1,044 Americans suggest that people are becoming more selective about what types of movies they will pay theater prices for. On average, people go to see only five movies a year in the theater, the study reported. That does not mean people don't enjoy seeing movies in theaters, as 81% of those surveyed told PwC that was their preferred way to see a film.

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Basically, people will go to a theater and pay what they perceive to be a high price if the movie showing has enough appeal. That means that blockbusters and event movies will continue to thrive and smaller movies will suffer as consumers wait to see them cheaper elsewhere, whether that be on-demand, on DVD, through pay cable, or on a service like Netflix.

That makes a company which produces big movies even more successful, and Disney has a slate of upcoming movies that's perfectly positioned to appeal to a customer base only willing to pay theater prices when the film playing seems special enough to warrant it.

Anembarrassmentof riches
In 2015,Disney has two movies practically guaranteed to rake in more than $1 billion in global box office,Star Wars: Episode VII: The Force AwakensandAvengers: Age of Ultron. The first film in the much-malignedStar Warsprequel trilogy-- The Phantom Menace -- broke $1 billion at the worldwide box office, according toBox Office Mojo,and anticipation for the new one should propel it to the same heights (higher if it's actually good). The firstAvengersfilm brought in over $1.5 billion in global ticket sales, making the sequel a contender for being one of the biggest releases of all time.

Disney also has two movies on its 2015 schedule from its Pixar brand,Inside OutandThe Good Dinosaur.Pixar movies aren't guaranteed to bring in $1 billion, but every film the company has released since 2008's Wall-E has topped $500 million, according to Box Office Mojo. Pixar's 14 films have averaged $607 million in global box office totals -- a number that would be higher if adjusted for inflation.

Disney alsohas a second Marvel movie scheduled for 2015, Ant Man. It's hard to predict ticket sales for the lesser-known superhero, but Disney did turn a similarly marginal property,Guardians of the Galaxy, into a $777 million global hit in 2014.

Disney also has two other films whichVariety Senior EditorMarc Graserconsiders tentpoles, March'sCinderellaand October'sJungle Book.Given the company's success with princess movies (2013'sFrozendid $1.2 billion in ticket sales) and its ability to turn another film based on a theme park ride,Pirates of theCaribbean,into a billion-dollar franchise, it's reasonable to predict these films will be blockbusters as well.

Source: Disney

Disney has the right strategy
By buying Pixar, with its flawless track record of producing hits, Disney found a successful strategy -- put your efforts and dollars into safe bets, movies which are almost guaranteed to be hits. The company doubled down on that strategy when its spent $4 billion each buying Marvel and LucasFilm.

Now those acquisitions are paying off as every film listed above starts with an advantage over a traditional stand-alone movie. Pixar and Marvel have both earned enough audience goodwill that as long as their releases remain good, both should continue to crank out hits and create new franchises. TheStar Wars brand may have suffered from the underwhelming prequels, but the new trilogy brings a new hope, which should re-engage the brand's massive fan base.

Disney is positioned to not only have a strong 2015 but to benefitfor years to come from the trend PwC found wherein ticket prices are causing people to make movie-going more of a special event. With multiple Marvel and Pixar movies each year coupled with a tentpole Disney-branded release or two and an annual Star Warsfilm, the Mouse House will be delivering nothing but big movies -- films people will be willing to pay theater prices to see.

The article Why Skyrocketing Movie Ticket Costs Are Good Business for Disney originally appeared on Fool.com.

Daniel Kline owns shares of Apple. He has seen every Marvel movie and is a diehard Star Wars fan but does not understand why the Pixar movies are so popular. The Motley Fool recommends Apple, Netflix, and Walt Disney. The Motley Fool owns shares of Apple, Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.