How Movie Theaters Work

Last week I went to go see The Dark Knight. As if the eleven dollar ticket fee wasn't bad enough, the concession stand made my stomach drop. Six dollars for popcorn? Five dollars for a soda? While taking out a loan or making a pre-theater pawn shop run may seem like the only way to get past those high prices "“ the strange truth is that those pricey snacks are the only reason there are still movies to experience. Here's why:

In the days of yore, the studio and the theater were one in the same. But in 1948, the Supreme Court forced studios to divest themselves of the theaters due to antitrust laws. (Paramount dominated the theaters in all but 4 of the existing 92 US cities with a population over 100,000.) However sixty years later, though in a different way, studios still control the theaters. Studios run an exorbitant bill, sparing little on actors, locations, post production etc. When it comes time to get a return on their investment, they turn to ticket sales.

See, studios need companies to distribute the films to theaters, and then later to DVD or television. The distributor takes on the cost of making the copies of the film and decides how many prints to make. They also decide which theaters those prints will be distributed to. This is often done through a profit sharing scheme, where the distributor gets between 10 and 50% of revenues. In the case of The Dark Knight, Warner Bros used its own domestic distribution.

The Breakdown

The distributor leases out the movie to theaters that promise to return a percentage of ticket sales. This percentage of this profit sharing scheme changes over the life of the lease. In the first two weeks, the theaters get between 0 and 25% of ticket prices and they fork over the rest to the distributor. The next couple, they get more: about 50%. The last few weeks they get about 75% of the movie ticket sales. But who goes to see a movie four weeks after its release? This leaves the theatres with no option but to raise ticket prices and charge as much as they possibly can get away with at the concession stand.

However, it's not all about the popcorn. Theatres also make money the same way magazines, radio stations, and websites do: by selling ads. The local advertising that shows before the movie begins generates a good percentage of revenue for the theater. As for the previews, the studios give trailers to theaters, and pay for each showing based on the number of people who saw them. Per a theater owner in Long Island, "we have to call in our numbers every night to the film companies, and they give you 'x-amount' per person."

So that's the story. As tough as it is to accept, I wouldn't have been able to enjoy The Dark Knight if it weren't for the expensive concessions I begrudgingly passed by on my way to theatre 10 and all the horrendous previews I endured before my eleven dollar movie finally started.