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Essential Economics and Online Movie Tickets

I realized very early on (perhaps even before I reached high school) that most of the stuff taught in schools (and by extension, the pre-university college, engineering college and MBA education) was perhaps not so useful. In its place, I discovered that these schools and colleges were a place to meet other brilliant minds – students, faculties, elderly scholars and university experts – from whom we can learn so much. It’s like going to a movie theatre and realizing that the movie snacks are better than the actual movie.

I found that the education system is flexible and allowed me to gather the knowledge I want even if much of it never came from the books. For that, and so much more, I continue to have profound respect for our education system, and the people who are part of it. Without them, I do not think I would have achieved whatever limited success I may have achieved today. 

One of those things that I discovered in my MBA days was economics. Over the years, I kept thinking, why isn’t economics taught to us as part of basic schooling? It is so essential to understand life, I think that is one of those they missed out.

As of now, I am in the fifth year of being an independent income guy. If I don’t figure out the economics of things, I have noticed that things seem to go very horribly for me. Over the years, I have become better at it but I feel that I have barely touched the surface. Today, I thought, I will simply write about economics using online movie tickets as the McGuffin.

I became a tax payer in 2008 and the first thing I did was demonetize my life. I went full online and that is when I discovered online movie tickets. The luxury of picking the exact seats (I am a big believer in sound acoustics, and take into consideration the size of the movie hall, the type of seats used and all that stuff to decide where I wish to sit and watch movies) is what really makes paying that extra amount of money to get the tickets online. Also, it totally beats standing in queue at the box office.

Movies fall into one of those services which can only be paid for with ‘discretionary income’. I have been watching, analyzing and understanding the movie industry (and its finances) for over a decade now and I have learnt that it is possible to understand a lot about any nation’s economy by looking at how much money the highest grossing movie has made on any given year. The more money a movie makes in any country, you can infer (with a certain degree of error percentage) how well off the people in that country are.

Discretionary income is directly linked to supply and demand for any service, and in our case, the movie service. Suppose, there is this super awesome movie that is simply the finest form of entertainment that cuts across age groups, gender groups, cultural groups and overcomes all language barriers. I am thinking of movies like Avatar and Titanic. Clearly the supply is of top quality, and the demand is there. For instance, when Avatar fixed its release date, movie theatres all over the world upgraded their projection systems to equip themselves with 3D. Thousands of movie theatres all over the world underwent fantastic renovations so they can feed off the millions of movie goers who want to watch Avatar.

Obviously, it happened in India too. So, there is a good supply and there is good demand with the super nice movies. That brings us to the fixed cost. A fixed cost is something that the owner of the movie theatre must pay irrespective of how many people are sitting in the movie hall. In fact, movie theatres have some of the highest fixed costs when compared to how much money they make when there are literally no customers. To understand this, imagine you are living in a big house (like in one of those Sooraj Barjatya movies) with ton of people. When everybody is at home, all the lights are burning and kitchen is being utilized and that is perfectly fine. That’s maximum utilization. Suppose all these people went for vacation and you are staying alone. If so, you could limit yourself to staying in a small room, so only that room’s light is burning. The food will only be prepared one person. The water will only be consumed by one person. By extension, the cost is directly connected the number of consumers. One consumer equals say, one unit of cost.

In a movie theatre, though, it does not work that way. There could be only one person in the movie theatre, or the movie hall could be full. Either way, the entire hall must be powered on. Fixed cost allows an individual to figure out so much about how the economy of an entire nation or city or individual is faring. When you connect to the earlier fact about discretionary income only, so many things become clear.

For instance, understanding this allows one to realize why the movie food is so overpriced. A tub of popcorn that costs barely 30 bucks (half a dollar) costs at least 200 rupees ( 3 to 4 dollars) inside the movie theatre. Water bottles are marked up by at least 200 percent, and that’s perfectly legal because the MRP label indicates it. Of course, this is also the reason why the water cooler (which provides free water) is almost always tucked away in some far corner where its impossible to find.

This extends to the several offers and all the stuff that the online booking service does. The service which sells these tickets online also has a fixed cost which relates to its IT cost. Its revenue is tied to the overall movie industry, essentially acting like a huge movie hall. That is why, it is almost always possible to guess when there will be loads and loads of discounts offered and when there will be none. It is also possible to predict ticket prices and what movie will cost how much.

This further explains why the ‘service charge’ or the ‘internet handling fees’ can sometimes be as high as fifty percent of the actual ticket cost. By extension, this is another reason why you must pay hefty fees for the 3D glasses, and further reason why so many movies are shoddily converted to 3D (instead of being shot on 3D) thereby ruining the movie going experience and also ensure that we will continue to have a poor opinion about 3D as an effective story telling medium.

The movie industry is also facing a slow death because now, there are so many alternatives. Television has always been the easy option for a lot of people. More importantly, television is not directly linked to discretionary income since it becomes part of the monthly utility bills. Same goes to online providers such as YouTube and Amazon Prime and Netflix. These folks avoid the problem of discretionary income, something which the movie chains can never avoid.

