movie theater's pricing

Discussion in 'Movies' started by dan fritzen, Jun 11, 2004.

  1. dan fritzen

    dan fritzen Second Unit

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    How does costing work for movie theaters and that translate into what we pay at the box office? I heard it was like 90% of ticket price is given to the studios the week, but do studios dictate the ticket price?
     
  2. Malcolm R

    Malcolm R Executive Producer

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    I don't think the studios dictate prices, but set up rental agreements on a per-film basis with the theater on based on a sliding percentage scale. Usually the studios get a higher return in the first couple weeks of a film's run, with the percentage becoming more equitable as the weeks pass.

    With films becoming more front-loaded, it has been to the detriment of the theaters since most of the money is made in the first couple weeks when most of the ticket $$ goes back to the studio. This is why you pay $8 for popcorn and $5 for soda. Theaters make the bulk of their profits from food sales.

    But they can't be hurting too much. Given how many new theaters have opened up around here in the past 5 years, there must still be good money to be made. 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.
     
  3. dan fritzen

    dan fritzen Second Unit

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    Interesting, I wonder why theaters don't charge a $1 for the ticket since that would leave more cash for consessions then.
     
  4. Jason Seaver

    Jason Seaver Lead Actor

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    You're working at a studio getting your movies booked in theaters. Do you book it at the theater that charges a buck, or the one ten miles away that charges $8.00?

    About a year or two ago, AMC tried to trot out a monthly pass program where you could pay $30/month for one movie a day. Paramount (and Warner, I think) yanked their movies from the theaters where this pilot program was being tried, even though AMC was allegedly paying them the equivelent of what they would get for an adult ticket, since they felt this violated their contract.
     
  5. Lew Crippen

    Lew Crippen Executive Producer

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    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.

    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.
     
  6. Malcolm R

    Malcolm R Executive Producer

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    Dollar theaters do exist. But your theory is probably why they only get second run films. They probably sign a lump-sum rental agreement as described by Lew, hoping to make up the balance in concessions.

    Not sure how successful these are, though, as the only discount theater in our area has recently switched to regular first-run films and raised admission prices accordingly.
     
  7. Lew Crippen

    Lew Crippen Executive Producer

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    The rentals for second-run (and later) movies is substantially different than first-run films. Plus the condition of most dollar theaters leads me to believe that they are not spending a lot of money on mountainous. [​IMG]
     
  8. Jason Harbaugh

    Jason Harbaugh Cinematographer

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    When Episode I was released, Lucas and company pissed off quite a few theatre owners because of the insane contract they wanted/made them sign. It was something like running the film for 8 solid weeks in the biggest auditorium and the % of ticket price didn't drop much during that entire run. So the studio got most of the ticket price even into the second month of showings.

    The thought was that Ep I would bring in sold out shows for that entire time. That wasn't the case though as by the 2nd month attendence dropped off and theatres that signed that contract were losing money because they weren't filling seats and the auditoriums were dedicated to Ep I already so new big pictures couldn't be shown on them.
     
  9. RichardK

    RichardK Second Unit

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    anyone know how i can judge the cost of a movie ticket against inflation rates? in texas i'm paying 7.50 to 8.50 for an adult ticket during primetime...i feel this amount is quite high considering the cost of living in texas... im not complaining per se because i know that prices are much steeper in other parts of the country... just wondering if the average joe can really afford to go to the movies these days? in the meantime i'll do a search on this topic as well...thanks RR
     
  10. Garrett Lundy

    Garrett Lundy Producer

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    How does it work with showing older films? What abou if I wanted to show Seven Samurai or Citizen Kane where the original film studios might not be around anymore?
     
  11. Lew Crippen

    Lew Crippen Executive Producer

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    Good question Richard—and I don’t have an answer.

    But I don’t think that movie prices are very high compared to other entertainment prices here in the DFW area. For example, to see any of the major sports is very expensive (except for the Ranger’s cheapest seats. Even then, you have to add the cost of parking (which can be split among how many people are attending—but it still costs money).

    SMU football is pretty cheap—but really they ought to pay you to attend—and again you have parking.

    The minor sports are not too expensive, if you like soccer or area football and the ilk.

    Even a cheap night out at a restaurant and club or bar is a lot more expensive than movie tickets.

    I do think that the cost of movies has gone up more than inflation, but I can’t prove it.
     
  12. Seth Paxton

    Seth Paxton Lead Actor

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    To put things in some historical perspective too...

    Before TV basically, the major studios (MGM, WB, Paramount, Fox) owned not only the distribution but also most of the large theaters. So at that time the deals were probably "the same" in that it was all going back to the main company, just that the theater was part of the company.

