Gayathri Shankar
Mr. Reuter
Economics
14 October 2014
Movie Theater Concessions - Justifiable or Not?
Whether it’s with friends or family, movie theaters are undeniably, one of the most popular areas for entertainment. Movie theaters have three main sources of profit, and they include, the movies themselves, the pre-movie advertisements, and most important, the concessions. How many times have we all gone to the movies and just spend money on the ticket? Exactly. We’ve almost always bought popcorn, nachos, candy, or soda, and the fact is, concessions are basically an inevitable purchase. I know for a fact my brother’s main intentions at the movies is to scarf down an entire bucket of buttery popcorn, solely for the pleasure of it. Just thinking about the outrageous amount of money we spend on movie theater popcorn is alarming, but movie theaters thrive off of their concessions. So the question is, for us as consumers, is it justifiable or not?
First of all, let’s take a look at the statistics involved in movie theater concessions. Movie exhibition houses rely on their concession sales to keep their business successful. The bucket of popcorn we pay $5 for or more only costs the theater about 50 cents, and the $4 bottle of soda only costs them 10 cents, as an approximate. Is it possible to restrict ourselves to just that one bucket of popcorn? Not quite, as the saltier the popcorn is, the more you’ll need a giant soda to quench your thirst. Not only are these concessions harmful to our wallets, but also to our bodies. A large bucket of popcorn contains approximately 1,030 calories, a negative externality worth considering. In this case, the marginal benefit would not outweigh the marginal cost, as buying more and more would just become unhealthier and unhealthier. When a theater manager was asked about how he felt about their business, he replied, “we’re not in the movie theater business... we’re in the candy and popcorn business.” Andrew Smith, from the University of South Carolina Press, states, “In the 1930s, the best comment was, ‘find a good place to sell popcorn and build a movie theater there.’” Smith also states that, “the reason for a 15 cent bag of popcorn costing you $5 and an 8 cent cup of Coke is costing you an additional $4, it’s because the economy system is so weak that the concession stand is where theaters make most of their money, rather than from their ticket sales.”
It is known for a fact, that without the overpriced concessions, the theater doors would close for good, and there would no longer be a main house of entertainment for the public. The demand for concessions, especially popcorn, is so high that if it happened to be scarce, our hometowns would no longer house a theater. “The argument that pricing secondary goods, in this case, the concessions, higher than primary goods, the movie tickets, can benefit consumers has been circulating for decades,” says Wesley Hartmann of Stanford Business. The truth is, if you want to bring more consumers into the market, you need to keep ticket prices lower to attract them. “Theaters widely make up the margin by transferring it to the person willing to buy the popcorn bucket, the nachos, the candy, the soda.” The opportunity cost of large buttery popcorn would be possibly purchasing another movie ticket for continued entertainment. People who come to the movies in groups also tend to buy more popcorn, soda, and candy; these will most likely be teenagers and families. If that turns out to be the case, “theaters will want to run more family or adolescent oriented movies to attract a more concession buying crowd,” Hartmann also says. On the other hand, there are definitely possibilities that may damage the market and business as well. If people happen to stop buying concessions, theaters will have to increase ticket prices to keep up the profits. This will result in a decrease in daily attendee population, leading companies to fail in making profits. The repercussions of all this? The closing down of the theater. However, if theaters decide to stop selling concessions, ticket prices will again need to be raised, reducing the number of people that decide to go to the movies, which will undoubtedly generate a lower income for the theater company. This will result in people losing jobs, a plummeting employment rate, and automatically, the economy as a whole is affected.
Ultimately, would there really be any successful movie theater without popcorn? It’s almost as if the whole experience is incomplete without enjoying the pleasure of snacks. People accept the movie ticket price and look past the concession prices, justifying it as “necessary” for complete enjoyment. Compare it to Starbucks, many of us consume this overpriced coffee day by day just for the enjoyment of it. I can definitely attest to the fact that the concession stand is almost unavoidable and that I seem to always purchase a packet of candy or a soda. This goes to show that it is so simple to shell out money on snacks that I could easily avoid. So next time you venture off to the theaters, ask yourself, can I really justify spending this much money on a bucket of popcorn -- or snacks in general?
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I have always wondered why the concession prices are insane in movie theatres. In order to attract buyers ticket prices are what will attract them because this is the essential thing in order to even go to a movie. Everything else is extra, however you will most likely get hungry or thirsty so why not make so more profit by increasing the prices dramatically?
