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Low, fixed price for movie downloads boosts profits by 42%: study

January 29, 2014

It was a pretty simple idea: $5. That's all you had to pay for comedian Louis C.K.'s standup special "Live at the Beacon Theater" -- a program that made more than $1.1 million in sales through his website in the first 12 days. C.K. plans to release his directorial debut, "Tomorrow Night," for the same price.

The comedian’s atypical approach to movie download sales is a successful model that's actually backed by academic research:

Anita Rao, assistant professor of marketing at the University of Chicago Booth School of Business, found that charging consistent, long-term prices for digital goods can boost profits by as much as 42 percent.

Though studios could implement different pricing strategies with the fixed price, Rao’s research shows that it is best to set a low price and try to sell to everyone.

"If there were some consumers who would want to watch 'Beacon' over and over again and some who want to watch it once — maybe C.K. could offer a sell and rent option," Rao says. "But standup comedy is probably something where once you watch it you don't want to see it again."

"At this point I think we can safely say that the experiment really worked. If anybody stole it, it wasn't many of you. Pretty much everybody bought it,” C.K. wrote in a blog post on his website after the early success of "Beacon." "I'm really glad I put this out here this way and I'll certainly do it again."