    Also, we actually live in a time when ticket prices are more stablized. When Cabiria played in the US around 1914 they were able to charge a full $1 for tickets instead of the normally much lower price. Then the next year Birth of a Nation was such a big hit that they were able to charge $2 a ticket.

    So in those days a movie ticket price varied according to the demand to see the film/the prestige of the film.


    In other words, theaters have rarely been in a strong position in the chain in the first place - many of the early studio heads actually moved from theater ownership into production, and there is a reason.

    And while prices seem high now, at least some films don't charge $15 while others charge $8 (barring night premiums, IMAX, and 2nd run theaters).

    I'm not sure what $2 in 1915 would be today, but I'd bet its at least $10.


    BTW, one reason the idea of "butts in the seat" doesn't work for measuring the "success" of a film is that it ignores things like the increased prices that people were willing to pay to see a hit film like BoaN, or even the various roadshows that went on for decades.

    The bottom line is not how many people you get into the theater (hey, give tickets away and set "records"), but rather how much money you can get out of the potential audience.
     
  13. Seth Paxton

    Seth Paxton Lead Actor

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    Someone owns the rights in most cases. Studios that go under get bought out, and catalog product rights are one of the things up for sale.
     
  14. Peter Apruzzese

    Peter Apruzzese Producer

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    Virtually all studios maintain a "classics" or "repertory" division for their older films. Terms are different from first-run. I deal with them every day, each studio is different.
     
  15. LanieParker

    LanieParker Supporting Actor

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    We enjoyed going to the drive in theater because we got to see 2 shows for the price of one, and the ticket price was $5 per person. They had a concession stand and the prices for popcorn and snacks were so low. I often wondered how they made enough money to stay openbut they did. They showed new releases too. We saw The Matrix and Ten Things I hate about you opening Night ( If I remember correctly).

    Theaters here usually run $7.75 - $8.75 for primetime and $5.75 for matinees. Food runs about $6 for the tub of popcorn and $5 for a large soda. Candy is around $4-5 a bag.

    I miss the mom and pop drive in experience. There are no drive ins where we live now. It's been a long time since I have seen the $1 theaters. I believe even the ones I use to frequent are now regular price theaters now.
     
  16. RyanAn

    RyanAn Screenwriter

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    At the theatre that I work at, about 90% of the revenue is sent back to the company, and the rest the theatre keeps.

    Ryan
     
  17. Carl Johnson

    Carl Johnson Cinematographer

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    I think there's a local dollar theater but I've never been there. Considering it typically takes less than six months for a movie to go from grand opening at your top of the line cineplex to DVD there's no reason to go to the dollar show.
     
  18. Jason Harbaugh

    Jason Harbaugh Cinematographer

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    A brand new theatre opened up near me over the Memorial day holiday so I went to check it out. I was shocked to find out that their matinee time ends at 2PM! After that it is $9. Despite all 16 screens being THX certified it was one of the worst theatres I've been too recently with only 2 decent sized screens and the rest dinky. They are the only ones I know of that have that early of a matinee cutoff. The other theatres are 6PM.
     
  19. Seth_L

    Seth_L Screenwriter

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    It's easy. Vote with your wallet... Don't go. I pretty much have stopped going to see movies in a theatre. It's a waste of money.

    Considering you can buy the DVD for the price of an adult ticket and a trip to the concession stands, I don't feel too bad buying DVDs sight unseen. I have a better viewing experience on my own system than I do in the theatre anyhow. Worst case if you end up with a bad movie on DVD you can always sell it for a few bucks and cut your losses some (try that in a theatre).
     
  20. Andrew Priest

    Andrew Priest Stunt Coordinator

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    One thing I find a little odd is, well, I'll explain.

    The local theater that I go to is in Castlegar, a city nearby, and it's a 5 screen multiplex. Anyway, they charge $7 for a ticket, $3 for a large pop and $4.50 for a large popcorn. This is Canadian, BTW. Now this is a small area so there just can't be that many people going to the movies. And they don't show nearly as many showings as a big city theater.

    Like the Silver City in the West Edmonton Mall. I've been there a few times, and they are more expensive to say the least. $14 for the ticket and a large pop will run you at least $5 or more. I remember they charge more or less normal prices for food, of which they offer quite a bit as in Baskin Robbins and Taco Bell, but way overprice the drink.

    What I wonder though is that since they both get the same movies at the same time, but the larger theater must see many times the volume in sales thus many times the revenue, why would it be so much more expensive? I'm sure there is an increase in overhead as well, but it seems like all theaters in larger areas, not just mall theaters, charge more. And once again the sheer increase in sales volume should compensate for the overhead.

    I suppose they charge what they can get away with. But I don't have to like it. It hurts when a night at the movie costs upwards of $40. At least I only go there when I'm visiting in Edmonton.
     

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