Tuesday, June 07, 2005

Why Movie Theater Prices Are So High (and keep rising)

Believe it or not, this is not a reprinting of my previous post entitled "Why Movie Theaters Don�t Care About You." (You can read that here, by the way). There are some points in that post that are mentioned here�but now they are expounded upon. That post was a list of five reasons why you get bad service and bad attitudes at the theater. This post is much more about the financial side of things.

But yesterday I heard the 104.5 The Zone guys debating and discussing why movie theater prices are so high�and why they constantly go up. I didn�t have time to call�or even have my phone with me�or I�d have enlightened them. As it is, I wrote this blog post and e-mailed it to them to help them gain understanding.

For anyone reading that isn�t already familiar�here is my brief history, to give you some reason to trust what I�m about to say: I�m thirty years old, and spent a little under a decade managing movie theaters, most recently with Regal cinemas. I was the second in command at a mega-plex for three years, and then General Manager of a 10-screener. So I thought I�d take a moment and give you the straight scoop. I find that anytime I tell someone this sort of "insider" theater information about how projectors work or how the industry is run, they are surprised and fascinated. I hope you find it intriguing. I keep telling Chris he and I should collaborate on a book of stuff like this. If you get bored�I�m sorry. My goal isn�t to bore you, but to explain how the money works in Hollywood. I hear complaints about movie pricing all the time, and perhaps this will help you understand one important thing: If the prices didn�t go up, the theaters would die off, and you�d have nowhere to go to see a film on the big screen. Whether you know it or not�you need those prices to go up (I feel like Nicholson�"you WANT me on that wall�you NEED me on that wall."). Please note that whenever I refer to "Regal" in this post, it represents any theater chain.

The number one reason concession and ticket prices are so high at the theater is the staggeringly thin profit margin in the industry of film exhibition.

To start with, the studios take most of the box office�but not all. Specifically, each and every single movie has its price set separately, with the studio asking for a certain percentage of the box office, and the exhibitor (Regal) haggling to lower that percentage. The theater chain will agree to play a certain movie at a certain price in exchange for a deal on a future movie, or some similar bargaining tactic. These negotiations carry on sometimes up until the day before a film�s release, but usually are settled about a week before then. Typically, the average film has a percentage take for the studio around 95%. Lately�over the last several years�the studios have become bolder, asking for more and more of the box office take.

This means that virtually all the ticket sale money returns to the studio, so concessions are the only place left for an exhibition company to make money. Thus, the five dollar Cokes and six dollar popcorns. If they weren�t charging that�there�d be no theaters�period. No question or debate about it.

But that�s not the only reason prices are high. For instance, when Galaxy Quest (Star Trek spoof starring Tim Allen) was released, Dreamworks (the studio that produced and distributed that film) asked for a whopping 98% of the gross. Regal had had enough, and decided to stand their ground. They said no. Dreamworks essentially said, "Fine, we�ll just play our movie in the other exhibitor�s theaters and you won�t get it." And that�s what they did. And both sides were hurt. The opening weekend gross of Galaxy Quest (and the overall take for its run) were far below industry predictions. By the time of the next Dreamworks film that was released, they�d lowered their asking price back down to a more reasonable percentage (somewhere around 96%).

But Regal was also hurt badly. Galaxy Quest had been the number one movie that weekend, and only two other films opened nationwide the same day. So a full one third or more of the moviegoing public went to non-Regal theaters that weekend�and it cost Regal millions. And ticket and concession prices went up.

Another example is Rush Hour 2. New Line was the distributor here, and they asked for an unthinkable percentage (rumors in company circles put it at 99%). Regal said "No." And Regal took another huge hit. Only this time, the studio did not suffer. Rush Hour 2 set records for opening weekend take in its month of release, and went on to gross over $200 million dollars. The next big New Line film was one of the Lord of the Rings chapters, and Regal had no choice but to bow to the greedy whims of the studio, and accept the outrageous percentage. And prices went up.

The price of a ticket at the theater is not set by the studio�they don�t care about the price of an individual ticket. They want a percentage of the take. So Regal (or a similar company) looks at that and says, "Well, if we raise the ticket prices a quarter for every theater, then the overall pie will be larger. Our 1% of that larger pie will therefore be larger than if we kept the same price." And that�s why ticket prices go up.

When the concession prices go up, it�s survival. Believe me, exhibition companies have some of the best minds working for them, developing mathematical models for how many customers they�ll lose based on the size of a price increase. Add in inflation, and a yearly rise to the concession prices makes absolute sense. But they don�t raise them too much at one time, so as to keep as much of their customer base as possible. If they didn�t do it at all, they�d go out of business�which almost happened for all the major exhibitors a few years back.

