Front Row Center

Epistemic Status: Lightweight

Related: Choices are BadChoices Are Really Bad

Yesterday, my wife and I went out to see Ocean’s Eight (official review: as advertised). The first place we went was a massively overpriced theater (thanks MoviePass!) with assigned seating, but they were sold out (thanks MoviePass!) so we instead went to a different overpriced theater without assigned seating, and got tickets for a later show. We had some time, so we had a nice walk and came back for the show.

When we got back, there was nowhere for us to sit together outside of the first two rows. They’re too close, up where you have to strain your neck to see the screen. My wife took the last seat we could find a few rows behind that, and I got a seat in the second row. It was fine, but I’d have much preferred to sit together.

It was, of course, our fault for showing up on time rather than early to a sold out screening. I mention it because it’s a clean example of how offering less can provide more value.

The theater should, if they don’t want to do assigned seating, rip out the first two rows.

At first this seems crazy. Many people prefer sitting in the first two rows to being unable to attend the show, so the seats create value while increasing profits. What’s the harm?

The harm is introducing risk, and creating an expensive auction.

The risk is that if you go to the movies, especially the movies you most want to see, you’ll be stuck in the first two rows. So when you buy a ticket and go upstairs, you might get a bad experience. If the show is sold out, that might be better, as you can buy a different ticket or none at all.

The auction is worse. Seats are first come, first serve. So if it’s important to get served first, you need to come first. If it’s very important to not be last, to avoid awful seats, you need to come early, and so does everyone else, bidding up the price of not-last the same way you’d bid up being first.

With no awful seats, those who care a lot about better seats will still come early, but most people care a lot less. So everyone can come substantially earlier, and not feel pressure. Many will show at the last minute, and be totally fine.

The deadweight loss in time, of adding those forty extra seats, is massive, distributed throughout the theater. Everyone feels pressure to get there early even when they already have a ticket, so even if their seat is good, they stressed out about their seat, and not only burned time but feel bad about being pressured.

Avoiding time-based auctions and signals, or at least minimizing the value at stake in them, is an important and underappreciated problem.



This entry was posted in Uncategorized. Bookmark the permalink.

8 Responses to Front Row Center

  1. Dave Orr says:

    Note that the first theater you went to had exactly the experience you wanted — you can look at the available seats at time of purchase and bail if you don’t like them. That seems better than removing the front two rows, since different people have different preferences and some may not mind the up-close seats.

  2. Pingback: Rational Feed – deluks917

  3. Anonymous says:

    Or the theatre could let you book the exact seats you want online before you even get to the theatre, with no waiting in line either (standard practice here in Australia).

  4. Quixote says:

    If the theater runs ads while people are sitting in the seats waiting, having enough bad seats to make people get there early and wait seems to make sense. The theater is not a charity. It is a corporate. It needs to do whatever it can to make money even if this produces a suboptimal experience for seat quality or time sensitive customers. I’m not saying that this is a great outcome, just saying, you see a bug, shareholders see a feature.

    • TheZvi says:

      I got a similar comment over at LessWrong, and I disagree very strongly. There’s no way they’re getting the kind of money from those ads that it justifies sabotaging the customer experience like this to get people to watch them. It’s suicidal, short-term thinking, and it’s killing us to think that this is *normal*. In the case where there’s no other way to capture revenue, e.g. broadcast TV, or the ads are incidental on top of production e.g. signs at the stadium, there’s a reasonable trade-off and perhaps they’re a good idea. But here you’re having people pay $17.50 and then deciding to make their experience worse in order to show a few TV show previews? Which gets you how much per customer, exactly?

      What I want to highlight here, actually, is that *we now think this is just good, responsible behavior*. Which means we don’t get mad at it, don’t punish it properly, don’t invest in the future or building good relationships. It’s pretty terrible.

      Or to put it another way, I stopped using DVDs entirely, because they had so many mandatory obnoxious advertisements on them. That’s how much this attitude is suicide.

      • Quixote says:

        So I agree that it makes the experience a lot worse for me. I don’t go to normal movie theaters other than with my extended family around winter holidays or Fourth of July. If I want to see a movie in a theater I go to the Alamo in Brooklyn which has no bad seats, reserved seats, and strictly enforced no talking and no cell phones policies. It’s a different experience at a higher price point.
        But let say $0.10 of ads per person, 4 screens 50 people per screen 4 showings a day. That’s $80, which at $10 per hour wages is 8 hours of work. So by having a few bad seats and forcing people to be early they cover the cost of the person at the front ticket booth. So there is value there if harvesting it isn’t too costly.
        For me, theaters greeding for the 10 cents has completely lost me as a customer, so it’s too greedy, and too short term. But I’m not a typical customer. If this is the market equilibrium, then for the typical customer it is likely that this is a revenue maximizing strategy. Most people won’t opt to pay Alamo draft house prices so they are locked in to putting up with the existence of bad seats or forgoing the movie experience entirely. So you could imagine this as a compound game (this is my coinage there may be a real technical term for this) where the outer level is a prisoners dilemma structure and the inner level is an ultimatum game structure. There is a total pool that is maximized at cooperate cooperate, and minimized at defect defect. The pool is then allocated based on an ultimatum game. And you are judged as defecting if you offer a non 50-50 spilt in the ultimatum game. So the theater shrinks the total utility pool (a defect cooperate square instead of cooperate cooperate) by offering biased split where in order to watch the movie you have to get there 10 minutes early and watch ads for which the theater only makes $0.10. The typical customer accepts this split rather than just taking a zero for both parties.
        Now, maybe you think this is a bad outcome. I tend to think that any defect outcome is prima facie bad. But how could it be better? In our society we have a social coordination mechanism that can be used to make it safe to cooperate and prevent defections; it’s called government. Concerned citizens could in theory lobby for minimum seat quality standards, theaters could lobby against. If the citizens prevailed theaters would lose $0.10 of ad revenue and movie goers would gain $1.67 of time value by not needing to get there 10 minutes early for a huge windfall gain to society as a whole. I don’t predict you would be in favor of that given many or your prior pro libertarian statements. There are no free lunches; you either have rules against defection or you have value destructive defection. A commitment to a low level of regulation is an approval of bad seats in theaters and a statement that this should be normal. You have to pick your poison.

      • TheZvi says:

        I like the detail here. To me it makes it super clear what is going on. For simplicity lets say they always get the $0.10.

        First off, it points to an obvious solution of raising the price point by $0.15 (the number of actually sold out shows is small, and people actually forced into those bad seats is not really a good outcome). I agree that many people don’t want to pay Alamo prices, but by construction there’s a 10:1 ratio in value of time saved to additional cost there. I think it’s safe to say both that customers will have a better experience, and will go to the movies more, while theater increases revenue on day one. There’s just too big a gap here (16:1!) between value destroyed and value transferred.

        If there was either a ruthless cheapest-price market where being a tiny bit more expensive was deadly (like if you go to Kayak or Orbitz to buy a plane ticket), you could use that to justify this in practice. Or if there was a standard price – all movies cost exactly $10 and if you charge more people rebel – but neither of those holds here, different locations are already unique in location, times and what’s playing plus their features, and prices vary.

        In this case, it’s especially bad because it seems like there’s a lot of people who aren’t sure how often it is worth buying the product, so these differences can be big swings in attendance. The typical customer has been going less and less for years.

  5. Pingback: Why Destructive Value Capture? | Don't Worry About the Vase

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s