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TOPIC: Need a reality check for operating cost %'s found in "The Mo

Need a reality check for operating cost %'s found in "The Mo 06 Jun 2002 08:17 #24285

  • Seeker
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I've been reading "The Movie Business Book" and came across a discussion of theater operating expenses by Stanley Durwood of AMC. At one point (p. 355 of the 1992 softbound edition) he lists the following cost allocations:

From total theater gross (boxoffice & concessions) deduct-

Film rental 35%
Rent 10%
Payroll 10%
Concession costs 10%
Advertising 5%
Taxes, licenses, insur 3%
Utilities 2%
Repair, maintenance 1.5%
Miscellaneous* 1.5%
Payroll taxes 1%
Supplies 1%
____________________________
Theater cash flow 20%
Less corp. overhead -6%
____________________________
Net cash flow (before depr.,
taxes & debt service) 14%

*Miscellaneous includes telephone, mail, postage, security, film delivery, checking services, arcade expenses & tickets.


I realize the 6% corporate overhead wouldn't apply to an independent, but I'm wondering whether these percentages are otherwise reasonably applicable to an independent operation. The 35% film rental sounds too low (I've seen more like 55% as the average here on this forum).

Comments?
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Re: Need a reality check for operating cost %'s found in "The Mo 06 Jun 2002 09:29 #24286

  • John Pytlak
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Remember, your "gross" included BOTH ticket sales and concessions. Film percentages are usually expressed as a percentage of ticket sales.

John P. Pytlak, Senior Technical Specialist
Worldwide Technical Services
Entertainment Imaging
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Eastman Kodak Company
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Website: http://www.kodak.com/go/motion
John P. Pytlak, Senior Technical Specialist
Customer Technical Services
Entertainment Imaging
Research Labs, Building 69, Room 7525A
Eastman Kodak Company
Rochester, NY 14650-1922
Telephone: +1 585-477-5325 Fax: +1 585-722-7243
E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Website: http://www.kodak.com/go/motion
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Re: Need a reality check for operating cost %'s found in "The Mo 06 Jun 2002 13:41 #24287

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Yep, you're right. Perhaps 35% of ALL gross revenue isn't out of line.
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Re: Need a reality check for operating cost %'s found in "The Mo 06 Jun 2002 15:50 #24288

  • Mike
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Including all: film distribs payments are 45 % of our total income. I don't know when he wrote that but it sure is low 48-53 is the norm for a first run.

Michael Hurley
Impresario
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Re: Need a reality check for operating cost %'s found in "The Mo 06 Jun 2002 17:19 #24289

  • wimovieman
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Well---never read that book, or saw those percentages before--but after reading the post I grabbed my accountants report for first 4 months of this year--and to my surprise all percentages are within 2% one way or other of the posted ones--I am a bit higher in payroll as running 4 single screen theatres uses more people than 1 four-plex.

Thanks for posting those--makes me feel good lol--I will need to show those to my accountant now.
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Re: Need a reality check for operating cost %'s found in "The Mo 07 Jun 2002 07:43 #24290

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Mike,

Your 48 to 53% figure- Is that 48 to 53 of revenue from all operations or just boxoffice?
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Re: Need a reality check for operating cost %'s found in "The Mo 07 Jun 2002 11:48 #24291

  • BECKWITH1
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After reviewing our financial statements for the year through May I can verify that the percentages have some validity but...

Our current film rental is at 40% of gross revenues(including all sources of income). Don't believe that we are making 20% profit. Partly because film rental is up so much from 1992 but also because many small changes in those percentages can wipe you out for the year. For instance, I have an older theater. We have just spent considerable funds having our 3 heating/cooling units reworked. They need to be replaced but we are not doing that now. My maintenance and repair budget just took a big hit and the percentage is now over 3%. I am crossing my fingers that we won't put any more money in them this year. (Or maybe we will just spend the $30,000 to replace the landlord's assets?). Several of the other percentages can take big hits depending on how we decide to spend our money. If we wanted to milk the theater for all profits and not fix, repair or work on our business, then maybe 14% profit?????



