Welcome to BigScreenBiz.com

We are working up a business plan for a small discount theater. We would like to try our hand at having Ads from local businesses be our main source of income. Championing them as the benefactors giving back to the community and keeping the price of tickets and concessions down. We would give them free tickets to use as incentives for customers (a restaurant could offer a dinner and a movie combo ect..)
The Idea would be to get people out of their houses and back into the local businesses.
Has anyone here tried anything like this?
If so what were the results?
If not, why not?

Details:
5-7 Screens- renting out what ever is left for event space
The Theater was built in 1987
City Pop: 333,055 (at least 3% Asian and Latino - recorded)
We are thinking $2 tickets and $2 base concessions (The idea being that our job is to keep a clean theater, fill seats, and have eyeballs for the sponsor ads)
We would offer design of the ads in house so we wouldn't be splitting anything with an ad agency
We look to play 2nd run movies as well as films that cater to the emerging communities in our city (latino, indian, korean ect...) that the 2 first run chains in town are ignoring
We would also be renting out rooms, having sponsored events, and your usuals cult / 80's film nights and whatnot.

Thanks in advance for your advice

A couple of thoughts. First, how many ads do you think it would take to keep you afloat? I'm thinking it would take a very large number to pay the bills. I don't know how many customers will sit still for that many ads. That's why ads are normally supplemental income at theaters, not the prime source.

As for giving out free tickets to businesses for their use, you need to keep in mind that film distributors limit the number of free passes you can use. It is normally 1% of ticket sales. That is not a lot for a smaller operation. If you give out more than that, you would have to still pay the film distributors their part. So, it costs you to give tickets away.

If your goal is really for the betterment of the community, and not really as a means of support for yourself, then why not investigate running the place as a non-profit? Then, perhaps you could get some corporate sponsors to pay to help keep the place going instead of driving away your customers with too many ads.

The ideal situation would be a 1:1 type sponsorship w/ the ads
with maybe different sponsorship of the concessions
X movie/concessions brought to you by X local business for this month
With signage for the consessions.
Advertisers branding for the preshow, along with an ad or a acknowledgement before the movie.

We hope to have an active member website w/ community input so they would also get ads on the webpage along w/ a sponsor site where they could choose which coming movies or events they would like to sponsor.

Asking such a small number of sponsors to pay enough for their ads to make advertising your primary income doesn't sound realistic to me. I know that such things are done for bowl games, and professional sports stadiums, etc, but it's hard to imagine that you would have the number of exposures for an ad in your theater to be worth that much money. If you know something about advertising, then you may know much more than me, but I understand that advertising rates are based on the number of people that will be viewing the ads, and on how targeted those contacts are. I just can't imagine enough people going to a second-run/foreign film theater to cause a corporate sponsor to plunk down hundreds or even thousands a month for the privilege of sponsoring a film. You would probably have to prove your numbers, before many would be willing to take a chance.

I know that sometimes sponsors can be found for special charity or community event type showings, but finding so many businesses to do it for a week at a time, or more, over and over again seems like a tall order.

I'm not saying your ideas don't have merit, but I wouldn't be looking to go in the same direction as you.

Asking such a small number of sponsors to pay enough for their ads to make advertising your primary income doesn't sound realistic to me. I know that such things are done for bowl games, and professional sports stadiums, etc, but it's hard to imagine that you would have the number of exposures for an ad in your theater to be worth that much money. If you know something about advertising, then you may know much more than me, but I understand that advertising rates are based on the number of people that will be viewing the ads, and on how targeted those contacts are. I just can't imagine enough people going to a second-run/foreign film theater to cause a corporate sponsor to plunk down hundreds or even thousands a month for the privilege of sponsoring a film. You would probably have to prove your numbers, before many would be willing to take a chance.

I know that sometimes sponsors can be found for special charity or community event type showings, but finding so many businesses to do it for a week at a time, or more, over and over again seems like a tall order.

I'm not saying your ideas don't have merit, but I wouldn't be looking to go in the same direction as you.

We had a local, single screen theatre try that for awhile. To start with, it was a huge drain on the owners' available time. As others have said, the money is not that great... and you have to work hard to get it.

Most of the films, if not all of them were "flat", or a fixed price to the studios. In the local case, that was the only way they could keep their costs down. The advantage to that is you know exactly what your film cost will be, regardless of how many people show up. The disadvantage is that the films were REALLY OLD, so not many people did attend.

So, yes. If you plan on something like $300 to $350 for an older film, once shipping is figured in, then your costs for rent, triple-net costs, utilities, insurance, payroll, taxes, business licenses, maintenance, advertising, and YOU... then factor in your $2 admission and $2 concession base (minus product costs), and you have what you need to get from your advertising community.

Do you know what that number is? If not, need to figure it out. Only then will you really know what you'll have to solicit from the advertising community. It could be an eye-opening figure. When you do get it nailed down, put that number on this board, and the other users here will have a far better idea of your chances for success.

An example: In my area, a "5 to 7 screen" theatre (are those screens in your place built right now?) can easily cost between $15,000 - $20,000 per month. For a 7-screen operation, each screen would have to generate nearly 3,000, just to cover the lease. A lot of sub-run theatres struggle to make much less than that. Add your other costs of operation, and that per-screen number can easily double.

If you book a film that requires a percentage payment, then you have to establish an admission price... IE, what each ticket is worth. That can't float around, based on how much advertising you attract. The studios will expect their percentage for each patron watching the film. You will have to figure out how to track that, especially considering that a checker could always walk in your door and count the number of people in the auditorium. That information goes to the studio, which will compare those numbers to your boxoffice report. A percentage deal will get you newer films, but in your case, probably nothing that's not on DVD, or very close to it... especially if you have any competition in your market.

If you can get all that worked out, and things still look good to you, the big question is, how long do you think the business community will stay interested enough to support your plan? They don't usually spend money on advertising, unless they feel there's a return on that expenditure. Your customers will have to make purchases, based on their exposure to those ads. Considering the very deep discounting you're doing, are these people likely to be the ones your advertisers are looking for? If response isn't up to the advertisers' expectations, they could eventually drop off and you'll be scrambling for a new business model. That's what happened here, and the theatre eventually closed (again).