Hi I was wondering how it works when cinemas are paying the movie studios, etc, for their movies… some cinemas charge less than half the price of others…
Do cinemas pay the movie studio (or whatever) a percentage of the ticket or a flat fee per ticket or once for each movie?
The typical arrangement is that the film distributor gets a share of the box office receipts. Typically, up to a certain amount of the weekly box office take is kept by the cinema operator, and this is supposed to cover the overheads of running the cinema and showing the film; everything above that is split, with the distributor getting much the larger share. The exact amount of the first tier that the cinema gets to keep, and the percentage split of the rest, is negotiable and depends on the size of the cinema, whether the movie is first-run, how popular it is or is expected to be, etc.
The result is that the cinema operator makes little or nothing out of showing the film; he may indeed make a loss. The main attraction to him is that showing the film brings people into the cinema, and he can then sell them overpriced sugar, fat and salt in a variety of formats. The take from this belongs wholly to the cinema operator, and the margins are huge. This is where cinema operators derive the bulk of their profits.
If customers don’t buy the calories, the operation is unviable. Hence, studios make films that are marketed towards people who consume more confectionery - teenagers.
Arthouse cinemas can get better deals on the divvy-up of the box office, since their clientele tends to have less interest in buying the dietary crap.
also, big cinemas have to take movies with low ticket sales in order to have access to movies with big ticket sales
More details here: The Need for Concessions - How Movie Distribution Works | HowStuffWorks
The longer a movie has been out, the lower the rental fees. There are second-run movie theaters that are able to charge less for admission because they don’t show newly-released movies.
Well, that’s true for short-lived movies, but popular movies that stay in the theater for a long time are more profitable for the theater operators. The distributor fees go down over time, so the first couple weeks it might be 90% of ticket sales, then the next couple weeks 80%, then 70%, and so on. A hit that stays in theaters for many weeks can thus earn the venue quite a lot of money eventually.
Second-run theaters show old movies for which the distributor fees are very low, thus they can charge much lower ticket prices and at least break even before concessions and collecting quarters from the beat up Ms. Pac-Man.
Agree with this. I had a friend who had some tangential connections with the movie industry. He told me many years ago that theaters make very little money on ticket sales and most of their money on sales from the concessions.
I have heard, BTW, that the same is true for gas stations. The stations make very little profit on the sale of gas, most of the profit going to the gas company. The stations make pretty much all their money on the convenience store sales.
Do the film distributors set ticket prices, then?
A theater owner giving up 90% of ticket revenue should have huge incentives to make the price quite low and fill the theater. But you don’t ever see that. There’s some regional variation in ticket prices, but it’s relatively small.
Distributers force ticket prices on theatres using availability. When the new Star Wars movies came out they literally said “you have to be charging this much or you are not getting the movie”. They also demand numbers of seats, in order to make the theatres run the movie in their big auditoriums for at least the first weekend.
If a theater is trying to cover costs like rent, 10% of $10 is still a lot more money than 10% of $1. I would think there’s a limit to what concession sales can make up for.
Also, my guess is that the folks paying $10 for tickets buy more at the concession stand than people who hold out for $1 showings.
If I may ask a follow-up question: If a film is said to have “grossed” so and so many dollars, does that figure refer to the total amount paid by cinema goers for their tickets, or does it refer only to the share of the distributor?