[This message has been edited by BECKWITH1 (edited June 07, 2002).]
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Re: Need a reality check for operating cost %'s found in "The Mo 07 Jun 2002 14:48 #24292

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Another point- My uneducated view is that 1.5% for meintenance & repairs sounds low. Of course, the other big item not included in the list is debt service. Does anyone have an idea as to what one's debt service should be as a % of the overall gross?
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Re: Need a reality check for operating cost %'s found in "The Mo 07 Jun 2002 16:27 #24293

  • BECKWITH1
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Traditionally debt service should be less than 30% of your gross. Obviously this does not compute with these numbers which explains why the industry is having trouble paying its bills. However, note that the figures you quoted included "rent" which could be replaced by the debt on your theater so it is not necessarily as bad as it looks.

Also your original "net cash flow before depr taxes and debt service" is the infamous EBITDA quoted in the financial statements of all publicly traded theater companies that I have ever read. EBITDA - Earnings before interest, taxes, depreciation and amortization.
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Re: Need a reality check for operating cost %'s found in "The Mo 26 Jan 2004 19:14 #24294

  • BECKWITH1
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Bumping this up for reference to another thread. I looked at our film rental for this year 34.29% compared to last year as mentioned above. Quite a difference but then we went from a single screen to a circuit of two theaters back down to a 4 screen all in the same year. Our payroll was also higher but the cost of running two places is higher than running one place even though two of us didn't get paid for our work managing the 4 screen every operating hour.

[This message has been edited by BECKWITH1 (edited January 26, 2004).]
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Re: Need a reality check for operating cost %'s found in "The Mo 26 Jan 2004 20:38 #24295

  • wimovieman
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I just received my end of year report from accountant--was pleased to see that we are in "ball park" too--film rental ended up 27%--but we run high per caps--and low ticket prices (which makes me nervous every time I consider increasing) running 5 single screens, but running one alot by myself when slow, our labor costs are 13%, over all though our profit after debt load (which is high as will be debt free in 4 more years if business stays the same and some pretty extensive updating last year) runs about 7%--taking out the major investments as in air conditioning and furnaces, which won't be needed for awhile now--it would have ran about 18%.
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Re: Need a reality check for operating cost %'s found in "The Mo 27 Jan 2004 00:42 #24296

  • CharlieBo
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Beckwith and Winmovieman:

Your film rental cost are real low.Are those percentages based on boxoffice gross or b.o. and concession combined??
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Re: Need a reality check for operating cost %'s found in "The Mo 27 Jan 2004 07:43 #24297

  • outaframe
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WHOA!... Are we all on the same page, here, as to what FILM COST is?... Film rental (paid to the film distributor) DIVIDED BY your gross ticket sales, equals a figure, which is your film cost expressed as a percentage... You don't mix in concession sales, or any costs (other than paid to the film distributor) into that figure... FILM COST goes into your balance sheet, along with other expenses to arrive at the bottom line... Anyone who has a film cost of less than 40%, nowadays, is either playing EXTREMELY late sub-run, or has a brother-in-law who works for a film distributor!... I can't remember the last time I was able to buy a % picture with less than a 35% floor... Even if it's a bust, they have a minimum rental that will drive up the cost above 35%, and IF you play anything recent, the overall average will be above 40%... I don't think you can hold a picture LONG ENOUGH for an extended run to average down to below 40%, and 42% (and up) is more likely, typical... IF you are ACTUALLY averaging some of the low percentages reported here, PLEASE let the rest of us in on the secret!...
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Re: Need a reality check for operating cost %'s found in "The Mo 27 Jan 2004 09:17 #24298

  • D. Bird
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I believe they are stating film rental as a percentage of GROSS sales, as it would appear on a financial statement.
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Re: Need a reality check for operating cost %'s found in "The Mo 27 Jan 2004 13:07 #24299

  • BECKWITH1
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Precisely! As pointed out earlier in line 4 of the original post:
"From total theater gross (boxoffice & concessions) deduct-"
and as referenced in my post last year:
"Our current film rental is at 40% of gross revenues(including all sources of income)."
Please read carefully as the information you are confused about is right there.

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