Regal, Carmike, AMC, United Artist Theaters, Edwards Theaters, and countless others all went through dangerous bankruptcies due to a lack of profit and overextension. In fact, Regal was rescued by Philip Anshultz, the billionaire who owns the Staples Center, The Colorado Avalanche, Quest Communications, and many more companies. He bought Regal�s debt, thus becoming their master. Then he did the same for Edwards and United Artist, and rolled all three companies into the Regal banner�which is why Regal is now the largest exhibitor in the world�by a long shot. Regal owns more screens than their next five competitors combined. But Anshultz swallowed a huge loss to do that. Granted, he�s made a fortune buying mismanaged companies and turning them around�but his chances of doing that in the theater business is slim.

The entire movie industry is headed for a colossal doom, based on their system. As studios ask for more and more of the box office, theaters will have to keep raising concession and ticket prices. Eventually, Joe Customer will be unwilling to buy a $20 box of Snickers. At some point, something has to give�and it might have already started.

The industry is at an all time low, and they are WAY off the pace of recent years in attendance and revenue (you may have read about this in Variety and The New York Times). Not even Star Wars Episode III could turn things around. People, for whatever reason, have stopped going to the movies. The studios will tell you that the public is fickle�that the numbers from last year can�t be trusted because of unexpected hits like The Passion of the Christ. Exhibitors will tell you that the product (the films) aren�t good enough. They�re probably both of them right. But there�s a greater underlying cause to this year�s drop in attendance.

The reality is that the film exhibition machine has fatal errors that are starting to catch up. And emerging outside factors aren�t helping.

The technology is now cheap enough that most movie fans can afford a home theater system. Big screens, surround sound, and even theater seating are popping up in homes left and right. DVDs are selling like hotcakes�and everyone�s buying (begging the question�have you ever seen a run on pancakes? Was there some Depression era shortage on pancakes of which I am not aware?). The quality of a film showing in your living room is now virtually as good as the one in the theater. And the window of a film�s release to DVD is shrinking, making it easier for Joe Customer to merely wait a few months and rent that movie to watch at home instead of going to the theater.

Then there�s the crowd problem. The introduction of cell phones has made the movie experience nearly intolerable. Everyone claims to hate people who talk on them during movies (or who fail to turn off the ringers) and yet you can�t go to a single showing without seeing that behavior. Theaters are trying to build new sites with roofs that impede cell signals, but already lawmakers and legislators are blocking that action with government rules touting individual liberties (I guess the government view is that people have a right to talk rudely on their cell phones wherever they like).

Theaters are trying to recoup some costs wherever they can. If you�ve been to a Regal Cinema in the last two years, you�ve seen a 20 minute digital presentation prior to the previews that Regal calls The Twenty. It�s humorously called �advertainment� inside the corporate walls�but we all know it�s advertising. New TV shows, candy, beverages, websites�.you name it�they�re advertising. And Regal is able to stay afloat with the extra revenue stream. But the public doesn�t really like this development. In fact, it�s one of the other reasons less people are going to the theater. Customers don�t want to be treated like hostages, forced to sit through ads before their film.

And the lawmakers are flexing their unnecessary muscles on this issue too. There have already been bills introduced in certain state legislatures like Michigan that would force movie theaters to advertise the �actual� start time of a film. Typically if the newspaper tells you a movie starts at 7pm�that�s actually the start of the ads�or the previews. The movie itself won�t start until 7:15. But if this law passes, forcing theaters to publish the actual film�s start time�then customers will skip the ads. Then the advertising companies will pull their dollars from Regal, and put them into some other, more viable area such as television where there is still a captive audience. Advertising the �actual� start time sounds like a great idea to customers, but if that law passes�it will kill the industry, leaving a gaping hole and nowhere for customers to see a film on the silver screen.

And Regal (and the like) will again be forced to get creative on making money.

And they�re trying everything you can think of, from renting out their theaters as conference rooms to playing Rolling Stones concerts at select screens. But it�s not working. One revenue stream that is working is beverage marketing. You know how everything at a Regal Cinemas theater has Coke written all over it? The concession stand, the drink cups, the popcorn bags, the tickets? That�s a marketing deal with Coke. In fact, Regal gets all the syrup for Coke products for free (making the soda mark up even more egregious, no?)�but then on top of that, Coke pays Regal millions every year to plaster the beverage logo on everything. It�s all about name recognition. But even with this added revenue�the theaters are struggling.

