Three are a couple of different ways that theaters get movies from distributors, but basically the deals are set up to get everyone their money back and to try to ensure a profit.
Malcolm is correct in how it works, but there are a couple of variations. Some deals are a straight leasing agreement, where the theater rents a film from the distributor for a fixed period of time, for a fixed cost. In this model, setting a price of $1 per ticket will probably not get sufficient revenue to cover the theater’s operating costs, plus the film rental. The theater owner has to strike a balance between maximizing the number of tickets sold and the price of the ticket. In most cases, the popcorn is where the profits are—the tickets pay for the overhead and rental.
There is also a model where the profits are shared between the distributor and theater. In this model the theatre gets to deduct its overhead (operating costs) and ticket sales after that are split between the distributor and theater. This model is where the split is 90% or more to the distributor in the first week of the film. I don’t know the actual contractual language, but there are clauses that prevent the theatre from setting the ticket price so low that the theater never shows a profit. Mostly, I think that a part of the operating expense is the cost of the rental, so the theater owner has to make back the rental cost before any profits are shared. Again, if you are pricing tickets a $1 per head, then it is pretty hard to make up the rental agreement.
All of this changes based on the expect popularity of the movie, how exclusive the agreement is and the market size and other factors.
Not really that complex, but the theaters need to sell concessions and advertising in order to make money. BTW, trailers are a form of advertising and theaters get paid for showing them.
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I also maintain that it's the theaters that get themselves into such lopsided contracts. If they were to band together and demand more equitable terms, they'd be a lot better off.
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The problem here is how the free market works. Most films are only distributed in one area by one distributor. Even though there is more than one distributor for any area, it is pretty hard to work them against each other. For example, suppose that Distributor ‘A’ has the rights to distribute one studio’s movies (the major studios have their own distribution companies, at least in the States). If all of the theaters in Dallas (for example) won’t pay the prices set by that company, then the chances are that they might lower their prices. But if only one place (Lowe’s for instance) decides to pay the price, they essentially get the movies on an exclusive basis and stand to make more money, while the other theaters and chains don’t have that product.
On the other hand, the big chains have a lot of leverage in dealing with distributors, so it may all even out.
EDIT: Jason supplied some information that I had forgotten while I was typing. Here we have had a theater or two showing mostly independent movies that sell books of tickets, so you can go to evening performances at matinee prices.
Of course the theater gets to use your money up front.
EDIT: To correct the theater/distribution company profit sharing. The theater gets almost nothing, after getting to deduct their expenses.
