In Australia buying movie tickets online means you pay more for a transaction that costs the provider less. An interesting paradox.

In the Netherlands, the cinema chains encouraged users to buy online (to save labor costs) so the idea of paying more irritates me to the point where I won't tolerate it. However, intellectually I'm intrigued. Buying tickets online saves money for the cinema, once a certain volume of transactions occur. Also, the cinema gets an advance sale of a ticket. Because this means an early allocation of seats, it should be a positive feedback loop, encouraging others to book online.

Now, when airlines sell advance seats, they discount them. Have done for years. The trick with pricing is to sell the same product at different prices to different customers. Most of the time when using a fixed price, you'll always sell to some people who would have paid more, and lose customers who won't pay what you're asking, even though they would have paid enough for you to make money on the deal. Instead, the seller is forced to aim for some average price that neither throws away too much profit nor loses too many customers. The airlines get around this by selling tickets early and cheap and then raising prices closer to the fly-date, getting a premium price from people who really need to fly on that date, and then selling left-over seats cheap at the last moment (or giving them away to valued customers). The same logic should apply to cinemas.

And when airlines sell tickets, you pay more to do it the old fashioned way, because human-involvement in this transaction increases costs. Of course, there is a cost in setting up the website. But it can't be much. The technology is off-the-shelf and publication of movie schedules is already online. And a ticket-selling website scales: built once, it will look after many cinemas and screens. The paradox remains.

Enter economics and added-value. The value of something is not the same as the cost to produce it (because the person buying it and the person making are different, with their own priorities, resources and comparative advantages). So there is no logical guarantee that something cheaper to make should be cheaper to buy. While the sale of online tickets saves costs to the cinema, it adds value to the purchaser. The movie-goer secures a ticket and a good seat; there is no need to get there early to lower the chance of missing out, and in fact getting there early anyway does not eliminate the risk of not getting a seat, unlike buying it online. Arriving later may bring lower parking charges. However, most of these benefits only apply to movies in high demand, yet the booking fee is applied indiscriminately.

What is the role of competition? It can not be very strong, because this booking fee, which is mostly pure profit, is not being whittled away. The competition exists between movies but not between venues, I think.

So the cinemas are treating online ticket purchase as a premium service, rather than encouraging it as a way to lower costs. I admire their pricing discipline, but I wonder at their modelling. I find it hard to believe that you're not better off driving a shift to online sales by encouraging it. My gut feel is that value of presales (committing people to see the movie) combined with a reduced box-office staffing requirement would be much more compelling. Possibly, the cinemas are protecting telephone purchases of tickets, which may be very lucrative?