Why Movie Theaters Charge So Much for Tickets and Snacks

A Lawsuit
Had you heard about the man who is bringing a class-action lawsuit to the AMC movie theater chain because of the price of snacks?

Yep... one Joshua Thompson is suing his local theater in Wayne County, Michigan because he had to pay $8 for a Coke and Goobers.  He says that what he paid is three times too high for what he can get in a local store and he is also begrudging the fact that the movie theater won't let him bring in outside food.

I get where he's coming from but I think Mr. Thompson needs to understand a few things.

First up, I hear ya Josh!  Last week a small popcorn and small root beer cost me $10.  That's for small.  On one hand I'm thinking gads that's pricey.  On the other hand, I see it as portion control and now that's 5 less miles I had to run that day.

But that $10 was on top of my movie ticket price, and whether I saw the same product in 2D, Extreme Digital or 3D... where each label has an additional price tag added to the price of admission.  But then, if you back up and ask why it is you're paying airport prices at a movie theater, all you have to do is look at how the movie theater makes its money.

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When A Theater Plays A Movie

When a movie theater shows a new movie that comes out, there's quite the balancing act that the theater chain actually has to pull off to make their piece of the profit pie.  The industry does manage to create about $12 billion in revenue, but it's a hard fought battle.

Movie theater chains have to pay the studios twice to screen a movie.

First up, a theater has to pay a license fee to show a movie.  This rate varies, depending on competition.  For example... if there was a movie theater in Middleton, Idaho, it would have no competition and could probably have the upper hand in negotiating a licensing fee per movie.  But in the big city, when there are other theaters within the magical 15-mile demographic radius, the competition makes it tougher to ring a good deal out of studios.

But the game isn't over yet despite the fact that the movie chain just paid for that licensing contract.

Now they have to negotiate the percentage of ticket prices sales that go to the studios.  And this percentage is a sliding scale, depending on when, in a run, a movie is in. fees they pay for showing a movie and how much they can try keeping from a movie's run.

One type of arrangement, which I believe is the more common fee arrangement, is called a sliding scale fee.  What this means, as an example, is that early on in a movie screening at your local theater, the studios negotiate to keep up to or around 70% of the ticket price for the first few weeks and that percentage changes as the weeks go on.  Meaning that the movie theater will start keeping more of the ticket sale price as time evolves.

But then sometimes the studios, knowing they have a hi-demand product coming out, will change the terms.  Sometimes its been noted that they take in 100% of the ticket prices in the first week or two of a movies' screenings.

Then when you're paying $10 for .25 cents of popcorn and .25 cents worth of soda, it makes sense that this is how the movie theater business actually manages to stay afloat.

But as quote in one source article says,

" We're not in the movie business… we're in the candy business."

Because of this understanding, I don't begrudge the movie theaters as much as I used to

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No Excuses & Alternate Planning

I'm not making excuses for the movie theater chains about the cost of seeing a movie.  They did wrangle their piece of the pie  ($12 billion) out of us.  I'm just presenting some basic statistics so it makes a little bit more sense.

Of course the consumer advocate in me says after the movie go hit up that pizza joint that has tactically located itself just outside the movie theater.  (In my case, that's Pizza My Heart!)  That makes the event more than just a two-hour event, but rather a longer time to hang out with family or friends and a great environment to chat about the movie you just saw!

Think about it...  two hours in the theater, then for probably less than what you would pay for popcorn and soda for one person, you can get a large pizza that feeds two, three or four folks.

Just sayin'.

But the magic of the movie experience, as we've been told (marketed to) through the years, is that soda and popcorn are what make the movie experience that much more fun... even if it's all gone before the movie starts.

Now... if my seat neighbor would just turn off his cell phone, then maybe, I won't have to ...  well, that's for another piece!

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delish: man-sues-movie-theater-chain

hoovers: movie industry overview

themovieblog: economics-of-the-movie-theater

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