The only area that consistently brings any profit at all is concessions. And here�s the kicker�this is what will really blow your mind: Less than 10% of movie customers even bother buying concessions. And this adds in all sorts of wrinkles to the problem. Have you ever heard someone tell a story about a bad experience at the movies and end it by saying, "I just don�t feel like they care about me as a customer at all?" Well they don�t. See my previous post linked to at the start of this one. Every manager in every theater knows that the bread and butter of the company is concessions. But they also know that very few customers are buying those concessions. So if you have a problem with your movie�say the sound goes out�they�re not nearly as motivated to help you as they should be�because you probably didn�t buy concessions, which means they didn�t really get any of your money. Sure, they�ll apologize and try to compensate you�but not with much feeling�believe me, I know.

Theaters aren�t threatened by customers who say "I�ll take my business elsewhere" because the average customer isn�t buying concessions. If all the money from the ticket is going back to the studio�who cares if you go buy that ticket at another theater? It won�t affect Regal if you buy tickets at Carmike�because Sony will still get all the money. This is also why a theater will always pressure you to take passes over your money back. If you take your money back, then you can go someplace else (maybe not even a theater) to spend it. You�re taking away their 1% of the box. But if you take a pass stamped with the Regal logo�you�ll come back to Regal for sure (because you can�t use it anywhere else). And because you�ll feel like that movie is free (hey, you used a pass to get in, not a dollar bill, right?) then you�ll be more inclined to open your wallet at the concession stand. But no matter what that manager says to you�if they�re offering you a pass it is company policy that if you don�t want a pass they have to give you your money back.

As more and more customers have a bad experience with shoddy customer service and apathetic managers�the industry slowly starts losing steam. It�s just more reason to wait for the DVD. And if you think the customers hate companies like Regal for their penny-pinching ways�you should work for them for a few years. They pay crap. They used to pay managers like me a bonus every year based on how much concession sales my theater did. A few years back they changed how bonuses were calculated, with the end result being far weaker bonus checks�another revenue stream for Regal!

I personally think the entire industry is going to die. Within my lifetime the movie theater as we know it will disappear. DVD, On Demand, home theater systems, and high prices will drive the customers away. The thin profit margin for the exhibitors will become so thin as to be nonexistent. And the studios will still be making money off all those other distribution channels like home video and cable. It�s inevitable. And also tremendously sad, I think. The movie theaters will die, like the drive-in before them. All in the name of money.

So there you go. There�s my little doctoral thesis on why movie prices are so high. I'm not trying to be a "theater apologist" as much as I'm trying to say, "This is just how it is." I hope you didn�t fall asleep reading it. I probably could have just written one sentence about studios taking most of the box office, but that would be no fun (and I wouldn�t get to waste an hour at work!). Plus, you wouldn�t get the full learning experience. I hope this helps a little in understanding why the prices keep going up, even if it doesn�t make it easier to take.

38 Comments:

At 6/07/2005 11:38:00 AM, Blogger PaulNoonan said...

Very informative. And very timely.

Check out related material:

http://www.marginalrevolution.com/marginalrevolution/2005/06/the_changing_ec.html

 
At 6/07/2005 11:47:00 AM, Blogger Kennelworthy said...

Thanks for the comment and the link. I enjoyed the Marginal Revolution post, though I couldn't tell when it was posted or how to leave a comment.

Definitely a topic of interest to some. And I think it would be to many more if they knew how the industry works...and how much danger it's really in.

 
At 6/07/2005 12:54:00 PM, Blogger Kevin Rector said...

What happens when Movie chains start going out of business and the movie companies start seeing that revenue stream drying up? Would they rather have 75% percent of something instead of 96% of nothing? Will they eventually quit being so greedy so as to avoid losing that revenue stream entirely?

 
At 6/07/2005 01:37:00 PM, Blogger Mike said...

You can't leave comments on the Marginal Revolution site normally. They don't want to keep up with it. Still my favorite blog.

 
At 6/07/2005 01:49:00 PM, Blogger PaulNoonan said...

That MargRev post was made at 5:15 AM Eastern Time today, and I think the good economists stop taking comments due to comment spam, which is unfortunate.

I was brainstorming possible revenue generators while I was eating lunch, and I was wondering whether the concept of "luxury boxes" might be worth investigating. The obvious problem with this idea is that it involves a huge capital investment, but it might not be so bad.

I would envision it more as "first class" on an airplane than a sports luxury box. Build a box, guarantee lots of leg room, exclusive food and drink (maybe alcohol, I know that alcohol is problematic for movie theatres in general, but it might not be in this limited situation), I'm sure there are other options as well.

You might be able to sell corporate sponsorships on this by guaranteeing opening day seats to certain movies (Star Wars for instance). If there is enough demand for a particular movie you could probably sell these for a fortune.

