Going to the movies used to be considered cheap entertainment. But these days theaters want you to show them the money. Ticket prices keep going up and so does the cost of the popcorn and soda we’ve been paying through the nose for since before Harry met Sally.
Faced with competition from DVDs and movies on demand, theater owners are producing new ways to lure you to the cinema and get you to spend even more cash on pricey martinis and pizzas, valet parking and other add-ons that make an expensive outing even costlier.
THE MONEY PIT. Movie ticket prices continue to rise, despite the challenge from stay-at-home movie options. The average ticket price in 2006, according to National Association of Theatre Owners (NATO), was $6.55, up from $6.41 in 2005, but that figure includes matinee, senior and kids’ tickets (the average price in 2002 was $5.80). NATO’s average 2006 ticket price also excludes tack-on charges for screenings/seating beyond the norm (more on that later). An adult, nonmatinee ticket now can run between $9.50 and $10.50.
Nobody tracks concession prices, but those costs keep creeping up, too. Several of the big chains declined to give us comparative figures, but the Boston Globe reported in 2007 that based on the paper’s survey of Boston-area theaters, the price of a 46-ounce popcorn—a small size at many establishments—had shot up at most theaters by a third.
Because theaters split ticket sales with the film distributors—who take as much as 90 percent of the revenues the first week or two a movie is shown then a lesser cut the longer the film runs—they increasingly depend on the profits from concessions. According to John Fithian, president of NATO, concessions account for an average 20 percent of a theater’s revenues but more than 40 percent of its profits. He contends that without concessions profits, ticket prices would be even higher.
“That’s where you make your money,” agrees Allen Michaan, owner of the four-screen Grand Lake Theatre in Oakland, Calif. But he’s forgoing some of that profit. Michaan gives away popcorn Monday through Thursday to draw customers to his stand-alone theater, which is struggling to compete with multiple-screen multiplexes.
On weekends, however, the Grand Lake charges $3.75 for a 32-ounce popcorn that Michaan says costs him about 75 cents for the popcorn, the container and the butter. The Grand Lake charges $3.25 for a 16-ounce Coke that also costs the theater about 75 cents for the syrup, cup, lid and straw. Candy profits are less but still notable. The theater pays 80 cents for a 3.27-ounce bag of M&Ms that it sells for $2.75. The profit margin on concessions at the big chains is even greater, because they buy in bigger bulk.
Prices vary depending on the market and region. At its Boston-area theaters, for example, National Amusements, a 1,500-screen chain primarily in the northeast, sells a small soda for $3.50 and a small popcorn for $4. The Northgate in San Rafael, Calif., owned by the big Cinemark chain, gets $3.50 for a small soda and $3.75 for a small popcorn.
“The price of popcorn and soda is exorbitant,” says food-service expert Dennis Lombardi of WD Partners, which helps develop restaurants. The mark-ups are unlikely to change, because theaters hold the advantage. “It’s a captive market,” Lombardi points out.
GREAT EXPECTATIONS. So, you’re paying a little more to go to the movies, but you’re still sitting near annoying kids. What did you expect? A quiet, nuisance-free movie? Well, you can have that—for an additional two or three bucks.
Several movie chains have created VIP sections, as well as entire auditoriums, to bring business from adult movie-goers back to theaters. A few such upscale theaters opened in the 1980s, but in the past couple of years, cinema companies built dozens of them. We spoke to five movie-theater executives, or their spokespeople, who told us that their high-end theaters—where patrons pay more for reserved seats, the option to be served food and drink at their seats, and other add-ons—were doing good business, and they plan to build more.