Good reason exists for movie theater concession prices

Tuesday, March 6th, 2012 By

Theater concession stand

Theater concession prices are something people love to hate, but there's a good reason they are so high. Image from Wikimedia Commons.

There are few things on earth that people whine about more than movie theater concession prices. There is little one can do about them, though, because without high concession prices, theaters wouldn’t be able to keep their doors open.

Blockbuster lawsuit

The story of a Michigan man sick of high theater concession prices has become national news. Joshua Thompson filed a lawsuit, according to MSNBC, against the AMC theater where he lives for charging $8 for a soft drink and a box of Goobers, a brand of chocolate-covered peanuts, three times what he would pay at a convenience store.

It may seem that he is bravely taking a stand against gouging by movie theaters. However, it may not do that much good. Few relish the thought of being charged $10 for a tub of popcorn, but theaters would not be able to stay open if they didn’t.

Spoke in the wheel

Movie theaters are a spoke in the wheel of the film industry; as a post on Wisegeek points out, film studios don’t even deal with theaters. To get a copy or “print” of a movie to show, theaters have to deal with a distributor. In other words, a theater has to pay to show a film before it sells the first ticket.

Hollywood still takes a portion once tickets are sold. According to the Wall Street Journal, 90 percent of ticket revenue from blockbuster movies goes straight to the studio on opening weekends and up to several weeks after release.

Tickets are the bigger portion of the bottom line. According to the Boston Globe, Regal Cinemas reported ticket revenues of $1.7 billion and concession revenues of $697 million, after spending $907 million for film rental and advertising and $105 million for concessions in 2007.

In other words, the chain’s profits were roughly a 60-40 split, but the costs of getting films to show was eight times that of concessions, so concessions are actually more profitable.

Keeps ticket prices lower

A study from Stanford University in 2009 found similarly that concessions were 20 percent of a theater’s revenue but up to 40 percent of the profits. That can vary, as concessions can represent up to 85 percent of some theater’s profits, according to the Wall Street Journal.

The Stanford study also found customers were more sensitive to ticket prices than concessions. In other words, if a ticket cost $15 but a tub of popcorn was $5, fewer people would go to movies because of high ticket prices. Ergo, high concession prices keep ticket prices low enough for people to buy them.

[No one would go at all if tickets required getting cash advance loans to buy]

Also, as CNN points out, the theater still has to pay employee wages and other costs after all that. Overpriced popcorn is one of the reasons why theaters can operate at all.

Sources

MSNBC

Wall Street Journal

Boston Globe

Wisegeek: http://www.wisegeek.com/why-do-snacks-cost-so-much-in-movie-theaters.htm

Stanford University: http://www.gsb.stanford.edu/news/research/hartmann.popcorn.html

CNN: http://money.cnn.com/2002/03/08/smbusiness/q_movies/

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