Speaker 1: Walt Disney Studios has some pretty steep demands for movie theaters,
Speaker 1: wanting to show Star Wars The Last Jedi. How does
Speaker 1: movie theater economics work? I'm Jonathan Strickland, and this is
Speaker 1: text up daily. When it comes to accounting, very few
Speaker 1: businesses are as opaque as the entertainment industry. You've probably
Speaker 1: heard tales of blockbuster films packing in a seemingly endless
Speaker 1: series of sold out houses only to show a financial
Speaker 1: loss on paper. Things are slightly less mysterious on the
Speaker 1: movie theater side of the equation, but it's still a
Speaker 1: tiny bit confusing. The mouse House is about to put
Speaker 1: the squeeze on movie theaters, perhaps even removing the incentive
Speaker 1: for smaller theaters from even carrying the next Star Wars film. First,
Speaker 1: Disney is demanding a sixty five percent cut of ticket sales.
Speaker 1: This is pretty high. The average split between movie studios
Speaker 1: and theaters tends to be between forty to according to
Speaker 1: the Wall Street Journal. Really big hits, ones that are
Speaker 1: most likely to pull in lots of crowds, may tip
Speaker 1: the scales at six share for the studio. Disney wants
Speaker 1: a bigger slice of the pie in return for granting
Speaker 1: theaters the honor of showing the last Jedi. But that's
Speaker 1: just the start of Disney's demands. The studio also wants
Speaker 1: theaters to promise to show the next Star Wars movie
Speaker 1: in the largest auditorium spaces for at least four weeks.
Speaker 1: So if your local movie megaplex has an auditorium that's
Speaker 1: larger than the others, that's where Star Wars will live
Speaker 1: for a month. If a theater doesn't play ball, that's
Speaker 1: take of the ticket sales jumps up to seven d percent.
Speaker 1: There are other requirements to go along with these, including
Speaker 1: Disney's demand that all marketing materials for the film must
Speaker 1: be held back until Disney gives the all clear. You
Speaker 1: could say that the studio is trying to control the
Speaker 1: experience as much as possible to make it ideal for
Speaker 1: the audience, but it's definitely being some theaters the wrong way.
Speaker 1: It's particularly tough on smaller movie houses and less populated markets.
Speaker 1: A four week obligation to show the same film in
Speaker 1: the largest house could lead to lost revenues for a
Speaker 1: small theater that only has a few screens. That could
Speaker 1: prompt some theaters to skip Star Wars completely. And the
Speaker 1: Star Wars. Fans who live in those areas may find
Speaker 1: that they have to travel far, far away to catch
Speaker 1: the flick. So this leads us to a question, what
Speaker 1: are the economics of running a movie theater? How do
Speaker 1: theaters make money these days? There are three main sources
Speaker 1: of revenue for movie theaters. One is ticket sales. You
Speaker 1: may have heard that ticket prices outpace inflation. According to
Speaker 1: box office Mojo's figures, that's not always the case. It
Speaker 1: sometimes is. There are stretches during which the ticket prices
Speaker 1: have surged ahead of inflation, But sometimes buying a movie
Speaker 1: ticket is a comparative bargain, taking inflation into account. At
Speaker 1: any rate back in a ticket to the Moving Pictures
Speaker 1: would set you back a single shiny quarter in today's money,
Speaker 1: that's about three dollars fifty seven cents. So if you
Speaker 1: wanted to see The Seahawk during its initial run, it
Speaker 1: would set you back less than four bucks. But let's
Speaker 1: take a big leap to nineteen sixty seven, when a
Speaker 1: movie ticket cost a dollar twenty. Adjusting that for inflation,
Speaker 1: it would cost you about nine dollars today in some markets,
Speaker 1: that's still a bargain. Here in Atlanta. An adult ticket
Speaker 1: to a first run movie I'm using for Ragnarok as
Speaker 1: the lynchpin here, it would set you back fifteen dollars
Speaker 1: forty cents. The average ticket price in the United States,
Speaker 1: according to the National Association of Theater Owners, is eight
Speaker 1: dollars in four cents, so in nineteen sixty seven, the
Speaker 1: average price for a ticket required more purchasing power than
Speaker 1: the average price in two thousand and seventeen, though both
Speaker 1: of those figures are almost half of what it would
Speaker 1: cost me to see a movie dag Nabbit. Movie theaters
Speaker 1: get to keep a percentage of those ticket sales, and
Speaker 1: the rest goes to the movie studios. So that's the
Speaker 1: first source of revenue for movie theaters. The next big
Speaker 1: source is one anyone who has gone to the movies
Speaker 1: is familiar with, concessions. It's no secret that theaters make
Speaker 1: incredible bank on selling cheap snacks for comparatively high prices.
Speaker 1: One estimate I saw set a theater makes nine cents
Speaker 1: for every dollar spent on popcorn, a n profit margin
Speaker 1: is pretty darned impressive. Soft drinks are another big source
Speaker 1: of revenue, though the actual figures aren't public information. Since
Speaker 1: big companies like Coca Cola strike deals with movie theater chains.
Speaker 1: You probably heard that theaters make more money on concessions
Speaker 1: than ticket sales. That's absolutely true. The third big source
Speaker 1: of revenue for movie theaters is advertising. This has caused
Speaker 1: some friction among the movie going public. Some people have
Speaker 1: even brought lawsuits against movie theater chains, arguing that the
Speaker 1: start times advertised for films don't indicate when a movie
Speaker 1: actually begins, but rather when commercials start advertising. Companies pay
Speaker 1: handsomely for that screen time. Having a captive audience staring
Speaker 1: at a big screen is worth a lot. We're talking
Speaker 1: maybe fifty dollars per year per theater for some of
Speaker 1: these deals. Make enough of those deals and that turns
Speaker 1: into some serious cash. That being said, movie theaters have
Speaker 1: overhead that eats into revenue. That includes paying utilities, taxes,
Speaker 1: fees on space, and employee salaries. If Disney's move is
Speaker 1: a sign of things to come, will that mean higher
Speaker 1: ticket prices? Not necessarily, but it might mean you'll see
Speaker 1: more ads in theaters, and that concession combo could set
Speaker 1: you back a bit more. There's no business like it,
Speaker 1: no business I know. That's all for today to learn
Speaker 1: more about movie tech, as well as all other technology topics.
Speaker 1: Tune into The Tech Stuff podcast. Each episode is a
Speaker 1: deep dive on a particular subject, including some of the
Speaker 1: most influential companies and people in tech today. I'll see
Speaker 1: you again soon