Movie Theaters: Why the Budget Breaker?
Jena Hicks
Anybody who has ever gone to a movie theater knows that whether you pay for a normal movie ticket, an Ultra-screen ticket, or one that offers premium seating, the real budget breaker and downside for most is in the concession prices. The majority of moviegoers opt for the “norm” choice of popcorn -- and this option, since 1999, has seen an increase in its average price by more than $3 and now has an estimated average price of at least $8.65 in relation to the price in 2016 (boxofficemojo.com). Despite this high price, consumers continue to purchase popcorn to go with their movie.
The question some are asking though: “Why do theaters make their concession stand prices so high?” When theaters sell tickets to their consumers, the majority of the money goes back to the movie producers. So, theaters receive very little profit from solely selling tickets and to compensate for the lost earnings, they increase their concession prices where they are able to collect the entirety of the profit and increase their revenue. According to Business Insider, of a theater’s total revenue, nearly 30% of it is brought in from selling their overpriced concession stand food and they continue selling it at these prices because they know that the movie-goers will continue to purchase it at the price because of demand. Theaters will sell their drinks and popcorn at an average of 11x the wholesale cost and gather 85% profit to receive the greatest benefit that they can (http://business.time.com).
In addition, movie theaters are able to bump up their prices and keep their buyers because within a theater, there is little to no competition. More than 45% of movie-goers at all ages will at least purchase popcorn when attending a movie. Therefore, theater concessions will supply more food for the consumers to purchase while discouraging any food to be brought in by attendees from outside. Movie theater companies, such as AMC, are banning the carrying in of any outside snacks in hopes of increasing revenue after seeing a decrease in the past (consumerist.com). This eliminates any competitors and pushes customers to purchase the goods that are available to them at theaters’ concession stands where they receive the majority of their revenue.
So is it completely necessary for movie theaters to have unreasonably high prices at their concession stands? In hindsight, yes, to keep the movie theater business going and our economy from dipping and falling. Within the consumer market, it can be hard to completely please both the consumers and the producers, or the attendees and the theaters in this case. The consumers don’t want the high prices that comes with the concession stand, but the theaters don’t want to go out of business. The trade-off is in the consumer's’ hands: purchase the concession food at a bit of a higher price or have no movie theater at all because suddenly it can not stay in business. The opportunity cost to continue having an outlet for entertainment seems very worth it especially if it can help the economy and keep businesses running.
Works Cited
Tuttle, Brad. "Movie Theaters Make 85% Profit at Concession Stands." Time. Time, 07 Dec. 2009. Web. 17 Apr. 2017.
Cwalters. "AMC Theater Chain Bans All Outside Snacks." Consumerist. Wordpress.com, 03 Dec. 2009. Web. 18 Apr. 2017.
Liebenson, Donald. "Consumer Spending Trends: Concessions Are the Ticket for Movie Theatre Profits." Spectrum Group, 2017. Web. 18 Apr. 2017.
Kuzoian, Sara Silverstein and Alex. "We Did the Math: Here's How Much Movie Theaters Mark up Your Popcorn and Snacks." Business Insider. Business Insider, 24 Apr. 2015. Web. 18 Apr. 2017.
"Adjusting for Movie Ticket Price Inflation." Box Office Mojo. IMDb, 2017. Web. 18 Apr. 2017.
I think the way movie theaters have their concession sales set up is a perfect way for them to maximize profit. Although, for the consumers these high prices are unfortunate, they continue to purchase which will only allow the theaters to keep their prices high. This example shows how movie theaters are finding ways to create new revenue streams since a lot of their ticket sales are going straight to the production companies.
ReplyDeleteConcessions are a smart way to make a profit. Now they are going past snacks and serving actual meals during movies. If you think about it their prices make sense. It's like going to see a play and going out after to eat. They've made it more appealing to do it in the same place that consumers won't care about the price. It's a good balance for a positive revenue.
ReplyDeleteI think that because of their need to make money to keep the theater running and make profit, the high prices are certainly acceptable. While it is unfortunate for consumers that the prices are so high, the prices are necessary. On the other hand, it might be more financially beneficial if the prices were lowered slightly, because it might cause more people who sneak in food, to instead buy fro the theater. By decreasing prices, they would increase demand and customers would choose their food instead of going through the trouble to hide other, cheaper stuff.
ReplyDeleteIt really seems like a perfect example of highway robbery. It is a nuisance for the consumer but it does make sense in a business perspective, since a lot of what they do gets sent to the people making the films, not so much the theaters themselves. They still have to be careful though, because if it gets too high, a lot of people won't bother anymore, as what happens naturally when price goes up. If you go to the movies and popcorn is $20 for a small size, you'd probably just deal with not having any and just settle for candy or something. They need to find a price that consumers like enough to still pay each time they go to the theaters.
