TOPIC: popcorn prices going up-up-up
popcorn prices going up-up-up 20 May 2008 08:36 #18600
What Popcorn Prices Mean for Movies
Ethanol and Rising Costs of Paper Eat Into Sales That Subsidize Tickets
By Claude Brodesser-akner
Published: May 19, 2008
LOS ANGELES (AdAge.com) -- Suddenly, in Hollywood and sticky-floored movie theaters across the nation, "corn" really is a four-letter word.
Thanks to the inflating cost of popcorn, the price of movie tickets is expected to skyrocket by as much as 30% this year, according to Ricard Gil, a University of Santa Cruz economist who studies the business. "You're going to see a one- to two-dollar increase in the price of a movie ticket," he said. "And that's being conservative."
Roughly 25% of the price of a movie ticket is subsidized by popcorn, soda and candy sales.
According to an Agriculture Department report, next year's corn stocks are expected to plunge to a 13-year low and, as a result, corn-futures contracts have soared to an all-time high. This can be attributed to the demand for ethanol, which will claim 40% of next year's corn crop, munching away at the margins of theaters that rely on concession sales for as much as 45% of their revenue.
"They're going to lose some of their customers," Mr. Gil said. "Some of them are just not going to go to the movies."
This is terra incognita for the movie-theater business. Ticket sales had been insulated for the past 30 years from both inflation and recession. (Adjusted for inflation, tickets today cost less than they did in 1977, according to the Motion Picture Association of America; the National Association of Theater Owners notes that in five of the past seven recession years, box office and admissions actually increased.)
That's in part because angst-riddled consumers sought relief from financial woes in the dark of the cinema, but also because roughly 25% of the price of admission is subsidized by popcorn, soda and candy sales -- a discovery Mr. Gil published in a landmark joint study with Stanford University's Graduate School of Business in February. (Popcorn accounts for an average of 32% of concession sales in the theater industry.)
In an interview with the Los Angeles Times in March, Mike Campbell, CEO of Regal Entertainment, the nation's largest theater chain, conceded as much: "If we didn't charge as much for concessions as we did, the tickets to the movies would cost $20." (According to the MPAA, last year's average movie-ticket price was $6.88.)
But while ticket prices have more than quadrupled since 1970, per-capita spending at concessions has only a little more than doubled in the same period.
This year's popcorn crop is down roughly 10%, said Larry Etter, chairman of the National Association of Concessionaires. In the past 18 months, the cost of coconut oil used for popping corn has risen 24%. And the price of the paper pulp to produce popcorn tubs has jumped 40% in the past 36 months, making the tub more expensive than the corn inside it.
The new "ear-conomics," along with a looming and costly changeover to digital projection, also means that for the first time, many independent theater owners may find themselves unable to weather a downturn, as concession sales typically account for 40% of smaller movie theaters' revenue. According to Patrick Corcoran, director of media and research at the theater owners' assocation, while top-10 megachains control half the nation's screens, the other half are run by some 500 independent theater companies.
Raising prices at concession stands won't help much, as popcorn and soda are already at an 80% markup, said Mr. Etter, who is also VP-theater services for the Malco theater chain. For consumers facing the biggest food-price jump in 18 years and gas prices up 20% from April 2007, a $6 bag of popcorn isn't a pleasing proposition. Mr. Gil said higher prices will appear at the box office as more moviegoers pass on the corn.
More reliance on cinema ads is one option. In a 2007 Arbitron study, 63% of respondents 12 and older said they "do not mind the ads they put on before the movie begins."
But even its chief proponents say cinema advertising has limited prospects. Lauren Leff, a spokeswoman for National Cinemedia, the largest digital in-theater ad network in North America, said once a theater's ad inventory sells out, the cost per thousand rises substantially. She added that theaters' ad-revenue potential is always constrained by the need to start the next film on time.
MPAA President Bob Pisano calls both scenarios -- higher concession prices or more ads -- "mutually assured destruction" for theaters and movie studios, because both will try moviegoers' patience and may lead them to stay home and rent or, worse, illegally download a film.
Mr. Pisano said ticket prices may start to rise with demand. For example, going to see a blockbuster when it opens Friday night could run you a dollar more than going a week later.
