5 ms·

Meh. This one's pretty simple. Ticket revenue mostly goes to the studios. The theater pulls in the cash through the concessions. The cost of the concessions, wh

by maratd 15y ago

Meh. This one's pretty simple. Ticket revenue mostly goes to the studios. The theater pulls in the cash through the concessions. The cost of the concessions, while high by microwaveable popcorn standards, are highly competitive among their peers.

Causification 15y ago
Exactly. Reading that whole page of specialized economic arguments while they ignore the major fact brings to mind the image of The Coneheads debating why people don't drive cars with their feet to leave their hands free, debating whether absolute foot comfort is of paramount importance to humans vs humans having a religious law against touching their feet with wheels. Missing the forest for the trees.
iradik 15y ago
how does it work? do theaters have to pay per ticket sold, or do they pay a lump sum for the rights to the movie to show it for a period of time?
- bitops 15y ago
  (I worked for Landmark a long time ago, some facts may be rusty). Theaters bid for the right to show movies, it's an up front cost to then. This cost is recouped primarily through ticket sales. Revenue beyond that is derived from sales of concessions. This is why big players like Cinemark dominate the landscape. Through economy of scale (# of theaters && screens) they can drive attendance and concessions. Very much a volume approach and so they show they movies that have a broader appeal. Indie chains like Landmark have fewer locations and screens, but they target metro areas with people who are more into "niche" films. They usually end up charging a bit more for concessions but they make their money through a loyal customer base. So for them it's important to be seen as stewards of good artistic movies. Yeah, I used to drink the Kool Aid big time. : ) But really, it's hard for all movie theaters, but particularly the art houses. (That's why the Stanford in Palo Alto is such a treasure. It has wealthy backing and so you get a cheap ticket and cheap concessions. Seeing movies there is a real experience).
  - iradik 15y ago
    Interesting... I wonder if the theaters bid on contracts to show the movie, where the contract includes provisions for the cut the studio gets of ticket gross. I say this because I found, by googling, that the studios get 100% of gross sales for opening week of a big release. Then this percentage goes down over time.
    - waterlesscloud 15y ago
      Generally it's a percentage cut that goes down over time, as you say. I've never heard of 100% gross to the distributor (studio), about 85% is the highest I've heard of, and that was for super-high demand premiere weekends. I think most blockbusters are closer to 70% on opening weekends. But it's all case by case, with a number of factors at work. There can be minimum run length guarantees (this many weeks on this particular screen), which can sometimes be conditions for getting other movies from the same distributor. Each deal really is individual. The rule of thumb is about 55% of box office goes to the distributor over the entire run of the film. The distributor then takes a cut before the rest is passed on to the production entity. Of course, it's often the case that the distributor and the production entity are two divisions of the same studio, so welcome to the accounting games. I had a friend who was assistant to the president of distribution at one of the giant studios. He would tell me that the dist. head would be able to discuss individual theaters and even screens with the big chains. They knew the demographics, seating capacity, all of it. The exhibition could be negotiated on a very fine level of granularity.
starwed 15y ago
>The cost of the concessions, while high by microwaveable popcorn standards, are highly competitive among their peers. I'm 100% unsure of what you mean here. What peers?
- klbarry 15y ago
  Probably that it is competitive compared to other theaters, which must also pay the bills with expensive concessions.
- oacgnol 15y ago
  Have you ever had really cheap theater popcorn? I think he means other theaters.
  - rdtsc 15y ago
    Hmm speaking of going to the movies. How many people here are still going to the theater to see a movie? I don't even remember the last time I went. I suspect a combination of (I became too lazy | I became too snobby and selective | Movies have gotten worse | Theater prices got too expensive) happened.
    - icebraining 15y ago
      I go to a theater owned by a film museum, where the tickets are less expensive. Went to see El ángel exterminador just a couple of weeks ago.
    - hippich 15y ago
      I and my wife go there once in a while. Thing is - we have have nor TV, nor Netflix/Hulu/etc. As a result, after careful research we really enjoy movie (well, almost always) and after movie we go to restaurant. This is really nice to have it once in a while. It is not about movie itself, but about going to movie theater with someone. I said it somewhere already, but will repeat myself - "Treat yourself, not bloat". This is a secret to good experience with movie theaters (and with most things in life, actually :))
    - 15y ago
TheFuture 15y ago
Thank you. I've worked at a theater, and this is accurate. Amazing the answers you get when you throw a bunch of economist at the question who know nothing about the industry.
- barrkel 15y ago
  That's odd, because the economists are agreeing with you - in your analysis, that is, not in your opinion of economists. But further than that; the microeconomic theories are more generally applicable. (Me? I hate the stink of popcorn. I'd pay extra to go to a cinema that didn't sell it.)
- paulgb 15y ago
  It's right in the sense that it's true, but it doesn't answer the question. Just because the theater gets most of its money through concessions doesn't automatically mean that concession pricing is exempt from competitive pressure or supply and demand. Of course theaters want to charge as much as they can for their product, as any profit-maximizing firm would, but the question (a good one) is why the market allows it.
waterside81 15y ago
You're bang on - all of the economic jargon on the StackExchange page is funny. People are overcomplicating matters. I used to work for the largest theatre chain in Canada and remember that George Lucas demanded 100% of ticket sales for the first 3 weeks of his Star Wars releases (and re-releases), which is unheard of, but he can command that. Popcorn & soda is where theatre chains make their money. From what I recall the marginal cost of each soda was about $0.25, popcorn is even less.
- mattm 15y ago
  I worked at a movie theatre during high school. On initiation day, as we were viewing the large stacks of popcorn kernels, my manager said the actual cost of a bag of popcorn is around 5 cents.
- joezydeco 15y ago
  There had to be a bit more to the Lucas thing, though. Like a minimum ticket price. Otherwise I would have (as a theater owner) slashed my ticket price by 99% and doubled the cost of popcorn. Still a win for the moviegoer and theater owner.
  - waterside81 15y ago
    Well, that's not really reasonable. Now you have different ticket prices for different movies (patrons would be outraged) and then you have inflated concession prices for all patrons (or only some?). The software that movie theatres use to run their POS terminals isn't that flexible.
- miked 15y ago
  This. I worked for AMC Theaters for 4 years as a developer. One of the wonderful things about that company is that every employee has to go thru a week long training program in the theater business, to include working at a theater. One of the things I'll never forget is the trainer telling us one day, "We're not in the movie exhibition industry. We're in the snack concession industry. We just use movies to get the patrons in the door." The reason is that, in the movie industry, the Hollywood studios have almost all the power. When the original Batman came out and lines were around the block, the company actually lost money on ticket sales (after theater costs). That's because Batman cost the theaters 90% of the gross ticket sales. If the theaters were really making big profits the companies would have margins -- and stock prices -- akin to Apple's. They don't. Check the stock listings: they have a marginal business.

