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I have the "golden", or maybe not, opportunity of buying a dilapitated, but still operating single screen, 500 seat theatre about 2 blocks from my house. It is in a smallish but upscale commercial district with bars, restraunts, coffee shops, and retail in the center of a major metropolitan area yuppie-ish residential neigborhood. The city really, REALLY wants a theatre there. So far, so good. Now, I have been lurking on this site for about 2 months gleaning all I can and have developed a reasonable cash flow model for the business plan. One question, and it may be the fatal flaw for the buisness model ... How much does it cost to rent the movies?

I have determined (from the helpful posters here) that first runs are gonna be at least 50% of the gross ticket sales. So first runs are out of the question. Second runs book for at least 40%. Probably not an option either. My question then, is, what is defined as a "second run" ? I am guessing right after it leaves the first run theatres but before it is syndicated to DVD? And what about art films? Is the booking for those still a percentage of gross? Somebody tell me that I can find a movie to rent for $200 a week that is not a Road Runner or Bugs Bunny cartoon! Also, has anyone ever thought of developing a co-op or network of independants or single screen theatres to leverage film booking?

Please correct any of my misconceptions, and any other help would be appreciated ..thanks!

PS >> There is NO WAY I could have even begun to look at this theatre without the wealth of information already on this site. With all the things going on in the world and the US, it is amazing how helpful people can be ...


[This message has been edited by scotchie (edited October 18, 2004).]

[This message has been edited by scotchie (edited October 18, 2004).]

[This message has been edited by scotchie (edited October 18, 2004).]

scotchie,

I opened my small one-screen theater about eleven months ago. It sounds like you have a good grip of some of the basics. I typically pay 35% for film and that is standard for films that are about three weeks after wide release (sometimes sooner and sometimes later).

check this out for definitions of first run and second run. Roxy has done an excellent job of it http://www.bigscreenbiz.com/ubb/Forum39/HTML/000416.html

I have booked from studios repertory divisions and been charged flat-rates on films (usually in the $300 range) and I've also booked what would be described as second run and been charged just the minimum guarantee (usually in the $150 to $250 range). Be aware that film shipping is a major investment too and shouldn't be overlooked. It is typically around $30 per trip for me(ie one charge to get it to me and one charge to send it away)

My advice: keep reading. It's all here.....

[This message has been edited by leeler (edited October 18, 2004).]

Depending on your town and the demographics (and if there is any other competition for such films), sounds like a good location for a first-run art house.

scotchie

Why are you so afraid of paying a percentage for film rental?

Every business has a guideline of what percentage each line item of overhead should be based upon. Payroll - 17%, rent - 15%, advertising - 7% etc, etc. Most of those items are difficult to control and must be adjusted to sales if needed. Film rental adjust automatically. 50% or 35% will always be that percentage of your gross. If you bought film for $500 flat and grossed $1,000 you'd be paying 50%, but if the picture performed much less, let's say $750 you'd be paying 67%.If it only grossed $500, you'd be paying 100%, and of course there is always the possibility that you would gross less then what you paid for the film and you would then be paying over 100%. Of course if you grossed $3,000 your film rent would be only 17%. No studio would rent you a current film that has the potential of grossing that well for only $500. Usually on those rare occasions when they do a flat rental, they also have a percentage stipulation such as: $250 verus 35%, whichever is greater.

Look at it on the bright side, while paying flat rentals, you could possibly pay over $100%, but when paying on a percentage basis you'll only pay that percentage... remember 50% of nothing is nothing. If you did absolutely no business, you wouldn't pay anything.

[This message has been edited by RoxyVaudeville (edited October 18, 2004).]

Well stated, ROXY, and all true except the final line... The studios always have that ace-in-the-hole called the MINIMUM... I have had a couple of films completely die on me, and had to pay "minimum rental" which exceeded 100% of my gross... Contracts are always in the studio's favor: THEY never lose, no matter what!...

Well Outaframe... this looks like another example where things differ from one area of the country to another.

I have never had a minimum on a percentage picture. As a matter of fact, a drive-in I book, this weekend was rained out and no one showed up at all. I asked the distributor if they needed to send in a box office statement, and he said yes, but show no sales and therefore no payment is due.

Thanks everyone for the input and links so far. I have a couple of follow up questions. Repertory Divisions? Would that be art films or old time classics, or .. ? And when you say "flat rate", is that per week or for unlimited showing. Also, from a booking perspective what would differentiate an "art film" from main stream first runs or second runs? Lack of promotion by the studio I am guessing. And a "first-run art film" now I am really confused.

Larry, you are right, this theatre is a relatively unique (locally) venue for more esoteric showings such as art or foreign films. Seriously, though, it is a dump, which is why I feel it can be returned to viability with some TLC. The owner, and I think not wantingly, has over the years "extracted a lot of value" from the old facility. When I say not wantingly, I mean, he does not live the life of luxury, but the realities of margins have forced him to neglect the infrastructure maintenance and it is now catching up and affecting attendance. On the other hand, maybe he is just tired of the whole business.

Roxy, I am not sure what you are saying. Any business has fixed costs and variable costs. Costs such as a mortgage payment or rent, insurance, utilities, etc. are a fixed cost of doing business and independant of sales, so to look at them as a percentage of gross does not provide much insight. I am not afraid of paying a percentage for film rentals since anything linked to sales is obviously a variable cost. I guess what scares me is the percentage! Since I have lived 2 blocks from the theatre for 16 years, I have a good idea of current and potential ticket sales. Now will a 35-40% payout sustain the business? Considering the amount of work that absolutely needs to be done on the building and the resulting debt service, my cash flow model says no without making unreasonable assumptions about the gate. Remember, it is only a 500 seat theatre with one screen. So I have to look at alternatives, hence the questions. Now I am as enthusiastic about running a movie house as the next guy. That being said I am still a realist. And I hope not, but at the end of the day, this place might just be more viable as a parking lot.

PS >> leeler, 11 months, congrats... (is the honeymoon over yet?)

scotchie,

the honeymoon is definitely over. Sales have been in a downward spiral since labor day. But, I have high hopes for the holidays and hope to make some changes after the holidays to keep this slide from being so severe next year.

Repertory divisions are where the films go once they have left first and second run. I have done a few of them and the flat terms mentioned above are what happen here. I showed "The Philadelphia Story" from 1941 last year from Classic Warner but I didn't know what I was doing then (I find that I know less and less every day) and didn't advertise well enough and ended up taking a loss on that picture. Classic films are hard to do but, I think, if you have a good client base they might do OK for you. I'm going to try again this year with Casablanca for New Years Eve. Hopefully, word will get around by then.

Anyway, it sounds like you may be considering an "art house". You can probably find some good definitions if you do a search of previous posts but, to me, an art film is a lower budget, lesser advertised film. They tend to be not you typical hollywood fare (like Spider-Man, or Mission Impossible) but off-beat. I think one of the more popular art house flicks currently out is I Heart Huckabees, as an example.

I'm not sure of your population but a 500 seat art house seems kind of large to me. Of course, my little one-screen seats just 128 so my perspective is skewed. You might consider splitting it into two or three screens if possible. There are many posts on this subject, too. Happy reading, and good luck. Let us know what you decide.

Leeler

[This message has been edited by leeler (edited October 19, 2004).]

Flat rates are common for art or classic films: often 150-350 minimum vs. 35-50%.

So if you gross 400.00 it's minimum payment. If it's 4000.00 it's % time.

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Michael Hurley
Impresario