The way I see it, I fully expect the movie chains (and the online ticket services) to ruin the movie going experience and do what is called as ‘self-fulfilling prophecy’. They want to avoid going out of business, and do lot of tricks and then, the same tricks will turn movie goers away. Almost all movie ticketing apps have turned into massive ad display banners. Movie theatres keep increasing the price of movie snacks (which has the effect of turning away people instead of making more people eat it) like every month. Then, there are these ads. Now, we are forced to sit through ads before the movie starts and then during the interval. Heck, last time I went to a movie, the movie just paused and an ad just started playing. The preceding scene was a dramatic moment and the ad just ruined the impression.

Essentially, in a bid to survive the movie chains and movie ticketing companies are both doing everything they can to put off to movie patrons.

As I said, its all basic economics, supply and demand, discretionary income and fixed costs. We must respect the invisible hand and play its own by its own rules. Trying to find short cuts will inevitably lead to drastic misfortunes.

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RIP - John Hurt

Got up this morning to find out that one of my favorite actors, John Hurt, is no more. For a movie buff (I am not sure if there is a definition for a movie buff. I watch at least 15 to 20 movies, and almost all new released movies in multiplex, every month) such as myself, an actor's passing (ah, the inevitable conclusion of every life!) is like losing a dear friend.

The first I saw John Hurt in action was in one of the all time classic science fiction movie, Alien. I remember two scenes very clearly from that movie. The first scene is the one where the Xenomorph comes out of the chest, also called as the chest buster. Another is when Ripley does that slow undressing to wear the space suit (a scene which I now believe is extraneous because I cannot think of one 'logical' reason why it was there). What made the chest buster terrifying rather than comedy was the acting that John Hurt did. I watched Alien when I was like 15, and even today, I remember the horror and the rise of emotions that came with that scene. I knew back then, that John Hurt is that one actor, who I will remember for all time.

Obviously, John Hurt is an English actor. That means, he has probably done a lot of theatrical work, and indie movies and other stuff. I dont know much about that because I am more of a 'blockbuster' and 'popular' movies watching kind of guy. However, I always recognize him in his many, many bit roles in both good and bad movies. Almost all the time, his seasons are the most memorable. Along with his obviously awesome acting, his voice is what got to me. That drawling, slow delivery with effective pauses almost gave me that kindly expression that...I kind of wish, my grandparents gave me. I kept thinking, man, if John Hurt would have been my grandpa, I would hear him talk, like all the time.

I remember him from that Wrath of the Titans movie. Then, Harry Potter with that wand thing. Then, the Hellboy movies, which is just super cool. I see now that he was in only a handful of movies, but that shows how amazing he was at his work.

You are super cool, John Hurt...guy. Rest in Peace, man.

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Netflix needs to enable offline mode

A few months ago, Netflix made a bold move and rolled out its services to India (and pretty much the rest of the world). That's fantastic news because Netflix knows how to do streaming right. They have a nice catalog and they also have some very cool originals. The app interface is simple and useful and subtitles make it possible to enjoy the media even without headphone in crowded places. 

The problem is, Netflix is sticking to its 'no offline' guns.  

This may not be a problem in developed countries like the US and Europe. Folks who live there are probably used to getting decent net connectivity no matter where they go. When I say decent, I am looking at a speed of 1 to 2 MBPS which is sufficient to stream video at lower quality (although Netflix does not let you choose the video quality the way YouTube does) and enjoy entertainment wherever you are. That's pretty much the point of a streaming service.  

The problem is, here in India, we don’t have the 1 to 2 MBPS wherever we go. Free wifi at malls and pizza places are fast enough to use whatsapp (and not much else really). The only place where we can get reliable speeds are at our homes and most of the time, the home is not where I really want to watch Netflix. I want to kill the commute time, or waiting in the queue time or at the bank or at the restaurant or at the mall and so on and so forth.  

Now, there is one place where speeds are not a issue and that's our mobile carriers. I use Vodafone, and my goodness, do they provide good speeds. That is just on 3G. I have used their 4G as well, and the speeds are incredible and the coverage is excellent. In fact, I am overjoyed that such great speeds are available in our country. The issue here are the data caps. For instance, at the time of this writing, I am paying through the roof (2500 rupees – roughly 38 dollars – for a measly 16 GB data) every month. At most, I could watch 20 movies before Vodafone downgrades me to an 'unlimited' speed of an incredible 64 kbps (which is just good enough to use whatsapp at a sending rate of one word per minute).  

I thought that perhaps, when the 4G rollout happens, the data caps would be eased. Nope! To think of an example, using 3G/4G in India is kind of like owning a Ferrari. It is so awesome because it is so fast and incredible but I can only drive it for a 100 kms and then do nothing else with it. I understand that data caps are inevitable but I only pray that someday, the cost will come down. I am holding out hope for Reliance Jio to shake things but I have been misled before. 

So yes, Netflix, please enable offline mode. YouTube and Hooq are doing it already and so can you.

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