Even though Netflix won seemingly everyone with their service, have you ever wondered how movie theaters are generating profits at the same time?
Without having to go out, I don’t think I have ended up in a movie theater in the last 6 months. Physically going to the movies to see a film is much less practical than simply getting a couch and watching Netflix.
Despite Netflix, cinema theaters are still booming in the new decade. But how? With companies like Disney who squeeze the cinemas to obtain ever-increasing reductions of box office for their movies, the question of : how do movie theaters make money? is a legit question to ask.
The answer is if movie theaters really relied only on selling tickets at the box office, they would already be out of business.
Major Disney films such as the Avengers franchise and Marvel movies can cost money to movie theaters because of Disney’s huge discount on tickets, in addition to their unreasonable demands.
Disney imposes very big screens for its films, seasons of projection that are much longer as their movies are much popular, adding to that huge quantities of merchandise and advertising.
The projection of a movie like “The Avengers” is a financial gamble for theaters, but they would never risk not showing a film that so many customers want to see. This is why theaters need to rely on other sources of revenue to make money.
Making money from foods and drinks
TIME Magazine reported that up to 85% of the money at movie theaters is made by concession stands.
I can’t emphasize how little movie theaters pay for the snacks you buy before watching a film. Soft drinks such as Coke are bought in large quantities and shipped to the theater as syrup.
Movie theaters pay very low prices for the syrup. Once the syrup is added to the soda fountain by a member of staff, the machine will use water to dilute it simultaneously while carbonizing the drink at the same time.
That’s why fountain soda tastes so much more crisp than bottled, but that’s also why it is so cheap in a movie theater.
According to movies, it can cost just one dollar to buy a bottle of syrup. This bottle can be turned into dozens of drinks. After each drink is sold at prices that are usually over 10$, the cinema makes lots of money just from drinks.
The corn-pop machine also functions in the same way. It is sent to theaters in huge bags of corn that only cost a few cents. These grains are heated in a pressure cooker with a blown popcorn that fills a bucket with comparatively few grains. The benefits are huge for the price asked
Popcorn and soda are the most popular choices for clients while also maximizing profits for movie theaters. Some movie theaters offer packages, encouraging customers to buy items that theaters may likely sell. They will put snacks in regular-sized packages so they can be resold more easily. They also ensure that the stock is always moving.
Movies theaters are ready to try anything to make money. They can offer you food during the movie now. Some movie theaters sell food before or after the movie, which is great for moviegoers who want to spend less money on dinner beforehand.
Some cinemas now even project the smell of fresh popcorn by using vents and fans to encourage more purchases.
Advertising is a good source of revenue
Cinemas use advertising agencies to find ads to play before a film starts and share profits with them.
Advertising in cinemas is considered a core product and has been since the early development of cinemas. It can be stacked to generate additional revenues. For discerning cinema-goers, it should be fairly easy to tell when a cinema is going under by just looking how many ads they have to show before each movie.
It doesn’t include the movie previews that are commissioned by the studio that play before the film starts. These ones are played at theaters as part of their contract with the projector.
Movies ticket sales
Do movie theaters make money with ticket sales? Not that much. Playing a film at a movie theater is the least profitable method to generate revenue. Every film is dependent on the cinema for as long as has been discussed during negotiations for that contract.
Percentage of box-office revenue retained by the studio depends on the movie’s production company. The major Hollywood studios that control a majority of Hollywood (such as Disney) can ask for the majority or all of the money earned during the first or two weeks of a film’s release. Smaller studios can’t ask for this.
Unknown directors are at the mercy of movie theaters and are only left with a small percentage to keep for themselves.
The longer a movie theater agrees to show a film, the larger percentage of revenue it can negotiate with.
The studio will always make the highest percentage over the first two weeks of release. During the third and fourth week, cinema will start to do better. Each week after it means mostly benefits for the movie theater, even though the number of people interested in it will likely be lower.
The studios will negotiate the best deal for them, trying to find the balance which will generate as much revenue as possible, without forcing the cinema to refuse the film.
The projection of the film is often accompanied by channels that include product, marketing & screens. Manage a movie theater requires a lot of negotiations and bargaining, so this isn’t an excuse for faking it.
Ticket prices are calculated on a number of factors. The most common being the competition in the surrounding area, which will help determine what people are willing to pay at certain events. If there is a nearby cinema charging £7.50, it wouldn’t be wise to charge more unless you offer something exceptional
The average cinema ticket price is 9$, but the annual box office income is $480k.
In weekends, admission tickets attract a higher price. Monday nights are usually discounted. Promotions, such as 2for1 offer lower rates or free entry for a desired event, can be used to raise profits and get more visitors in the short-term.
A movie theater is finally just a snack shop that also shows movies. Making money is just a matter of convincing people that watching a movie without eating is unthinkable.
So.. which one do you want .. sweet or salty popcorn ?