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ReplyDeleteWow, Gayathri, you make really great points with your essay. I have to be honest and say though, like a lot of people who go the the movie theatre, I sneak my snacks in the theatre via an extra large oversized purse. Lots of time though, it is not because I am being cheap, but because movie theatre popcorn is nasty, makes my stomach hurt, and is not yummy. The popcorn is a classic movie snack, and I’m wondering if people feel the need to buy it, not because they want it, but just because they are at the theatre and the thing to get at the theatre is popcorn. If concessions started offering more nutritious and delicious snacks, I would probably spend a lot more money at the theatre. I don’t think that the theatre can benefit from raising ticket prices any more than 10 dollars on a Friday night though... because if I’m willing to pay 10 dollars to see the movie, I’m probably willing to wait a few months until it comes out on Blu-Ray and then I can own it (hence the theatre would lose profit). This is a really interesting post though, it made me think about just how theatres make profit with their advertising techniques.
I really liked your topic, because it is very applicable and often something that really bugs me. I rarely go to the movie theater because of its extreme prices unless it is the glorious $5 Tuesdays.Other than that the fact that it is far cheaper to rent a movie and just make your own goodies keeps me away from theaters. So maybe it's this fact that also keeps prices so high. However, if they did decide to lower the prices of tickets and concessions would people then be able to go more to the movies and then they would be able to maximize more of their profit, or would it just not change anything at all? For example on Tuesdays, Marcus is usually packed so could they do that another time during the week and make more and therefore lower some of their ridiculous prices for standard commodities? Because there is no natural competition inside movie theaters I greatly disprove of this price gauging.
ReplyDeleteI believe the current movie theater concession prices are justifiable, as they are an essential part of the movie industry's economy. It goes without any doubt that the movie theaters wouldn't be where they are today without these prices. The demand is great for popcorn at the movie theater, because we cannot bring our own food in. This is one thing I don't support too much. I can't argue however that soda and popcorn just tastes that much better in front of the big screen. I'm fine with current concession stand prices, they've never really hurt me, but if they continue to grow, we'll have a problem.
ReplyDeleteI agree that the concession stand prices at the movie theater are insane, and yet I too can never seem to avoid the concession stand. I don't want to be the guy that goes to the concession stand with a group of friends and then stands there awkwardly when I'm the only person who doesn't get anything. Also, I can't carry in snacks that don't take up the majority of my income because I do not carry an over sized purse like Abby does. I understand that movie theaters make their profit off of snacks, but do the prices really need to be that high? Movie theaters could easily lower the prices and still make a profit off of their company. This is an issue that really annoys me, but I still go to the movies, and I still buy food. Why? That's a very good question.
ReplyDeleteI never would have thought that theatres could be losing money in ticket sales because of their prices being cheap. I always thought that the prices for movie tickets were insanely expensive, sometimes I pay more at the movie theatre to see the movie once than I might to just go to Walmart a month later and pick it up on DVD so I can watch it whenever I want. Also, I think another factor playing into all this would be the people that sneak food into the theatre so that they don’t have to pay the high concession prices. Do those people really damage the profits of the theatre that much? It would be nice to know how much your typical movie theatre makes in concession profits and how much they lose in ticket sales to support your claim that these high prices are justifiable.
ReplyDeleteUnfortunately, I agree, movie theater concessions are infinitely overpriced. Their profit margins are insane, in some cases upwards of 400%. The problem is, as you said, the bulk of their money comes from these concessions. Its a tough debate deciding if these prices are unfair. Its understandable, the theater needs to make money, but I seriously don’t think that charging their current prices is justifiable. There are other ways they can make money. For instance, charging more for a better view--Something many theaters already do. Personally I think they should find a way to lower the prices, but I doubt that will happen anytime soon. Overall though, great post, it was very interesting and you had a strong vocabulary.
ReplyDeleteGayathri, you make some really good points! Although I love going to the movies, I rarely do so because it's so much money. Me and five friends could all watch a Redbox movie together for under two dollars, so it's hard to justify us going to a movie theater and spending 60 dollars just on the tickets! However, occasionally I treat myself to the overpriced movies at the theater because of the whole experience. Besides, no matter how much of a rip off it is- you can't get that same delicious popcorn anywhere else!
ReplyDeleteIt is not impossible to suggest that movie theaters would go out of business if they did not supply compliments such as popcorn. The companies that own the movie theaters are actually considered farming businesses under some circumstances and with that, they can have employees working long shifts. These compliments are overpriced but the prices are justifiable because of the mass amounts they make, its practically more of a food business than a movie business.
ReplyDeleteMovie theaters in general are overpriced, $10 to watch a movie plus the popcorn, sodas and candy, it’s insane. My family only goes to the theater once in awhile due to the extremely high prices but sometimes it’s worth the price, watching a movie you’ve been waiting ages to see come to life on the big Ultrascreen with buttery theater popcorn is part of the theater experience. People still buy tickets and concessions everyday because it’s the experience that they are paying for, not the food or the movie individually. Theaters are able to charge however much they want to on food and tickets because they know people will still but them in order to have the special experience of going to the movies.
