One of the worst things about working for a movie theater is informing the customer of the total cost of their order, be it working in the box office or working the concession stand. The higher the total, the worse I feel about it. As a result, I tell them the total in a sympathetic, soft voice. It’s almost as if I’m saying, “I’m sorry, but that’s going to be $54.25.”

Most people are used to the higher prices at the theater, and they have little or no response. But, there are others who are completely shocked. They open their eyes and mouths wide. Then, they look perplexed, as if I made some sort of mistake. I usually run down their order, so they know what they’re paying for. Once they realize it’s no mistake, they make a comment about the exorbitant prices.

A lot of people complain about the cost of a movie ticket, which is $10 at my theater. Unfortunately, the theater doesn’t really set that price. Movie distributors set the price. They can be entitled to 100% of the gross ticket sales for a movie’s opening weekend. That’s an extreme case, though. In most cases, the distributors receive 70% to 80%.  That means that the theater doesn’t make a profit off of ticket sales when you factor in the operational costs of showing the movie. They’re actually losing money.

As the movie continues its run in a theater, the distributor’s share goes down, meaning the theater keeps more of the ticket-sales money.
 
Few movies illustrate this better than the Telugu language movies from India that my theater exhibits. The distributors of these films vary more than US distributors. For example, no matter what US movie you see, the price will be the same (unless it is in 3-D). Telugu movies vary in price. On its opening weekend, Magadheera was $15. Three weeks later, it was $12. A month or so after that, it was $8.

When we have two or three Telugu movies running in the same week, there could be as much as a $7 price difference between them.

With distributors being entitled to so much of the gross ticket sales, theaters are left with two options to turn a profit, raise ticket prices, or raise concession prices.

It makes more sense to raise concession prices, from a consumer standpoint, because concessions are “frill” items, in that a customer doesn’t need to buy concessions to see a movie. They do, however, need to buy a ticket. So, by pricing the secondary product (concessions) higher and keeping the primary product (tickets) prices relatively low, price-sensitive people are not priced out of seeing a movie.

This is how theaters can afford to run matinees and “discount days.” By eating the loss on ticket prices during off-peak times or days, the theaters attract people who wouldn’t otherwise come to see a movie that day. And, the more people they attract with the price, the more opportunities there are for people to purchase concessions, which will drive up a theater’s profit.

And that, my friends, is why it costs so much for movie theater popcorn: so you can enjoy discount days and matiness, and so the price-conscious can still see movies.

I know many of you are thinking, “What about the money theaters get from advertising?” That’s a good question, but it’s way too big of an issue to get into for this posting.  I’ll address that later.