For instance, the year that Milwaukee had the all-star game, they sold way, way more season tickets than normal because they included all-star tickets. What if, 6 months in advance, you sell box seats to nerds and corporations on E-bay, giving them the box not only for Star Wars opening night, but also 5 other movies. A few blockbusters, along with some "lesser fair" (The Pittsburgh Pirates of moviedom).

I think this strategy would allow for maximum proftiability from the most affluent moviegoing people, similar to how Airlines, forever, basically subsidized their coach sections with business class and first class.

This could certainly work in a big city (In Chicago, where I live, I can imagine a few corporations falling over themselves for primo downtown spots so that they can entertain clients on opening night.

I also think this could work in smaller areas (suburb size) where there is an absence of pro-sports, theatre, and concert, but small businessman still have clients.

Granted, I don't know what I'm talking about, and it may create too much overhead to be practical, but it seems good in theory.

 
At 6/07/2005 03:01:00 PM, Blogger Kennelworthy said...

Well that actually sounds like a decent idea to me, Paul.

I do think the cost of building and marketing those "luxury" suites would be hard to swallow up front for some theaters.

But then they could go to someone like Coke and have them ease the cost in exchange for putting giant Coke swooshes on the outside of the box (like American Idol does with its contestant lounge couches).

The bigger hitch with the luxury suites is that there are so few "event" films that it might not sell all that great. Sure, Star Wars would bring maximum revenue for a first-class seating box. But that's a pretty singular phenomena of fandom. Nothing quite reaches those levels.

Most interestingly, your idea is already being done to a certain degree, with companies like Bass Industries, Inc. and their Universal Seating Showtime Lounger. Their website has pictures of their seats, which look like leather recliners that have cupholders in them.

And there are trade magazines we get at the theaters all the time and I remember seeing some upscale theaters in Chicago and other trend-setting cities where they had implemented a preferred seating arrangement. Those in such seating have waiters that come take your concession orders so you don't have to stand in line...of course they come with a higher price tag.

I'm just not sure if it's something that would work on a large scale. You'd pay extra for a seat, for instance, that is a fancy recliner and you'd have a waiter and more legroom....but you'd still be just as bothered by the cell phone ringing as the people in the ailse behind you.

But it might be that it's not widespread yet simply because the notion hasn't caught on. Look at the NFL, they're experimenting with luxury recliners down right behind the sidelines. Maybe success there will breed success in other industries.

It's a good thought.

 
At 6/07/2005 03:03:00 PM, Blogger Kennelworthy said...

Also, as an UPDATE to the post.

I just came from a lawyer's office. A customer has sued Regal for something that occurred when I was the GM of the theater and now I have to give a deposition.

I can't say too much because of the legal ramifications, but as lawsuits become both more frivolous and more frequent, it only hurts the chances companies like Regal have to stay afloat.

Just another in a long line of reasons why the industry is in trouble.

 
At 6/07/2005 03:08:00 PM, Blogger Mara Jade said...

See, this is why we should all go back to trading and bartering.

The above comment is also why my boyfriend calls me a communist.

And both comments were mostly a joke.

Informative writing. It does make sense, but it doesn't stop the hurt. I barely go to see movies anymore. You can still catch them cheap at one theater about an hour away but you have to wait for them to be old by a couple months before they play them.

I'm only 22 and longing for the good ol' days. This can't be good.

 
At 6/07/2005 03:10:00 PM, Blogger MaraJade said...

Dang it. I posted the above from my stupid backup blog. Oops.
. . .sorry.

 
At 6/07/2005 03:21:00 PM, Blogger Kennelworthy said...

We're just glad to see you post at all. Thanks for continuing to come by. Sorry the explanation doesn't ease the pain.

But it sounds like you're already one of those customers I wrote about...fed up with the ancillary problems of attending a movie and adapting your life to a more trouble-free viewing experience. When more and more join you...the slide will officially kick into high gear.

 
At 6/07/2005 03:34:00 PM, Blogger Kennelworthy said...

Oh, and Kevin, your logic is totally right. They are greedy and could solve the problem. But they won't do that. They won't scale back the fee they charge after all these years of it being higher.

And I think studios make so much money off of DVD sales, merchandising, overseas markets, On Demand, and a host of other outlets...that they would survive where the exhibitors would fail.
Just because there's sort of a symbiotic nature of their relationship doesn't mean they'd go out of their way to help the other...there's really a lot of animosity there. The exhibitors also need the studios much more than the studios need the exhibitors.

But I agree with you. In a perfect world the studios would cut their own percentage to help the theaters stay afloat. I just don't think it'll happen.