ReplyDeleteKnowing that the majority of profit for movie theaters is generated from their concessions, I think the high prices are necessary to keep them in business. While the situation is not ideal for consumers, there is no other large contributor aside from concessions that adds to the profit of the theaters. Therefore, so long as consumers continue to attend movies and purchase concession items, movie theaters will be successful.
ReplyDeleteMovie theaters bring in thousands of consumers every single day, and even though most of ticket sales go back to producers, they are still earning profit from it. For consumers going to see a movie now becomes more an event due to the amount of money potentially having to be spent. Ticket prices have shot up significantly since the early 2000's, and with the added cost of expensive concessions, it takes out some of the enjoyment. Selling concessions at a higher price for the movie theater to make money is obviously reasonable, but eleven times the wholesale is bringing it to another level. With theaters banning people from bringing in their own snacks and drinks, they are just taking away any variable that would keep consumers from buying their concessions. I believe that movie theaters should drop prices down to a more realistic level, since they are already making so much profit.
ReplyDeleteSince many people don't go to the movie theater very often, when they go it is like they are treating themselves. Before they even get into the theater, they've already paid $10+ to see a movie once. When they go they just kind of accept the fact that everything there is expensive, and that is exactly what the corporate heads want to happen.
ReplyDeleteI do agree with the fact that movie theaters have all rights to have high prices on concessions. I never would have guessed that this was the reason why prices were so high. But I do wonder what the producers would do if the movie theaters did start to shut down due to the lack of revenue. Would they invest some of their own money into it, or would they increase the percentage that the theaters get from the ticket sales to increase their revenue?
ReplyDeleteIt's almost impressive how much a movie theater can sell normally low priced items such as popcorn for. Now most people expect on paying much more than the ticket price at the concessions alone. It's all because of the demand for concessions during a movie. Everyone associates popcorn and a soda with a movie and the theater is able to sell concessions for extreme prices.
ReplyDeleteI fall victim to the movie theaters over priced cookie dough bites, and popcorn every time I see a movie. I tell myself I wont spend over $10 on food, but it's just tradition to eat popcorn while I wait through 30 minutes of advertisements on the big screen. It's crazy that 30% of movie theaters profit is brought in from selling their overpriced concession stand food. I'm not sure the demand for popcorn and other concession items will ever decrease, so there is no reason for the theaters to decrease their prices.
ReplyDeleteMovie theaters are able to charge exorbitant prices fro their concessions due to artificial scarcity created by their own snack monopoly. By banning food and beverage carry-ins, theaters leave no consumers no less-expensive choice. As with any monopoly, some customers begin to avoid the rules, bringing their own snacks against theater policy because they feel as if the prices are unfairly high. The problem is heightened in our area because the vast majority of theaters are owned by the Marcus brand, so for both food and movie prices, there is no competition to drive market prices lower. It is interesting to see that the 41-50 year old age group seems to be the most likely to buy movie theater snacks, possible because they have more disposable income or are more attached to the tradition of having popcorn at a movie. Overall, the theaters have enough control over the market that they are able to set prices without major demand repercussions.
ReplyDeleteThis is a very relevant topic because many of us teens regularly go to the movies. It has become very expensive and that is part of the reason I don't go that often anymore. I knew concessions was expensive, but eleven times the actual price for snack food is our right ridiculous. I would like to see how much money actually goes back to the makers of the movies and compare it to how much the theaters make. Without the actual movies there would be no theater.
ReplyDeleteI agree with the movie theaters putting their prices up a lot higher. If the movie theaters are not selling any concession or making a lot of money then they will go out of business and then we would have no more movie theaters around. If you don't want to buy the expensive movie theater food then eat before you go and don;t buy anything there.
ReplyDeleteIf only 30% of a movie theater's total revenue comes from selling overpriced concession items, where does the other 70% come from? I know you said they receive little profit from ticket sales, but I'm just wondering where they get the rest of their total revenue. I agree though that concession items are way overpriced at the movie theater, especially at the Majestic in Brookfield. I normally just sneak snacks and sodas in my coat because I'm not trying to pay $5 for a drink.
ReplyDeleteI didn't know that movie theaters didn't get that much money from ticket sales, so it definitely makes sense why their concession prices are so high. I still do think they are a little too high to begin with and that movie theaters are really just taking advantage of their "monopoly" selling food. Personally, I have been sneaking snacks in or eating beforehand due to the high prices. My own demand for theater food has gone down and I would like to infer that others has as well. My question is, where is the equilibrium where the movie theater can make the most profit and consumers can feel happy with the prices? I feel like the answer to this question would bring more consumers to concessions and leave both sides happy and fulfilled.
