Transcript: Reel Rip-Off?

This is a partial transcript from "Your World with Neil Cavuto," February 17, 2006, that was edited for clarity.

NEIL CAVUTO, HOST: You know, most of us try to arrive at the movies a little early to make sure we get a good seat. But what if I told you, if you pay a premium, you could show up any time you feel like it and get those good seats, but, if you don't pay up, well, you could be sitting in the front row straining your neck? It's called variable pricing. And theaters nationwide are talking about starting it up as early as next year. Is it a good idea or is it a rip-off?

David Brain says the idea is a no-brainer. He's the CEO of EPR, which leases properties to theater owners.

But Tom O'Neil, senior editor of In Touch Weekly and columnist for TheEnvelope.com, is on the other side.

Tom, you don't like this.

TOM O'NEIL, SENIOR EDITOR, IN TOUCH WEEKLY: It's a terrible idea, Neil.

CAVUTO: Why?

(LAUGHTER)

O'NEIL: Come on.

It's not as if they are going to stagger these prices and then charge me less money for that back-row seat behind 42 rows of heads. You know, what it is one more way to weasel money out of us as moviegoers. And it's already too expensive.

You know, the average ticket price, in a metropolitan area, anyway, is $10. The popcorn, the Coke costs you a billion dollars. Then you have to sit through 22 minutes of commercials before the film starts.

CAVUTO: David, it does seem obnoxious.

DAVID BRAIN, CEO, ENTERTAINMENT PROPERTIES TRUST: Oh, to get that kind of value for average ticket in the U.S., $6.25?

CAVUTO: What is the value of paying extra for a seat that I could get for free — well, not for free, but at a standard price before?

BRAIN: Well, it's a matter of choice. It's a matter of convenience. And it's also a matter of value.

There has been a lot invested in theaters over the last five, six years. It's really about a third of the screens in the U.S. have changed over into the new mega-plex format. It's a higher value, higher luxury, higher convenience. In a lot of cases, there's more that can be done.

CAVUTO: Yes, but, David, you know what? You guys are thrusting these commercials before the movies that I don't want to see. And now you're charging me a premium for seats that, if I got early to the show before, I didn't have to worry about.

It seems like you're gouging me.

BRAIN: You're showing your age, saying you don't want to see. Most of the people under their mid-30s, enjoy the information and the ads before the show.

CAVUTO: I find that hard to believe. They welcome these? They come in. They're early there with the popcorn. They say, please, show me the commercials?

No way.

BRAIN: According to Nielsen, people appreciate that as part of the value they're getting, mostly under the age 30. Over the age, they do feel like...

CAVUTO: Tom, you know the under-30 crowd well. Is that true?

O'NEIL: Oh, no.

Nobody is welcoming this at all. Here is what's wrong. Our patterns to seeing movies has changed in recent years. It used to be that, when a new film came out, we would go to see it over the first two or three weeks. And, then, the theater would get 10 percent of your ticket price the first week, 20 percent the second week, 30 percent the next week, up to 50 percent.

But, now, we go as a nation to this movie this weekend, this movie that, and the drop-offs are 50 to 60 percent. Now, what has happened, as a result of that, is the theaters are being squeezed. This is an economic problem for the theaters. But they have not adjusted their percentage splits with Hollywood.

And that's what's really the problem here. On one hand, you have got the theater making less money because of this viewing trend. And, then, you have got Tom Cruise, Spielberg, grabbing 30 percent of the gross on the other end of movies, and 50 percent of DVD money.

CAVUTO: Well, let David answer that.

BRAIN: Really, theaters are not being squeezed so much. Film rent has risen maybe from an average 50 percent of admission revenue to about 52. It has gone up a little bit, but very incrementally.

It's really a matter of investment. Our company, we invested $2 billion over the last half-dozen years. And theater chains are ready to invest, to give the consumer choice, give the consumer value, give them luxury, give them convenience.

You know, we saw this last year. You see, during the Christmas holidays, luxury goods did very well. People are looking for that in a lot of cases. They're looking for choice. They're looking for...

CAVUTO: I understand that, David. But I thought, when you started showing commercials in the movie theaters, it would put a ceiling on how much I was going to pay for a ticket.

It didn't. And now you're saying, not only are you going to have those commercials, but we are going to start charging you for premium seating within the show. You think your attendance is bad now?

Here is my prediction, Sparky. It's going to be nonexistent. Nonexistent.

BRAIN: Well, the attendance isn't bad now. The attendance is not bad now.

The attendance was off last year, grabbed a lot of headlines, was off in the summer. There were a lot of reasons for that. The summer of '04 was really an anomaly, and, in comparison, '05 was bad.

But, really, the attendance trends are still, over the last 10 or 15 years — are still 3, 4 percent gross — growth a year.

CAVUTO: Well, you know what, David? I'm going to have you back. I'm going to have you back, because I think you're wrong. But I think you argue your point well.

It was very good you, very good having Tom.

But it's crazy out there. But that's just me. All right.

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