by maratd 15y ago

Causification 15y ago

Exactly. Reading that whole page of specialized economic arguments while they ignore the major fact brings to mind the image of The Coneheads debating why people don't drive cars with their feet to leave their hands free, debating whether absolute foot comfort is of paramount importance to humans vs humans having a religious law against touching their feet with wheels. Missing the forest for the trees.

iradik 15y ago

how does it work? do theaters have to pay per ticket sold, or do they pay a lump sum for the rights to the movie to show it for a period of time?

bitops 15y ago
(I worked for Landmark a long time ago, some facts may be rusty). Theaters bid for the right to show movies, it's an up front cost to then. This cost is recouped primarily through ticket sales. Revenue beyond that is derived from sales of concessions. This is why big players like Cinemark dominate the landscape. Through economy of scale (# of theaters && screens) they can drive attendance and concessions. Very much a volume approach and so they show they movies that have a broader appeal. Indie chains like Landmark have fewer locations and screens, but they target metro areas with people who are more into "niche" films. They usually end up charging a bit more for concessions but they make their money through a loyal customer base. So for them it's important to be seen as stewards of good artistic movies. Yeah, I used to drink the Kool Aid big time. : ) But really, it's hard for all movie theaters, but particularly the art houses. (That's why the Stanford in Palo Alto is such a treasure. It has wealthy backing and so you get a cheap ticket and cheap concessions. Seeing movies there is a real experience).
- iradik 15y ago
  Interesting... I wonder if the theaters bid on contracts to show the movie, where the contract includes provisions for the cut the studio gets of ticket gross. I say this because I found, by googling, that the studios get 100% of gross sales for opening week of a big release. Then this percentage goes down over time.
  - waterlesscloud 15y ago
    Generally it's a percentage cut that goes down over time, as you say. I've never heard of 100% gross to the distributor (studio), about 85% is the highest I've heard of, and that was for super-high demand premiere weekends. I think most blockbusters are closer to 70% on opening weekends. But it's all case by case, with a number of factors at work. There can be minimum run length guarantees (this many weeks on this particular screen), which can sometimes be conditions for getting other movies from the same distributor. Each deal really is individual. The rule of thumb is about 55% of box office goes to the distributor over the entire run of the film. The distributor then takes a cut before the rest is passed on to the production entity. Of course, it's often the case that the distributor and the production entity are two divisions of the same studio, so welcome to the accounting games. I had a friend who was assistant to the president of distribution at one of the giant studios. He would tell me that the dist. head would be able to discuss individual theaters and even screens with the big chains. They knew the demographics, seating capacity, all of it. The exhibition could be negotiated on a very fine level of granularity.

