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TOPIC: Studio - Exhibitor pricing model

Studio - Exhibitor pricing model 05 May 2012 14:24 #38397

  • mrs_leeler
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I have been a theater owner for about 9 years. This is my first post, although I read over Leeler's shoulder a lot. I would really like to get perspectives from other theater owners on the following:

I do not think that the way studios charge theaters for movies serves the industry well.

We are close to the point where studios are prescribing how much per head they charge for their product with their development of “per-caps.” I guess this is to put pressure on the $0.99 and $2.00 theaters. Regardless of why they developed them, let’s say the studios did dictate a per head price the exhibitor had to pay the studios. Being from a small town where wages are very low, I know that this new model would have to take market into account, just as the per-caps do now. The per-head cost could be different on a per-movie basis, as the percentages are now. The per-cap charge should go down as the movie becomes older, like the percentages do now (usually). As long as the studios don’t raise the aggregate amount of money they charge us, but just redefine how it works, that would really help us exhibitors.

With studios taking a percentage of the ticket price, we keep our ticket prices as low as we can, and try to use concessions to make the majority of our revenue. This punishes our best customers -- the ones who actually buy concessions -- and allows the ones who never buy concessions to see movies without contributing enough revenue to cover our costs.

If a theater knew that, on-average, it was going to owe the studio $X for each ticket, it could set the ticket price appropriately higher to cover operational costs, and set lower concession prices. Then the patrons coming to “The Artist”, who never buy soda or popcorn, could actually help pay the electric bill, too. We wouldn’t have every family of 6 buying one large refillable soda and one large refillable popcorn and passing it up and down the row the whole movie. We could reduce the number of people who smuggle in food and drinks. We could encourage the honest patrons who simply avoid the concession stand due to the high prices to reconsider. Maybe we wouldn’t have people filing lawsuits over high concession prices. This pricing model change would not make any prices low. Exhibitors have huge costs to cover. But, it would allow exhibitors to try to find the appropriate prices for tickets and concessions with more equal weight on each.

Contracts between studios and exhibitors could be simplified. Clauses where studios demand a percentage of ticket-concession bundles would go away. All the deep thinking by the theaters of how they can get more money from customers without owing more to the studios, and all the deep thinking on the part of the studios of how they can prevent the theaters from getting more money from the customers without passing it on to them, can go away.

Sky-high concession prices have created a huge perception problem with the public. Our customers don’t understand the business model, and they shouldn’t have to. They just want to do see a movie and they don’t want to be gouged at the concession stand.

Thanks for reading.
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Re: Studio - Exhibitor pricing model 05 May 2012 19:13 #38398

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Are you having issues with the studios because your prices are too low?

I have never had a problem with any studio with the min. per cap rules and our prices for our first run are cheaper than yours at your 6. I know on average I will have pretty close the same amount of gross profit from the ticket sale as the concession sale. I believe the current terms are reasonable.

You can certainly blame AMC for the ticket/concession bundles. They started selling their premium auditoriums with a food credit. For example a slightly more fancier room tickert was sold for $15 with the patron getting a $5 food voucher. The nicest ones were selling for $20 or more with a $10+ voucher. I can see why the studios were concerned with that. AMC no longer does the bundles.
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Re: Studio - Exhibitor pricing model 05 May 2012 19:40 #38400

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Hello -

No, we're not having any trouble with studios. I just don't like the model in general. If I raise my concession prices, I keep that whole additional amount. But, if I raise my ticket price, I only keep 35-65% of that raise in price. So, this leads us to have concession prices that are too high, and ticket prices that are too low. I would like my patrons who buy only a ticket to help cover my costs more than they do. And, I would like to encourage customers to buy concessions by having lower concession prices.

So, I'm looking for a fixed amount the studios demand per person, instead of a percentage. It seems like that's what they want, too, with the per-caps.
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Re: Studio - Exhibitor pricing model 06 May 2012 11:58 #38402

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I do not think you and I will like what they would come up with though. Probably close to 90% of a movie gross is coming from theaters charging $9 or more for a prime time adult ticket. So they would start there at maybe $5 a person. I do not see them taking the time or think it would be reasonable to expect them to set a different price for each theater.

Our problem is no different than what restaurants see. I would be probably be seen as one of those customers who is not paying their share for the electric bill. When I go out to a restaurant, I do not order alcohol as I do not drink. I also do not order desert and seldom order an appetizer. If we do, we usually share a entree.

I have got to the place where I am fine if a customer chooses to not to purchase concessions as long as they are not sneaking it in.
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Re: Studio - Exhibitor pricing model 06 May 2012 16:19 #38405

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I see what you're saying. There will always be people who don't want any concessions, even if the concessions are less expensive. I would certainly defend a customer's right to choose not to purchase concessions. I just wish I could raise the ticket price without giving so much of it away.

As far as not expecting studios to customize pricing to a theater, maybe not to a theater. But they do customize it to a market now. Not sure if market is the right word -- zone? Anyway, they do it now with the per-caps.
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Re: Studio - Exhibitor pricing model 19 Jun 2012 16:16 #38636

That day many be coming quicker than you think. Would it not be nice if the big studios would just do a 50/50 split with you instead of taking 65% for themselves. Then you could lower the price of popcorn and soda and make both sides happy. :woohoo:
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Re: Studio - Exhibitor pricing model 19 Jun 2012 16:40 #38637

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50% would sure be better than what we've been seeing. Why do you think that is going to happen?
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Re: Studio - Exhibitor pricing model 19 Jun 2012 17:39 #38638

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ricklwinters wrote:
That day many be coming quicker than you think. Would it not be nice if the big studios would just do a 50/50 split with you instead of taking 65% for themselves. Then you could lower the price of popcorn and soda and make both sides happy. :woohoo:

Seldom are we paying over 60%. Hunger Games, Avengers, & MIB3 recently. Usually below 60% and in the end averages out to 54-55%.
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Re: Studio - Exhibitor pricing model 27 Jun 2012 19:48 #38757

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With all due respect... getting up in the morning costs money.

A gallon of gas is somewhere between $3.50 & 4.00 in places.

A decent cheeseburger is around $5. Add fries and a drink & you're somewhere around $8 or $9.

How is $8, $9 or maybe (gulp) even $10 not reasonable for an evening of entertainment?

If you're not getting balance from your concession, then perhaps putting your admissions within shouting range of "normal" would be appropriate. Then you're getting a reasonable return from the people who aren't inclined to buy concessions, and you can lower the popcorn prices for those who do support your snack bar.

Personally, I just don't think the studios are being all that unreasonable. Put yourself in their shoes. Spend XXX million to make a movie, market, promote and distribute it. They're doing all the heavy lifting, so why is 60% unreasonable, and why would anyone have a problem with them feeling everyone who watches their product should pay something for it?

It's very easy to succumb to customer pressures to push prices ever-downward, even while costs go up. Most of the time, other than a very few grumbles, making a periodic, reasonable price increase goes by relatively unnoticed... and reasonable customers do understand.

When we raised our prices this year, nearly all of our customers had already figured out we were preparing for digital conversion. I don't think we've lost one of them to Redbox as a result.
Last Edit: 27 Jun 2012 19:49 by rodeojack.
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