Wednesday, July 30, 2008

How much revenue do theater chains get from movies?


* image modified from Boeing website


A small debate has sparked off in one of my recent posts about Batman: The Dark Knight and movie theater chain revenue:

From two comments:

The split between the theaters and the studios is nowhere near 50%. It is always a back loaded deal for theaters. Its more like 80/20 for the first few weeks and gradually over the run of the film it can swap to the theaters advantage. That's why theaters don't want you bringing in outside food. They make most of their profits off of concessions. That's also why theaters love films like My Big Fat Greek Wedding. Something that builds slowly and is then a huge hit late in its run.


AND


I have a friend that owns a theatre. A few years ago someone stole a star wars film reel. I thought that was kinda fishy, films must weigh a ton, right? Well I asked my friend about it. He told me a few interesting things. First, star wars was on 6 reels. Each reel weighs as much as an average man. And, it costs so much to rent the films, that he makes no money from ticket sales. Profit is entirely concessions. It's not a small theatre, he owns a major theatre with 14 screens.


-------- FIX YOUR THINKING COMMENTARY --------


Its interesting that Star Wars is mentioned because Revenge Of The Sith is actually a good example of how movie theater chains are actually making more money.

Starting right around the time Star Wars Prequel Episode III came out; movies were being offered in 3 formats reels, hard drives, and satellite downloads.

The same theater where I get my 50/50 figure from is an independent theater with 4 screens that rotates 6 movies each night. They charge $9.50 per ticket. About a year ago, I spoke with this owner to see if he was interested in opening a theater up to show television shows (like LOST) in the theater and possibly open up a drive in theater. We discussed how much profit he makes per movie. I had always heard the "no profit off of the movie" line myself. He has been the owner of a large theater chain and now owns his own independent movie theater near me. He has worked for AMC and Regal.

He explained it like this:

Upon initial release, for the first 10 days of a movie, the box office is split 80/20 in favor of the studio. For the next 10 days, it is split 60/40 in favor of the studio. For the next 10 days, the split is 50/50. For the next 10 days and usually a films final week in theaters the split is 30/70 in favor of the theater.

If a movie makes it to almost 2 months in theaters the split goes to 20/80 (theater favor) for the remainder of the film's time at the theater.

For most films - this ends up being a 50/50 split over the entire run of the movie in theaters.

The theater then has the option to sell or rent the movie to another theater for up to 75% of the cost to obtain it from the distributor (like Warner Bros). Some theaters will rent the reel out to other theaters like discount movie houses - while others will keep a reel/movie (especially children's movies) to show for a Kids weekend. The same revenue split applies to the second theater with the distribution studio. (Independent movies make their own deals with discount or second run theaters.)

Furthermore, archive houses buy the reels/movies back to rent them out at a later date or to provide paid archive use for news/research/education use.

For the past year, movie cost to theaters have gone down dramatically because of the much lower cost it to get a movie.

Reels have also gone down in cost a small fraction as they have moved from developed print to digital print.

Most Regal Cinemas get movies in on BluRay, HD DVD, a pair of hard drives, or they download it from a secure satellite connection. Less and less films are coming on reels these days.

As for the concessions - yes they are a big profit margin, but they simply don't sell the volume of concessions that they use to, plus prices for concessions have gone up dramatically at a wholesale level.

Furthermore, theater chains make revenue based on the previews a movie has before it.

Also take into account theaters OTHER revenue streams like Fantom Live events (Miley Cyrus concerts, the MET opera performances) and classic movies (I've seen Poltergeist advertised for a horror weekend) Plus you have corporate meeting/presentation bookings.

These events are split somewhere around 25/75 in favor of the theater.

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