Why it seems expensive to pay 21.99 euros to see ‘Mulan’ in streaming, but we see “normal” to pay up to more than 30 euros to go to the movies with the family.
Finally, and as part of what seems to be one of the most risky movements in the film industry in recent years, ‘Mulán’ can also be seen in Spain for 21.99 euros. Disney faces the challenge of making a movie profitable whose total budget exceeds 450 million dollars trying a ‘somersault’ down the road: changing the way blockbusters are distributed internationally.
It will not be easy. Above all because the general feeling is that the price that the film giant is asking to see the film is high, “exorbitant” even. But why does it seem expensive to pay 21.99 euros to see ‘Mulan’ in streaming, but we see “normal” paying up to more than 30 euros to go to the movies with the family? The answer, as almost always, is in our psychology.
Literally. George Loewenstein and Drazen Prelec in 1998 used the concept of “the pain of paying” to refer to that discomfort that spending money causes us and that, as a consequence, ends up undermining customer satisfaction. It is a well-studied phenomenon and it is what is behind numerous innovations in payment systems (since the fever of subscriptions to the famous Amazon Go): reducing that pain (and the friction it causes) to a minimum.
What does that pain depend on? From the assessment we make of the price. As Guido Corradi, professor of psychology at the Camilo José Cela University explains, “When we value a price, what we do is compare that price with other similar experiences“. In this case, there are two standard situations with which we compare the Disney + proposal. The first is the cinema, obviously.” If we think about it in detail, it is true that the quality of the ‘home theater’ with the new screens, sound equipment and others has been getting closer to that of the cinema; especially, if we compare it with the old tube TVs of 20 or 25 years ago. However, it is to the idea of going to the movies that we compare it: to the full experience. ”
The second situation is the streaming video platforms (like Disney + itself) that offer “infinite amounts of movies and series at home thanks to a subscription with a much lower price”. It is true that the Disney + proposal “is not just one of the most. This is a world premiere. “But, as seems evident from the reviews we’re hearing,”our cognitive apparatus does not understand it that way“.
Deep down, there is one thing that hurts more than paying: paying nonsense. For this reason, “as long as we frame Mulan’s price between two apparently cheaper situations that offer more,” the pain of paying will be greater. But then, Why has Disney made this move? What could with a decision that (and I quote) “undermines customer satisfaction”?
Everything behind a price
In 1997, Judith Holdershaw, Philip Gendall, and Ron Garland discovered something interesting: 60% of the prices that you could find in a supermarket (and in the vast majority of stores) ended in the number ‘9’. The thing did not end there. 30% ended in ‘5’, 7% ended in ‘0’ and the other seven numbers shared the remaining 3%. From a strictly economic point of view it was strange. If cost determined (one way or another) the price of the products, it is reasonable that Holdershaw and his team would have found a much more homogeneous distribution.
Obviously it is not that it was a radically new discovery, but the “phenomenon of 9” is very useful to make visible something that consumer psychologists have been working on for years: that price is an essential element that consumers use to assess the value of the things they buy. After all, how can we know if X product is worth it? Everything influences. The quality of the packaging, the design, the place in the supermarket where it is exhibited, the perceived quality of the product, our personal history or the comments from our environment. Also the price.
For this reason, manufacturers and distributors have been using price to influence consumers’ evaluation of your brand. Luxury products not only use price to reinforce their image of exclusivity and quality, but they take it very seriously. Burberry even burned products valued at more than 31 million euros to avoid lowering the prices of its products. But if we look at the other end of the spectrum, white marks do too. There are dozens of manufacturers that package the same product in different ways in order to simultaneously sell to different demographics. Price is crucial in estimating the value of things on the market.
In the online world the situation becomes more complex because many of those contextual clues that helped us to get an idea of the value of things disappear. That is to say, price becomes even more important. Things that are too cheap tend to generate the same distrust (or more) than things that are too expensive. This is one of the reasons why mid-priced apps ($ 7-20) have a conversion rate five times better than low-priced apps ($ 0.99- $ 7): the message that developers send / producers to clients about their work is very important for them to get an idea if it is worth it or not. If Disney + wants us to value the movie, it can’t treat it as just another addition to the catalog.
How to put a price on something “new”?
With those two ideas in mind (“paying hurts” and “price influences the perceived value of our product”), it is easy to realize that pricing a product is very difficult. And even more so if the product is novel in some way. Because, after all, the reasonable price range for a product is something that is reached through a long process of trial and error. Finding the exact amount of euros that minimizes the discomfort of the payment, allows us to value the product correctly and allows us to earn money with it can turn into hell.
The case of ‘Mulán’ can become paradigmatic. As has been repeated many times in recent weeks, it is not just that the price of going to the movies for a family of four is higher (much higher if we include things like food and transportation); is that the price is not much higher than that of the digital purchase in 4K on current platforms. Above all, if we take into account that it is an exclusive world premiere (while those copies can take months to reach the platforms). Even so, the general feeling is that paying 21.99 euros (in addition to the Disney + fee) is expensive.
In this sense, Corradi assures us that “the idea that we are rational maximizers, the famous economicus, is a myth that we have created for ourselves, an abstraction, which can be useful under certain conditions, but which will not always happen” . The challenge of Disney +, like that of all who make a relatively new movement, is complex because, Although the play makes economic sense on paper, it does not always have to make sense for some consumers who value many more things. For this reason, the bet is so interesting: if it is successful, it will open a new distribution channel outside the cinemas that can change everything; If it does not have it, it will possibly close the horizon of possibilities for a few years (or it will take us in other directions).
Because yes, as Corradi insists, “we cannot think that this is always going to be like this.” Our perception of prices changes as fast as the market changes. Fundamentally because all the actors try to position themselves with the wind in favor and the keys that we use to value products and services change at the same speed. If not, the current price of cinemas (despite continued criticism) would not be widely normalized. That is why it is not unreasonable to wonder if the same cognitive mechanisms that cause us astonishment when we see the price of ‘Mulan’ will become its main defender in a few years.
Updated: As the original headline of this article we chose “Why it seems expensive to pay 21.99 euros to see ‘Mulan’ in streaming, but we see” normal “to pay 10 euros for a movie ticket” but, as some readers have corrected us, It was not entirely accurate because a movie ticket costs less than 10 euros in many cinemas in Spain. Although the idea of this article was not to discuss the specific price of a movie ticket versus streaming or its economic or strategic reasons, but rather to focus on the psychology behind prices, we have slightly tweaked the headline so as not to give place to misunderstandings.