Ever wondered why the food is so expensive at a movie theatre??Read to know why
I have a friend that manages a movie theater. He says he manages an “air conditioned popcorn and soda parlor that plays movies in the background."
There are a couple things at play, here.
First, prices are set to what the market will bear or what competition demands. Once a customer enters the doors of a movie theater, they are in a monopoly market. There is no competition and the audience is captive. The prices will then, of course, be higher than the same products in an environment in which multiple businesses are competing for customer dollars.
But, that natural process aside, movie theaters charge higher prices because they have to, to provide their services and profit.
When we pay our $10-$15 for our ticket and sit down in a packed theater with about 400 other people, it’s easy to imagine that the theater is making a killing. But the theater doesn’t keep all of that money. Movie theaters, distributors, and studios make a variety of deals with each other, so there isn’t one single set of numbers to use. On average, for the first few weeks that a movie is playing in a theater, 70% of the revenue will go to the distributor/studio and 30% will be kept by the movie theater. After those few weeks are over, the numbers will change, possibly switching to the reverse, where the theater keeps 70% and the distributor/studio keeps 30%. The problem, for the theaters, is that by the time they can actually start keeping most of the money, the audience has dramatically shrunken in size. Here’s a graph showing the numbers for a very successful film (Guardians of the Galaxy).
In its opening week, Guardians of the Galaxy brought in almost $33,000 per screen for the week. Using the above numbers (Marvel’s explicit arrangements with theaters aren’t public), the studio took $23,057.30 and the theater took $9,881.70. That means that for running the movie on a big screen, probably five times a day, for a week, the cinema got to keep less than $10,000. Obviously, most movies don’t make as much money as Guardians of the Galaxy, and most movies aren’t in their first week. In week twelve, the theater got to keep $1,124.50 for a week’s worth of showing that film on a single screen.
So, theaters clearly aren’t making a killing from movie tickets. They are also expensive facilities to run. They have vast air conditioning bills. They have to be cleaned. There are constant technology advances like digital projection, 3D, IMAX, and surround sound that require huge investment. The buildings themselves take up a lot of space, often in high-demand areas, meaning high rent.
Raising tickets prices often isn’t the best solution. If they raise ticket prices, they might lose customers before they enter the doors and become a captive audience. They also have competitors that might not raise their ticket prices. Plus, 70% of the ticket increase will go to the studios, in the prime weeks.
Movie theaters have an 85% profit margin on concessions, but the total average profit margin for a theater is just 4.3% That shows that high concession profits are essential for a theater’s survival.
Social media links:
Like us on Facebook: TechTalks.
For Amazon Loot deals join the whatsapp broadcast text sub on 9820438588.
There are a couple things at play, here.
First, prices are set to what the market will bear or what competition demands. Once a customer enters the doors of a movie theater, they are in a monopoly market. There is no competition and the audience is captive. The prices will then, of course, be higher than the same products in an environment in which multiple businesses are competing for customer dollars.
But, that natural process aside, movie theaters charge higher prices because they have to, to provide their services and profit.
When we pay our $10-$15 for our ticket and sit down in a packed theater with about 400 other people, it’s easy to imagine that the theater is making a killing. But the theater doesn’t keep all of that money. Movie theaters, distributors, and studios make a variety of deals with each other, so there isn’t one single set of numbers to use. On average, for the first few weeks that a movie is playing in a theater, 70% of the revenue will go to the distributor/studio and 30% will be kept by the movie theater. After those few weeks are over, the numbers will change, possibly switching to the reverse, where the theater keeps 70% and the distributor/studio keeps 30%. The problem, for the theaters, is that by the time they can actually start keeping most of the money, the audience has dramatically shrunken in size. Here’s a graph showing the numbers for a very successful film (Guardians of the Galaxy).
In its opening week, Guardians of the Galaxy brought in almost $33,000 per screen for the week. Using the above numbers (Marvel’s explicit arrangements with theaters aren’t public), the studio took $23,057.30 and the theater took $9,881.70. That means that for running the movie on a big screen, probably five times a day, for a week, the cinema got to keep less than $10,000. Obviously, most movies don’t make as much money as Guardians of the Galaxy, and most movies aren’t in their first week. In week twelve, the theater got to keep $1,124.50 for a week’s worth of showing that film on a single screen.
So, theaters clearly aren’t making a killing from movie tickets. They are also expensive facilities to run. They have vast air conditioning bills. They have to be cleaned. There are constant technology advances like digital projection, 3D, IMAX, and surround sound that require huge investment. The buildings themselves take up a lot of space, often in high-demand areas, meaning high rent.
Raising tickets prices often isn’t the best solution. If they raise ticket prices, they might lose customers before they enter the doors and become a captive audience. They also have competitors that might not raise their ticket prices. Plus, 70% of the ticket increase will go to the studios, in the prime weeks.
Movie theaters have an 85% profit margin on concessions, but the total average profit margin for a theater is just 4.3% That shows that high concession profits are essential for a theater’s survival.
Social media links:
Like us on Facebook: TechTalks.
For Amazon Loot deals join the whatsapp broadcast text sub on 9820438588.
Comments
Post a Comment