I took the family out to see Shrek 2 yesterday afternoon. The matinee prices were outrageous--it was $20 for two adults and two kids, and one of the kids was actually free.

The movie was fine. But this did point out that the cost of cinema is rising at a steady rate while game pricing has held more or less steady for years.

In the raw calculus of fun, games keep getting better as an investment, while films get worse.

We don't need to get out a spreadsheet to calculate some of the interesting points here.

Relative to the product, cinema prices have increased at a much greater rate than games.

A quick look at the National Association of Theater Owner’s Web site show that tihe average ticket price has increased about 30% in the past 10 years ( From $4.14 in 1993 to $6.03 last year).

I don’t have any economic data handy for video games, but I’m fairly certain that the average price of a game has not increased 30%. In fact, with the advent of “greatest hits pricing”—relatively new titles knocked down to $20 or less within months of initial release—I’d be willing to guess that the average price of a new game may have actually declined in the same period.

Since both industries talk about the escalation of technology and investment required to bring a product to market, we could assume that the relative costs of producing games and films have increased at about the same rate.

If we make this assumption, then we need to explain the hyper-inflation of the movie ticket. One explanation is that movie houses are not getting enough people through the doors to meet their financial goals, so the industry escalates moving ticket prices to try and fill the gap. And certainly, there is a bit of price inelasticity when it comes to big movies. I complained about the Shrek tickets, but I did buy them.

I also noticed that the prices of concessions have generally stabilized or, in some cases, declined. This is probably the eventual result of patron smuggling--tired of paying $3 for a few ounces of cola? Stick a few cans in your pockets before the movie. So, part of the increase in movie ticket pricing might be to offset the loss of concession sales.

Another thesis about the discrepancy in price inflation is that the cost structure for film production has risen faster than the cost of producing video games. If this is the case, then games and films are in a sort of innovation arms race with film playing the role of the Soviet Union. Films already cost an order (orders?) of magnitude more to produce. So, over time, games will simply put films out of business by making them too expensive to make.

What I think the price gap really indicates is something important. The video game industry is growing. The movie business is in decline. It's hard for people to see or accept this because film has been such an enormous part of culture for the past 100 years. But the commercial film business is reaching a crisis point, and the pricing of cinema tickets show this.

I am not suggesting that films will collapse in the next decade. They will, as senior media do, retire to a long, deserved position of stable honoraria. Films will be with us for as long as we can imagine.

The film generation will continue for a while longer to stave off this decline by pumping more into their films, rising costs and increasing ticket sales.

But as the dominant commercial entertainment form, they are at, or have passed, their zenith. Kids growing up with the brutal trade-offs required by limited allowance will look at $10 movie tickets and $50 copies of Halo 2 and vote with their wallets.

Price is simply a moving indicator of taste and value. And from where I sat, in a mostly empty matinee, it looks like the people that produce films think more highly of their value than the people who pay for the tickets.