This past summer, movie theaters experienced the fewest tickets sold since 1997. Of course, ticket prices are at an all-time high, so box office grosses didn't reflect the abysmal traffic, but the fact is clear: fewer people are going to see movies.

With technology where it is now, the fear is that the industry (both studios and theater owners) don’t have the market on theater experiences cornered anymore. HDTV’s have gotten pretty big and loud, making the technical aspects of the home experience more and more similar to those of a theater. Further, the window of time between theatrical release and DVD release has shrunk, enabling patient consumers to get their gratification a little sooner than they used to.

We’ve seen domestic box office revenues fall off over the past year from $6.8 billion to $6.42, mostly due not to reduced traffic or falling ticket prices, but the abandonment of 3D screenings, resulting in a lower ticket price. In fact, 2D tickets prices have been rising, indicating that fewer people have been going to see movies. As this New York Times article demonstrates that, since 1999, ticket price increases have outpaced the Consumer Price Index by more than half. But there’s only so much that a consumer is willing to pay before abandoning the whole thing on principle. If a movie ticket costs $10, then the cost rises to $12, then perhaps a consumer will see 20% fewer movies. But if you raise that price to $20, they won’t see half as many movies. They will see closer to zero movies because they’re pissed off.

So while theater owners have been unilaterally raising ticket prices to realize spikes in the near-term, are they slowly alienating theater-goers in the long term?

Without a lot of forward-looking data at my fingertips, common sense dictates that the industry isn't doing itself any favors with the current customer experience. The push-down, pop-up effect of high ticket prices, partnered with rising parking costs, brokerage fees online, and 3D surcharges has made theater-going more of an ordeal than ever before.

In the face of lower demand for the theater product theaters, studios, and even audiences are trying to figure out what the current theater experience is worth and to whom.

Historically, a premium was placed on moviegoing because it was, quite simply, the only way to see a film. Then, with the rise of VCR’s and video rentals and sales, a threat presented itself, but the gap between the home experience (crappy TV, crappy VCR) and the theater experience (big screen, Dolby surround) was big enough that the video cassettes didn’t serve as a substitute for the experience. However, DVD’s and video on-demand have changed all that.

Huge cheap TV’s have become ubiquitous, as have Blu-Ray discs and digital cable services. Movies are, as the saying goes, at your fingertips. Further, torrent technology has given a whole marketplace access to screeners and hotel PPV films, undermining the studio’s VOD and DVD release strategy (and, it merits noting, gives the studios precisely zero dollars in revenue).

In summation, there are many reasons not to want to go through the trouble and expense of going to the theater. But are there any reasons to still want to go?

Of course there are. But right now, those motivations are hard to quantify. Which, as one could guess, is driving the industry crazy with infighting in determining what the value of getting a patron into a theater at ticket price X dollars instead of capturing them with DVD’s, VOD, or not at all. It’s easiest though to examine the low-hanging fruit and who is easiest to capture in the theaters.

The Die-Hards

Die-hard fans of any genre (Tarantino, comic book movies, Twilight) won’t accept anything but the best for the initial screening of a new film, and “the best” still resides within the walls of a high-tech theater. However vocal these people are on the Internet (and they’re EXTREMELY vocal), they don’t constitute the lion’s share of ticket sales for a theater.

The Social Patrons

When a bored group is tasked with deciding on an activity, it’s a foregone conclusion that someone will suggest movies. Because while they may be more and more expensive when compared to watching them at home, the social aspect of going to see a movie on a date or with friends is pretty much commensurate with every other activity, though it has gotten more expensive.

The Blockbuster Audiences

A blockbuster gets to be a “blockbuster” by infiltrating popular culture to the point where one pretty much feels like an asshole for not having participated in this element of the zeitgeist. So, rather than feel like an asshole or be the only one out of the loop, people will pay a premium to see a film at the first opportunity (usually the theater, though there may be exceptions on the horizon). Unfortunately, manufacturing this type of demand costs marketing dollars (or requires a clever title like Snakes on a Plane), so to keep people coming to the theater in the face of mounting obstacles, studios might have to pay more and more to get the same returns.

So there are groups that have proven themselves inelastic when it comes to ponying up for the traditional theater experience. However, all these groups are vastly outnumbered by:

The Casual Moviegoer

This segment will continue to dwindle unless something changes. Right now, waiting four months so that four people can watch a film on a couch for $9.99 is a perfectly good and attractive substitute for paying $80 all-in and having to brave the multiplex. Especially if the film is one that reads just as well in low-tech surroundings.

That last part is important. If the industry is able to create a markedly different experience, like they were able to throughout most of the modern era, then it could find itself once again with a competitive advantage. One that will be leaps and bounds ahead of a cheaper substitute. 3D was knocking on that door, but headaches, ill-fitting glasses, and annoying surcharges all took the wind out of that movement once the novelty of the technology wore off.

So, now theaters are desperate to produce something that even the finest home theater can’t. They are even doing it withou knowing. About a decade ago, new theaters such as Angelika and Landmark integrated coffee, gourmet food, and even wine into their theaters, most likely in an effort to simply appeal to their yuppie customer bases and generate a few extra bucks from sales of these products. But what they ended up doing is differentiating themselves from other theaters (which they probably meant to do) and also from the home experience (which the probably didn’t). Coincidentally, it’s these very theaters that have the most to lose at this moment, with IFC releasing many of their films on VOD the same day that they are released in theaters. These moviehouses need a leg up more than anyone else based on that fact alone. Couple that with the fact that they’re showing indie films which aren’t known for their box office muscle, and they’ve got a problem.

Multiplexes peddling Hollywood fare can’t depend on wine and coffee to lure in many of their customers, so they’re going in a very different direction. A Korean company, CJ 4D Plex is working on changing the way audiences experience a movie by adding spraying water, shaking seats, and, naturally, smells. While getting sprayed, shaken, and odor-ed while watching a film doesn’t sound like a good time to me, it does show how far theaters will go to maintain an experience distinct from the one in your living room.

Will audiences return to theaters with the siren lure of affordable wine or gunpowder smells? Maybe some will, but the theaters are beginning to realize, with the availability of substitutes, that audiences are a lot more price sensitive, so the simplest solution is probably the one they want to hear least:

Drop your prices.