ReplyDeleteThis piece brought up a lot about movie theater profits that I didn't know. While I was aware that prices have been increasing for both tickets and concessions, I never knew what the reasons behind it were. I figured that ticket sales still went to the theater, but it makes sense that most of that would go to the producers, which also means that they can't control those prices as much. While a movie can be somewhat expensive many places do offer discount days, like $5 Tuesdays and $5 Student Thursdays. These days help to make the movies more affordable, but also allow consumers to spend more on concessions, than they would have been willing to spend normally.
ReplyDeleteThis is how the movie theaters stay in business by increasing the prices of food. They can do that because people will still buy food from the movie theaters despite the high prices. It's a little monopoly because they charge more for food because they don't allow carry ins for the movies. I didn't know that the movie theater's revenue depends on the purchases of their concession stands. In the Pewaukee area most of the movie theaters are owned by Marcus which makes it a lot harder to get competition spread out to lower the prices of the food. If two different movie theaters that are owned by different companies had the same movies and movie ticket prices but lower food prices, a lot more people will go to the movie theater with the lower food prices. People can't find another competitor that has better prices simply because Marcus brand own most of the movie theaters in our area. The point is that theaters have a lot of control over the market and what they sell for the fact that nobody else has the same good or service as they do.
ReplyDeleteIt makes sense movie theaters would up charge their food as every entertainment establishment does this including sports and other events. The increase in food prices may come from a combination of inflation and people becoming more and more creative in ways to sneak food into the theater. Of course people will always carry in food, but the theater must remain profitable and in order to do this, must increase costs at some point but in order to remain competitive, cannot increase ticket prices that much.
ReplyDeleteMovie theaters have made a smart move with food. It is unlikely that someone seeing a movie won't buy popcorn or any other items on the menu. So that's where raising the price is smart. Food makes the movie much more interesting it opens a whole new view of a movie. Plus who would want to sit during a two hour show with nothing in them. There is no competition for this too. Movie theaters are the only place to watch new released movie's so keeping ticket prices low will allow a much greater profit for food.
ReplyDeleteTo think that 30% of a theater's revenue comes from concession sales when they surely make a huge fortune off of playing ads prior to movie showings is ridiculous to think about. Though, the lack of profit from tickets likely plays a large part in boosting the effectiveness of concessions sales. Lack of competition among theaters is also a heavily under looked aspect of movie going. Many cities only have the option to go to a single theater because it's the only one within a reasonable distance of them. This is a crazy amount of freedom for a business to be granted and movie theaters are taking advantage of it as much as possible.
ReplyDeleteEven though I hate how overpriced the snacks are at the movies, I will live with it because I know there are a lot of people the theaters have to pay before they can get their profit. After paying the movie companies, employees, clean-up costs, and movie companies, the profit margin is very small. These overpriced snacks are the only reason that the movie companies can make any money. Everyone has had at least one great moment at the theaters and I think they are a great form of entertainment that should be kept. If this means I am going to have to fork out 5 bucks for some skittles that is okay.
ReplyDeletePersonally I feel the price for popcorn is too high however I now understand why that is. The price of popcorn and drinks don’t affect me because I don’t ever get them. I am curious as to how much profit the bistro sections brings in. That is a commonly overlooked factor in profit because even though the bistro is lowkey it can bring a substantial amount of income.
ReplyDeleteIt is interesting to see that movie theaters don’t get much of the money from individual ticket sales. This makes sense of how they would need to make up for their losses by increasing prices on their concessions. Although it isn’t ideal to the consumer, it is what allows movie theaters to say in business my allowing them make a profit. This industry is a major oligopoly as Marcus and AMC have a strong foothold in this region. This also could explain why prices are high. They have such a strong market share in southeastern Wisconsin that they can charge whatever they want since your only options are to go to the theater or wait six months for it to come out on Blu-ray or for it to be on Netflix or on-demand.
ReplyDeleteBecause the theater is in a unique situation where the consumers at the theater are willing to overpay simply due to convenience, the theater can get away with charging ridiculously high prices. It will be interesting to see if theaters start to lower prices if theaters start to lose popularity as streaming services (Netflix, Hulu, etc.) grow. Also, the higher profits from concessions can potentially allow nominal wages for movie theaters to go up because they have much better profit margins than most business and have consistently high demand.
ReplyDeleteIt's interesting that movie theaters don't receive as much profit from actual tickets and most of their revenues are from concessions. Movie theaters now days have many food options then they once had which increases consumer satisfaction by providing all different types of food people can get. Additionally movie theaters also have the diner and a movie, where people also pay great amounts of money to be survey while watching a movie. I would be curious to know what how much prices have changed in relation to the diner and a movie part of the theater.
ReplyDelete