Are there Blogger police who come and arrest you if you leave too many comments on your own post?

 
At 6/07/2005 03:43:00 PM, Blogger Kevin Rector said...

I'm not saying the studios would do it out of any altruism, I'm saying that companies want to maximize their profits. That means they want to exploit every single revenue stream available to them. They make a ton of money from ticket sales, Billions actually.

If all of the exhibitors start to go out of business then those billions of dollars go away.

When that day comes the studios will give the exhibitors a break (not for the exhibitors sake but because 80% of a billion dollars is better than %100 of none).

 
At 6/07/2005 03:50:00 PM, Blogger Kennelworthy said...

I see your point. And I suppose it's possible. But not likely.
The worldwide box office is raging stronger than ever, in direct contrast to the domestic trend. There's just too many other ways to make the money. They'd be more likely to let the exhibitors disappear and then reopen their own theaters so they can have 100% of everything.

Keep in mind, I'm not predicting the theaters will all die off in three years. It will take a long time, with many changes likely to occur before then that I can't forsee. But I do think it will happen in our lifetime.

 
At 6/07/2005 04:14:00 PM, Blogger Jonathan said...

I admit it is annoying a lot of times to go to the movie theater, but I hope your predictions about the industry dying don't come to pass at least in my lifetime. Granted, I have had to sit through a lot of crappy films this year, but that was my choice; I can't possibly blame the theater chain for that, and I still think that is part of the problem in attendance dropping this year.

A movie like "Cinderella Man" for instance is a prime example why I love going to the movies. You could not have the same experience watching this film at home no matter how expansive your theater system is. Trust me on this. I have a 53 inch HDTV with surround sound, THX capabilites, the works. I have a movie collection consisting of well over 600 DVD's and a couple hundred tapes or so. And I still choose to go see a movie at the theater at least once a week because the theater is still such a wonderful, unique experience for me.

I have so many memories of watching some of my all time favorite movies on the big screen. I can still remember being 8 years old watching "Ghostbusters" with a packed house and everyone laughing their ass off. Mike and I went and saw the rerelease of "The Exorcist" a few years ago, and someone actually ran out of the theater screaming because she was so scared. I can remember everyone crying while watching Bernie's wife die at the end of "Cocoon." I can remember everyone clapping their asses off when Tom Cruise finally gets Jack Nicholson to admit his wrong doing in "A Few Good Men." These are experiences I can't have at home watching these movies by myself or with a few other people.

That's not to say that I don't buy the DVD's and watch them many more times after that; I do, and I still enjoy them. But nothing beats watching a great movie on the big screen; there is just no comparison.

On a bit of a different note, you made me think of this when you mentioned managing a theater, KW. I don't know if you remember this, but Chris reminded me that we met one time. It was a few years ago, and Chris and I came to see "Changing Lanes" at that theater in Gallatin. We talked to you for a little while after the movie. I just thought I'd throw that out there because it came to me.

Also, wonderful blog. I learned a lot of things I did not know.

 
At 6/07/2005 04:28:00 PM, Blogger Kennelworthy said...

I agree with you Jonathan, in that I enjoy the theater experience for things the home system cannot reproduce. And I also hope my little "prediction" doesn't happen. But the economics of the situation are not good...and even with millions still enjoying the experience...it might not be enough to keep the theaters afloat.

Chris and I both often talk about walking into a showing at our theater to witness the audience reaction--I remember Liar Liar was a big one for me...constantly cracking up the audience into hysterical laughter. And the home cannot recreate that.

But for every one of us that loves the group experience...there is someone who gives greater weight to the growing annoyances that group can cause such as talking, cell phones, candy wrappers, seat kicking, etc.

And I do remember meeting you, though I wish it'd been under circumstances better than a Ben Affleck screening.

Hopefully we'll hang out sometime and talk movies...I'd like that. And I'm jealous of your home theater set up. My girlfriend babysits for a family that has actual stadium seating in their basement theater, top of the line sound, and a screen the size of the entire wall. Granted...that's not the norm...but that stuff is getting cheaper and cheaper. Remember when DVD players alone cost $300? I do. Now you can get them for twenty bucks and a handshake. Same thing will happen to home theater systems, though the progression won't likely be as quick.

 
At 6/07/2005 04:50:00 PM, Blogger Jonathan said...

I do remember. My first DVD player cost $350; I got it in 1998, but the good news is it still works fine. And also, while a Ben Affleck screener may not usually be the best circumstances to meet at, "Changing Lanes" was a pretty damn good movie. Although that had a lot more to do with the great script, direction, and Samuel L. Jackson than it did with Affleck.

