The movie ‘3 Idiots’ is supposed to have broken all records of total money earned for a Bollywood movie with collections rumoured to surpass Rs. 100 crores in its initial 4 days of run. One of the critical factor, I think, behind these huge collections is the high ticket pricing strategy employed by Raju Hirani [Raising the evening show ticket prices in multiplexes by 30-35% and morning show ticket prices by 100%]. No doubt, Raju Hirani created an entertaining movie and the audiences, yearning for a decent movie since a long time, flocked to theatres. But the high ticket prices did play a role in the high collections earned.

In another story, Moser Baer has started raising the prices of its home video CDs and DVDs. Hence, 2 yrs back, when a home video CD was sold for Rs. 24 and a home video DVD for Rs. 35, the prices today have been raised for CDs and DVDs to Rs. 50 and Rs. 99 respectively, although in select markets only as of now. And the overall revenue made by Moser Baer post this price increase seem to suggest that this increase did help Moser Baer in making more money.

The point I’m making here is that increasingly, Indian consumers are becoming price inelastic in some way, when it comes to consuming media of their choice. The affluent Indian living in metros doesn’t mind paying even upto Rs. 2000 for a family movie-out, or mind paying higher price for a genuine movie experience. To use an analogy, today the mobile companies in India are making more money than the music companies in India, because when it comes to getting music on a mobile, one can get the music of his/her choice right on the spot without any fuss.

The lesson for Indian media and entertainment players is that changing demographics along with rising incomes is leading to a change, in which creating a value product becomes vital; However, once you’re sure of the value of the product, don’t be afraid to experiment with the price of the product. At its core, a new movie is always a high risk product for a potential viewer because a movie’s actual worth can never be ascertained without consuming it. However, in case of blockbusters like ‘3 Idiots’ or ‘Avatar’, a certain amount of risk is reduced for the viewer due to the positive word-of-mouth and past associations with star cast/director/etc. of the movie (in case of ‘3 Idiots’, the factor being Aamir Khan followed by Raju Hirani’s team). Raju Hirani seems to have learned this lesson well and charged his audiences a higher ticket price for this risk reduction. That’s why today, he and his producers Reliance Entertainment are laughing all the way to bank.