ReplyDeleteI completely agree with your opinion that the price of concessions is outrageously high. Not only are the majority of the food options extremely unhealthy, but a bank breaker as well. While I understand that companies need to make profit by selling items for more than they pay for it, why does it have to be this expensive? Movies themselves are not cheap either, $10 for an hour and a half of film is hardly worth it in my opinion. I personally wait until these movies are out on Redbox so I can rent them for a fraction of the cost, watch them in the comfort of my home, and choose my own snacks without spending a fortune. This was a good topic choice and well written, nice job.
ReplyDeleteUsually when I go to the movie’s I have to have either pretzel bites or popcorn, yeah its expensive, but it also tastes good. Although I do try to limit my spendings in order to save money, but usually I end of up spending around $20 on food and a ticket. There are very few people who have never been tempted into getting food from the movie theatre, so who ever initially thought of this whole concessions thing was smart. It is not very often that I don’t make a stop at the concession stands, off from my own observations these movie theatres wouldn’t survive without this delicious thing called the concessions.
ReplyDeleteThank you for incorporating the health aspect to movie theater food to your post. It is an externality that definitely would not come to my attention at first, but it for sure has an impact on the marginal benefit and cost. It makes so much more sense that theaters make money off their concessions rather than off of their ticket sales as ticket sales are about fair. I like how you turned your post into a mini marketing lesson ;) . It is interesting to see that getting consumers “roped in” (so to speak) requires a low primary product price so that it can have a high secondary product/ compliment price. Personally, I don’t pay for the candy and popcorn at movies, and will, instead, bring my own snacks. However, I wouldn’t want to drive super far and spend a ton of money on gas in order to get to the closest movie theater. Right now I think of it as someone else’s job to keep the theaters open through the purchases of snacks.
ReplyDeleteI will have to say that I am one of those people who will sneak snacks into the movie theater. Why? Because I don’t want to pay a ridiculous amount of money for popcorn. But I only do it when I am going by myself, when I am with a friend we share the cost. Like Ross said I understand that theaters make profit off of the snacks but do they really need to be that high? Even so my friends and I still go to the theaters and buy their food more times than I would like to say.
ReplyDeleteMovie theaters today are totally overpriced! Thankfully there are movie tuesdays! You did make a very interesting point that theaters rely more on their concession stands than actually selling tickets. Then why are their prices so high? If it only costs them 50 cents to make a bucket of popcorn, why are they charging consumers $5? Wouldn't they make enough profits to charge us $4? Or $3? I do think spending so much money at the movie theater is unjustifiable. But that won't stop me from doing it!
ReplyDeleteWow, I never looked at concessions that way. However, if the theater "business" is subsisting on snacks alone it is time for a serious reevaluation of the whole model. When looked at under the scope of both explicit and implicit costs, we would probably see that most movie theaters are in the negatives.
ReplyDeleteHiya Gayathri,
ReplyDeleteThis is interesting because it also brings up the idea of bringing your own food into the movie. Why would I spend $30 getting food with a friend if I could just grab some sodas and Taco Bell and jam them under my jacket for less then $10? I've never seen anyone in a theater called out for popping open a soda can really loud in front of the employees in the theater, so if you can plan ahead, it seems like a silly waste of money to go dumping all your money into theater concessions as opposed to using the extra saved money to go see a second film instead.
Although the cost of production may seem low for a box of candy or a bucket of popcorn, it probably doesn’t represent the total cost. The theatre must pay fixed costs, like taxes and insurance, in the short-run, and these costs are assessed on a per unit basis. Also, the people who work at the concession stand must be paid on an hourly basis, so the costs associated with payroll must be added onto the cost of production. So far, these are all explicit costs, but there may be implicit costs associated with the sacrifices made to produce the popcorn and the entrepreneurial talent of the managers.
ReplyDeleteThis is a topic that seems to be talk about a lot. That being said, there are some points to your argument that some would say are justifiable and others that are not. When a movie theater sells you your tickets a large portion of that goes to the Box office for the people who starred in it and also those who produced it. Now in order for the movie theater to play these movies they take a huge hit if they do not get a large profit from things other than tickets. Thus, the popcorn and concession stands profit sky rockets due to the theaters lack of profit from the tickets themselves.
ReplyDeleteGayathri, I really enjoyed reading this post. I am most certainly, a movie enthusiast. I have seen many movies, but I actually can’t remember the last time I purchased a snack from the concessions. In my opinion, the marginal cost of buying even one bucket of popcorn exceeds the marginal benefit of enjoying this traditional theater snack. For me, as well as many other teenagers nationwide, the price of the movie ticket alone is a little steep.
ReplyDeleteI found this post very interesting. I love movies, so I am a frequent visitor to my local movie theater. Every time I visit, I have to buy a popcorn! And every time I purchase a bag, I am shocked by the prices. The drink prices are even worse; I have started putting a water bottle in my purse to avoid the $5 bottles offered at the theater! I completely agree with the statement that movie theaters are in the concessions business, not the movie theater business.
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