 
At 6/07/2005 06:24:00 PM, Blogger Kennelworthy said...

I love the line in that movie where William Hurt says to Samuel L. Jackson (after an AA meeting and a huge argument): "You know what your problem is? You're addicted to chaos."

Fine movie. Wasn't trying to disparrage the film. I was, however, trying to disparrage Ben Affleck, even though Changing Lanes (along with Sum of All Fears) is probably some of his best work.

 
At 6/08/2005 04:33:00 AM, Anonymous Buckley said...

So, I guess I�m one of the few (probably the only one) to post a comment at 430 in the morning. How very informative. I actually read it twice so I didn't miss anything. I thought I would add a little more insight from someone who is still in the treacherous land of the dreaded popcorn mines. Someone at this money hungry company came up with an ingenious idea. Did you know that you can no longer save a little bit of money by purchasing a small popcorn and a small coke? Are you sitting there right now thinking, �That�s not true, I bought a small coke just last week/month.�? Well you might have bought a small, but what you really bought used to be a medium coke. And that small popcorn you ask. Yep. It was a medium as well. Still confused? What Regal did was they got rid of their �Extra Large� and turned it into their �Large.� They got rid of all their small coke and popcorn products. The funniest part about it is that since this change not a single customer has asked me about or even complained about it. Just my two cents, have a great day.

 
At 6/09/2005 02:30:00 PM, Blogger Kennelworthy said...

Buckley...now I get it. Thanks for stopping by. Didn't realize that was you. Hope you come by every so often--we talk movies pretty regularly, and I know you like talking movies...and sports. And fantasy sports.

That's why I gave you the url...'cause I thought you'd enjoy this blog. Feel free to stop by anytime. But only if you let me come watch Batman before it opens!!

 
At 6/17/2005 11:30:00 AM, Anonymous Anonymous said...

The whole model is a sham. I suppose that secondary to greed, the studios want higher percentages for the higher $ figures...bragging rights, since distributors post sales in $ amounts rather than # of tickets sold.

 
At 6/27/2005 06:30:00 PM, Anonymous Anonymous said...

If the industrial multiplexes went out of business tomorrow, it would be a good riddance. Just think what you get when you pay $9-10: sticky floors, bad recycled air, generic and generally artificial unhealthy snacks, stadium seating, and to add insult to injury, commercials! If only theater owners exercised a little imagination, the cinema could actually be a destination people would want to go. If Starbucks can replicate a clean and comfortable setting on a mass scale, why can't theaters do the same? Starbucks overcharges for their products too, but at least you get to slip your coffee in a pleasant environment.

I can understand that it's not easy for cinemas to squeeze out a profit with the studios being so greedy, but treating customers like farm animals is no way to win customer loyalty. I like the big screen experience, but the cinemuck conditions at the local multiplex keep me at home.

Berzerkeley

 
At 7/05/2005 12:12:00 PM, Anonymous Anonymous said...

The economics just dont make sense! Am I the only one who notices?

Want to see my complaint? Try this:

Set the ticket price to $1 and sell and the sodas for $1. Now Regle should make BANK! See, the studios will have 99% of $1. And the movie goers will have lots of money to buy soda and stuff. Theatures can sell T-shirts, or food or whatever..

Currently it costs me $40 to take my wife and kids to the movies. If the movies were $1, I would be happy to give the theatures $30. Appearently a MAJOR increase to the theature over the ZERO I give them now. Why won't it work?

 
At 7/06/2005 09:44:00 AM, Blogger Kennelworthy said...

Well, I can't tell if you're being rhetorical or serious...so I'll answer anyway.

Not that it's not a good idea, because who wouldn't want to pay only a dollar for a movie ticket? But it wouldn't work because the studios would never negotiate a deal like that. They'd simply refuse to book their films in that theater company's auditoriums.

There are all sorts of factors that play into the negotiations, and it's ever changing. If the theater does something that upsets the studio (for instance, putting their recent film in a smaller auditorium or something) then they apply leverage. It goes something like this: "We won't book you with Star Wars if you ever do that again."

And ticket prices are part of that. The most constant pressure to raise ticket prices comes from the studios.

 
At 7/07/2005 12:32:00 AM, Anonymous Anonymous said...

Interesting discussion. I never knew the studios were getting such sinful percentages; I am a very regular movie-goer, so this leaves a bad taste in my mouth.

I wonder if the $1 theaters are then actually doing better than those w/ recent releases? Get them in the door cheaply, and then they will be more inclined to spend some money at the concession stand. Especially families, when the kids are all clamoring for candy and popcorn. Parents gotta feel a little like "why not, we saved $30 on the tickets?".

