Mark Cuban & Differential Movie Pricing

Mark Cuban continues to make the argument that in digital products it makes no sense to promote and sell a product twice. Case in point: Hollywood studios should run one marketing campaign for new movies, and then release in theater and on DVD simultaneously, albeit charging much more for the DVD version:

[Mark Cuban and Todd Wagner] also are refining a strategy for releasing films simultaneously in several media, rather than adhering to the industry practice of sequential release in cinemas, then airplanes, then DVDs, and so on. They’re working with big-name directors such as Steven Soderbergh, whose most recent film was ”Ocean’s 12.” Cuban wants to make movies available in formats consumers like, as soon as they come out, whether that means DVD, cable pay-per-view, or a keychain USB drive.

”If you want it, and you’ve got kids and can’t make it out, but you still want to talk about it around the water cooler at work — we enable you to do it,” Cuban says, adding that a DVD might be priced at $34.95 on the day a movie debuts, compared to an $8 movie ticket.

”Why not have one single, efficient advertising campaign?” Wagner says. ”Today, advertising is done twice. Once to get people to the theater, and again five months later to get them to buy the DVD.

”This is a digital world,” Wagner says. ”Either you get on the opportunity, or somebody else will do it for you.”

It is a fun idea in digital markets, and one that need not be limited to movies — but it doesn’t work everywhere. Consider books, where while you could sell paperbacks and hardcovers at the same time, it’s not clear why many (any?) people would choose the more expensive over the less. Seeing a movie in theaters and seeing it at home are very different experiences, ones worthy of differential pricing; reading a book with stiff covers versus soft covers are not nearly so separable experiences. Yes, some collectors prefer hardcovers, but they aren’t much of a market.


  1. I always prefer hardcover over a softcover. In fact, I am a bit peeved when I have to purchase a softcover. I like the larger print, better spacing (more whitespace), and durability of a hardcover. If I am going to invest several hour reading a book, I don’t mind spending a few extra bucks.

  2. It seems that it would make more sense to release the paperback first and price it the same as the delayed release hardcover. This would allow for the higher profit margins of the early release, and also serve the smaller collectors market with a second release a few months later.

  3. Majority of consumers are book-type-agnostic, usually preferring the cheaper alternative. They buy hardcovers en masse only when they are the only available option.
    Margins on hardcovers are significantly higher for publishers. As long as there is significant demand, hardcover remains the only option.
    Simultaneous release with “differential pricing” would result in diminished profits for publishers: hardcover and paperback are so similar that consumers would by and large opt for the cheapest alternative.
    Books are nothing like the movie case in this regard. The difference in medium between hardcover and paperback is nearly non-existant when compared to the difference in experience between cinema and DVD. Differential pricing can only work in cases where the difference in medium is comensurate.
    However, differential pricing for films must be flexible enough to attract repeat business in multiple mediums — that is, the price of the DVD must shrink over time such to allow the price-dependent consumer to both see the film in the theatre, then buy the DVD at a reduced price some time later; this seems viable.
    However, the crux of the argument will fall on whether there is enough non-elasticity among price-independent consumers to purchase early-release DVD’s at prices high enough to discount the fact that they will only purchase in one medium — that is, will they pay enough that it doesnt matter if they only buy the DVD and dont see the movie in cinemas.
    If both of these premises are true, differential pricing works for films; if either are false, it does not.