Sources: National Association of Theater Owners, MPAA, National Association of Concessionaires, Nielsen EDI
National Association of Theatre Owners
P.O. Box 77318
Washington D.C. 20013-7318
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Re: popcorn prices going up-up-up 23 May 2008 11:31 #18601
Corn price is factor in rising movie ticket prices
By ROBERT W. BUTLER
The Kansas City Star
The rocketing price for corn already is hurting Americans at the grocery store and the gas pump. Now itâ€™s going to hurt us at the multiplex, too.
Partly because of the rising price for popcorn, on Thursday Kansas City-based AMC Entertainment Inc. announced that beginning today it will increase its ticket prices from $9 to $10 for weekend show times after 4 p.m. at its five area theaters. (Children ages 2 to 12 will be admitted for the usual $5.)
Also beginning today, AMCâ€™s popcorn price will jump 25 cents nationwide.
An economics professor at the University of California-Santa Cruz predicted this week that movie ticket prices might leap as much as 30 percent because of the cost of popcorn. In fact, Ricard Gil concluded, the success of a movie theater now rests largely on the price of popcorn.
In a study, Gil pointed out that concession sales allow theaters to keep down the cost of a movie ticket by nearly 25 percent. And popcorn accounts for a third of those sales.
In a Los Angeles Times interview, Regal Entertainment CEO Mike Campbell said that if theaters didnâ€™t charge what they do for concessions, â€œmovies would cost $20.â€
Gil, interviewed before the AMC announcement, said that a big release â€” like this weekendâ€™s â€œIndiana Jonesâ€ movie â€” would be an ideal time to introduce higher-priced tickets.
â€œYouâ€™ll show up at the theater and find youâ€™re paying 25 to 50 cents more for a ticket.
â€œThis means that the most valued customers, the ones who come out to see a movie on opening weekend, will end up paying the most.â€
AMC based todayâ€™s increase on dozens of economic factors, not just the price of popcorn, company spokesman Justin Scott said.
â€œWe evaluate our concessions prices in the fall and in the spring. â€¦ No one factor influences any of our pricing modifications.â€
Memorial Day traditionally is when movie theaters jack up prices.
Scott said that at the same time AMC hiked the price of prime weekend shows, it would expand its $5 matinee price to include evening shows as well, Monday through Thursday and until 4 p.m. Friday to Sunday. Previously customers paid more on weeknights than for weekday matinees.
The last time AMC altered local ticket prices was in November, when it lowered its matinee prices from $6 to $5.
But why not raise concession prices and leave ticket prices alone?
â€œItâ€™s not one or the other, concessions or tickets,â€ Scott said. â€œA lot of factors are considered to find the right balance.â€
Locally based Dickinson Theatres, which operates five multiplexes in Kansas City, will not raise popcorn or ticket prices for the foreseeable future, owner John Hartley said. With the economic pressures facing his customers he wanted to hold the line, at least through the summer.
The once-humble corn is in huge demand as a food additive (corn syrup), livestock feed and as a biofuel source.
In three years corn prices have soared from $2 to $6 a bushel.
A big factor is the Bush administrationâ€™s support for corn-based ethanol, said Mary Haffenberg, spokeswoman for the Chicago Board of Trade.
â€œIt used to be that only 5 percent of our corn crop went to ethanol. In the next few years it will be more like 30 percent,â€ Haffenberg said. â€œThat has an effect on food costs, since corn that used to be fed to livestock is now diverted to biofuels.â€
And while the U.S. is producing more corn, demand still outraces supply.
â€œWeâ€™re seeing a sort of perfect storm of factors bringing up corn prices,â€ Haffenberg said.
The USDA predicts that corn supplies will plunge to a 13-year low in 2009.
â€œThere are a lot of â€˜ifsâ€™ in this,â€ Gil said. â€œFirst, we donâ€™t know that the corn shortage will last forever. And itâ€™s possible that corn producers and all the middlemen involved in the chain of production will absorb some of these increasing costs.â€
If corn were not a factor in the economy, he said, prices would still rise. But with corn prices escalating, â€œI do think prices will go up faster.â€
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