We've got a recently-defunct Wallace theater here (about 10 screens, smaller venues) that shows movies that are about a month or so old. For a buck. I had never been there before 'cause when I want to see a movie, I usually see it w/i a couple weeks of coming out.

It wasn't all that bad, minus a little more noisy than the usual (no knock against families).

Kennelworthy, do you know what kind of percentage places like this are paying?

 
At 7/19/2005 09:28:00 AM, Anonymous Anonymous said...

While I completely understand your stance on the industry... I have to disagree with one thing. I currently work for Regal as an assistant manager and can tell you that not everyone is as cold and calculating about who they'll help and why. I may be of the minority in this theory, but there are a few of us who still believe that customer service is #1 priority. We understand that they DON'T have to see this movie at our theatres. And despite the nasty customers who talk rudely to me and blame every problem on me (like power surgers and noisy teenagers), I'll continue to provide the highest level of customer service I can.

I will say this: I am much more inclined to help a customer who brings my a concern in a respectful manner over one who yells or calls me names. But that's just me.

And to all the customers out there: I don't come into your workplace and call you stupid or cause you problems. Please remember in the end most of these managers are college age kids trying to earn a living and get a good experience out of their job.

And some of us really do care!

 
At 7/19/2005 09:38:00 PM, Anonymous Eric said...

Why do theaters defend their measly 2-6% box office returns when the real money is made in the concession stand. Patrons only have so much money to spend, so why not drop the ticket price so more of that money is spent on high margin concessions than low margin tickets. If studios ask for a percentage only, than dropping tickets from $10 to $5 only costs the theater $.10 or $.20 per patron, but promotes higher attendance and more concession buying.

If theaters are corporate owned and not franchised, it costs very little at least to do this in limited test markets. Bet it would work!

 
At 5/08/2006 08:19:00 AM, Anonymous Anonymous said...

the price of the movie is set. they will never get less than 1% like the 01 rush hour 2 thing. i remember that. i was working box office that night and i can tell you of 100% of the people that came to see that movie only to find out we didnt get it 75% stayed and watched something else.

regardless of the % that the movie co takes the theater still gets profit. i dotn undestand what exactly has changed over say 5 years againg? the drinks are free to regal the movies are made by someone else and they still get money from them. bonuses to managers for consesion sales! you dick! 4 years and i never saw a single dollar from that shit!

as for the food price increase, where is the employee pay increase? gas prices have risen so much in the past 3 years. however 6 years ago when i started at regal they began pay at 5.45 minimum wage. today it is the same! fuck regal and i hope every manager of a regal entertainment group theater goes to hell and is forced to burn in a popcorn oil for ever!

 
At 8/03/2006 08:19:00 PM, Anonymous Anonymous said...

While I enjoyed the post, it was overly pessimistic in one regard. The movie theater's take of the box office proceeds is not as low. The average, spread out over the year, is around 52 percent for the studio and 48 percent for the theater. You can verify this by looking at the EDGAR filings for any of the publicly traded companies. At our small theater, the average ticket price (matinee, children, prime time combined) is $5.25 and the average per capita concession expenditure is $2.50. Gross margin on concessions is about 80 percent.

Therefore, we keep $2.60 per custome r from admissions and about $2 from concessions. From this $4.60 per customer, we have to pay salaries, rent and other administrative costs.

So when people ask whether we make money on concessions or admissions, I say "yes."

The margins are higher on concessions, but the dollar amount is higher on admissions.

Paying 95 percent for film rental, even in the first week of a blockbuster, is the exception rather than a rule. IN some hyper-competitive markets where studios BID against each other, it is possible. More typically, the first week rental is 60 percent, followed in a week or two by 50 percent and then eventually falling to 35 percent. The average rental, as I said, is about 52 percent.

At the end of the day, after EVERYTHING is paid, we keep eight to 12 percent of every dollar of revenue.

 
At 2/28/2007 05:30:00 PM, Blogger TamporA said...

five dollar cokes and six dollar cokes my ass...thats complete bullshit. Due to the dicked-up prices, i dont go to the movies all ALL anymore...so thats even worse than prices being low! going to movies is supposed to be about the fun of it, and somethin cheap, fun, and easy to do on the weekend or even during the week. On tuesday nights here in Rocky River, OH. we have "4 dollar movie night". its $4 a ticket and u get a free small popcorn...thats the only time anyone goes. Other than that, its like 8 fuckin bucks just to get in, and if i wanna take a girl thats $16 right there, then she's gonna want popcorn (and any smart guy isnt gonna get a SMALL on a date, you get at least a medium which is like another 5) so we're up to like $21, and of course we're BOTH gonna want drinks so now its like $29 (thats assuming each drink is only $4...larges are like $5 or $6) and u gotta be prepared to buy candy if she (or you) wants, so add another 2.75-3.00 and that makes about $32.00 total for a simple movie date. Also, the movie might suck! What kind of highschool guy wants to spend 32 bucks on a friday night date?? not i, my friend, i'll bootleg 'em offline or wait till theyre on HBO. so all-in-all: FUCK the movies...i'm takin my date to mcdonalds.