starwed 15y ago

>The cost of the concessions, while high by microwaveable popcorn standards, are highly competitive among their peers. I'm 100% unsure of what you mean here. What peers?

klbarry 15y ago
Probably that it is competitive compared to other theaters, which must also pay the bills with expensive concessions.
oacgnol 15y ago
Have you ever had really cheap theater popcorn? I think he means other theaters.
- rdtsc 15y ago
  Hmm speaking of going to the movies. How many people here are still going to the theater to see a movie? I don't even remember the last time I went. I suspect a combination of (I became too lazy | I became too snobby and selective | Movies have gotten worse | Theater prices got too expensive) happened.
  - icebraining 15y ago
    I go to a theater owned by a film museum, where the tickets are less expensive. Went to see El ángel exterminador just a couple of weeks ago.
  - hippich 15y ago
    I and my wife go there once in a while. Thing is - we have have nor TV, nor Netflix/Hulu/etc. As a result, after careful research we really enjoy movie (well, almost always) and after movie we go to restaurant. This is really nice to have it once in a while. It is not about movie itself, but about going to movie theater with someone. I said it somewhere already, but will repeat myself - "Treat yourself, not bloat". This is a secret to good experience with movie theaters (and with most things in life, actually :))
  - 15y ago

TheFuture 15y ago

Thank you. I've worked at a theater, and this is accurate. Amazing the answers you get when you throw a bunch of economist at the question who know nothing about the industry.

barrkel 15y ago
That's odd, because the economists are agreeing with you - in your analysis, that is, not in your opinion of economists. But further than that; the microeconomic theories are more generally applicable. (Me? I hate the stink of popcorn. I'd pay extra to go to a cinema that didn't sell it.)
paulgb 15y ago
It's right in the sense that it's true, but it doesn't answer the question. Just because the theater gets most of its money through concessions doesn't automatically mean that concession pricing is exempt from competitive pressure or supply and demand. Of course theaters want to charge as much as they can for their product, as any profit-maximizing firm would, but the question (a good one) is why the market allows it.

waterside81 15y ago

You're bang on - all of the economic jargon on the StackExchange page is funny. People are overcomplicating matters. I used to work for the largest theatre chain in Canada and remember that George Lucas demanded 100% of ticket sales for the first 3 weeks of his Star Wars releases (and re-releases), which is unheard of, but he can command that. Popcorn & soda is where theatre chains make their money. From what I recall the marginal cost of each soda was about $0.25, popcorn is even less.

mattm 15y ago
I worked at a movie theatre during high school. On initiation day, as we were viewing the large stacks of popcorn kernels, my manager said the actual cost of a bag of popcorn is around 5 cents.
joezydeco 15y ago
There had to be a bit more to the Lucas thing, though. Like a minimum ticket price. Otherwise I would have (as a theater owner) slashed my ticket price by 99% and doubled the cost of popcorn. Still a win for the moviegoer and theater owner.
- waterside81 15y ago
  Well, that's not really reasonable. Now you have different ticket prices for different movies (patrons would be outraged) and then you have inflated concession prices for all patrons (or only some?). The software that movie theatres use to run their POS terminals isn't that flexible.
miked 15y ago
This. I worked for AMC Theaters for 4 years as a developer. One of the wonderful things about that company is that every employee has to go thru a week long training program in the theater business, to include working at a theater. One of the things I'll never forget is the trainer telling us one day, "We're not in the movie exhibition industry. We're in the snack concession industry. We just use movies to get the patrons in the door." The reason is that, in the movie industry, the Hollywood studios have almost all the power. When the original Batman came out and lines were around the block, the company actually lost money on ticket sales (after theater costs). That's because Batman cost the theaters 90% of the gross ticket sales. If the theaters were really making big profits the companies would have margins -- and stock prices -- akin to Apple's. They don't. Check the stock listings: they have a marginal business.