 
At 5/16/2007 02:20:00 PM, Blogger Yitzy said...

How can I contact the author of the post?

 
At 5/16/2007 03:53:00 PM, Blogger Kennelworthy said...

The author of this post (me) is here on the blog every day, and you could ask a question through the comments. If I had a better idea as to your reason for wanting to contact me, I might be able to give you an e-mail address that you could use. But not if you hated the post and you want to key my car or something.

 
At 6/26/2007 07:49:00 PM, Blogger Ellen said...

So true, so true. My dad's always falling over because of the ticket price ($9 for students). "Might as well by the DVD," he says.

 
At 7/23/2007 09:47:00 AM, Blogger Twerpette said...

Thanks for the thoughtful posting. My experience however is that Regal (in Houston anyway) runs "The Twenty" before the posted start time of the movie (beginning with previews and a couple of ads). I don't mind 10-15 minutes of previews, in fact sometimes people go to the movies for the next hot movie preview as much as for the showing feature.

 
At 9/01/2007 12:04:00 PM, Anonymous Anonymous said...

I loved your article, I wanted to comment on the part about cell phone signal blocking theatres.

Blocking the signal is not just a problem for those annoying people that want to talk on the phone. For example, I own a technical business and I can't go to the theatre at all if I can't get a cell signal. In my case, I don't need to get calls but I need to get SMS or black berry alerts if a customer has a problem or a server goes down. I have my phone on vibrate and don't talk on it at all. Getting a silent alert when there is a problem, allows me to go to the movies and know when there is a serious problem with my business. Without a signal, I wouldn't go ever.

Also, from a non-business side, how about parents? My wife and I very seldom leave our children with anyone but once in a while my Mom will watch the kids while my wife and I escape to a movie. As paranoid parents, we would never go somewhere where we couldn't be reached. This is simple common sense as a parent.

Whomever thought of this idea to block signals obviously doesn't have much in the way of responsibilities in life (like children) and must have their head up somewhere that the sun doesn't shine.

 
At 9/13/2007 05:23:00 AM, Anonymous Anonymous said...

Correction, AMC never went bankrupt and was never near bankruptcy. Remember, AMC was the first to introduce the Stadium Seating, revolutionizing the MEGA PLEXES. As a result, AMC took away many patrons from other chains. As other chains started to see the loss, they started building new modernize theatres with stadium seating with money they didn't have and heading into debt they couldnt keep up. Is true that the studios need to have more consideration when making business with theatre chains, but unfortunately, due to technology, for example: The DVD, online etc, they are starting to have less compasion for theatre chains, making it more dificult for cinemas to gain a profit. As a result, patrons are the ones paying the high prices at a movie theatre.

 
At 12/27/2007 09:33:00 PM, Anonymous Anonymous said...

Thanks for the tip, whoever left it. The EDGAR filings do show that Regal is only paying out for rental fees about 54% of what they are taking in for ticket sales. So, sorry, Kennelworthy, but respectfully I won't be shedding any tears for the poor theater corporations.

Also, I don't mind the ads and the previews, but I can survive without a coke for 2 hours. It would be nice if I didn't have to, but heck - someone offers you a coke for $5.oo, they might as well flip you off as they hand it to you.

And if only 10% of people are buying concessions then why not slash prices to something reasonable - or at least less insulting - and sell more concessions? If you could get 25% of people to buy them at half the price, you would make more profit.

 
At 4/10/2008 06:20:00 PM, Anonymous Anonymous said...

TWO Words DIGITAL PROJECTORS

This will bring the theaters out of the hole. Not to mention all the 3-D film coming out. I agree with your assessment but don't count them out yet. You can't get the same experience at home and you know it. The big screen is a league of its own...

 
At 10/22/2009 11:55:00 AM, Blogger James said...

I understand that the movie theatres are more expensive to operate but still, it isn't fair for the consumer to pay $6 for a small popcorn and $15 just to get in. I signed up at the site below just so I could get the gift certificate for movie passes...it was worth it...

http://www.mediancs.com/rd_p?skipRedirect=1&p=192462&t=9534&a=25081-blgr&c=&gift=27203

 

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