Slate on the ‘Popcorn Palace economy’

posted by Patrick Crowley on January 5, 2006 at 4:01 am

In a new article on Slate, Edward Jay Epstein looks into the economics of the exhibition business.

While most of you are probably aware that theaters make much of their profits from the concession stand, there’s plenty in this article you might not have thought about before.

Once upon a time, movie studios and movie theaters were in the same business. The studios made films for theater chains that they either owned or controlled, and they harvested almost all their revenue from ticket sales. Then, in 1948, the government forced the studios to divest themselves of the theaters. Nowadays, the two are in very different businesses. Theater chains, in fact, are in three different businesses.

First, they are in the fast-food business, selling popcorn, soda, and other snacks. This is an extremely profitable operation in which the theaters do not split the proceeds with the studios (as they do with ticket sales). Popcorn, for example, because of the immense amount of popped bulk produced from a relatively small amount of kernels—the ratio is as high as 60:1—yields more than 90 cents of profit on every dollar of popcorn sold. It also serves to make customers thirsty for sodas, another high-margin product (supplied to most theater chains by Coca-Cola, which makes lucrative deals with theater owners in return for their exclusive “pouring” of its products). One theater chain executive went so far as to describe the cup holder mounted on each seat, which allows customers to park their soda while returning to the concession stand for more popcorn, as “the most important technological innovation since sound.” He also credited the extra salt added into the buttery topping on popcorn as the “secret” to extending the popcorn-soda-popcorn cycle throughout the movie. For this type of business, theater owners don’t benefit from movies with gripping or complex plots, since that would keep potential popcorn customers in their seats. “We are really in the business of people moving,” Thomas W. Stephenson Jr., who then headed Hollywood Theaters, told me. “The more people we move past the popcorn, the more money we make.”

Comments (15)

HowardBHaas
HowardBHaas on January 5, 2006 at 4:29 am

This is another reason why the intermission should return to long movies, especially a 3 hour movie like the new King Kong, so moviegoers don’t need to miss the movie to obtain refreshments and the related visit to the restrooms. There would also be less disruption, as people wouldn’t need to leave their seats during the movie. Presumably an intermission work work to the beneifit of the movie operators.

William
William on January 5, 2006 at 4:37 am

But remember at the start of the movie, the snack bar person only needs to sell the upsized version of the drink and popcorn. So you have to go to the bathroom in the middle of the movie.

Ed Solero
Ed Solero on January 5, 2006 at 6:23 am

How different would the state of theatrical exhibition be today if not for the anti-trust ruling of 1948, I wonder?

pbubny
pbubny on January 5, 2006 at 8:21 am

Hmmm, one thing I get from that report is that the chains would really prefer that the studios consistently turn out bland movies that are only mildly interesting, so that patrons can step out to the refreshment stand mid-show without feeling any obligation to stay involved with what’s happening onscreen. That prospect is almost as icky as the fake butter on the oversalted popcorn.

IanJudge
IanJudge on January 5, 2006 at 9:21 am

This article seems full of assumptions and innacuracies. The whole part about projectionists and methods of projection shows a complete lack of understanding of how any booth operates, nevermind automated ones. While it may be true that many chain theaters could care less about presentation, I have never heard of any theater purposefully putting the picture out of focus to prevent snafus, and furthermore, doing so does not effect the ‘safety’ of the film not snagging at all. Also, projectionists at multi-screens do not change reels anymore like in the old days, today it is all platters for a multi-plex. One experienced operator can run several screens by themselves with no problems at all so long as they are attentive to presentation issues in general.

The big chains may be stingy with bulbs, though, but I think the real problem there is that few theater managers are aware that old bulbs can contribute to bad picture quality, and few chains care to educate their managers on picture quality. Any education I have gotten on presentation has always been from experienced (and usually union) projectionists who know their stuff, not from the theater management I have worked for.

This article was interesting but poorly researched, if you ask me.

IanJudge
IanJudge on January 5, 2006 at 9:23 am

I should also add that I think all theater owners would prefer the studios made GOOD films that are marketed well, you know, the kind people want to pay to see. Length can be a factor but I’d take a 3 hour movie pulling 500 people a show over 10 shows a day of a 90 minute piece of crap nobody sees.

David Wodeyla
David Wodeyla on January 5, 2006 at 10:27 am

The “over-salted” comments are another one of those urban legends, as audiences that pay the high prices at the stand are more demanding of their popcorn than the author realizes. (although I must admit Managers sometimes joke about it when under the pressure of executives to increase the per-persons) I’ve never seen a rush in the middle of a movie to visit the stand, although you’ll find a few who need to use a restroom after drinking the giant soda.
The comment about focus and gate tension is odd. I never heard of that before.

HornerJack
HornerJack on January 5, 2006 at 5:34 pm

It seems like b.s to me. It is not likely that exhibitors believe that mediocre movies help business. If that were true, then it would imply that the business is in the hands of people so dumb that the business will end in the near future.

My observations of exhibtion are:

  1. Concessions have been priced beyond what some customers are willing to pay. The law of supply and demand has been ignored. More than once I have entered a theater with a friend who has proclaimed he or see won’t pay those prices. I will because I like popcorn and because I know how a theater makes its profits, but the average consumer could care less about how profits are made.

  2. Few theater managers seem to know how to staff concession stands. Theater food service is by nature fast food. The time between buying a ticket and finding a seat is limited. Often, I bypass concessions because I don’t have time to stand in line. Sometimes, once we have found a seat, I’ll go back to the lobby. Point is that I often see concession stands undermanned and overwhelmed.

Ron Meisenhelter
Ron Meisenhelter on January 5, 2006 at 9:38 pm

Unfortunately here in Australia, those customers who aren’t interested in paying inflated prices for popcorn, drinks and lollies, many cinemas now have combined the concession stand with the ticket box. Waiting inline now is longer than ever, as you have to wait extra time as they prepare and serve food as well as sell tickets.

Some cinemas now have an express lane where presold internet tickets can be collected. These tickets are sold on the internet at higher than normal prices – usually $1.00 extra with no discounts available.

John Fink
John Fink on January 6, 2006 at 3:50 am

Another observation I observed is staff doesn’t care about picture presentation. I went to see Memoris of a Geisha at the Clearview Kinnelon 11 last Sunday and told some idiotic usher about about a problem with the framing, he interupted me in the middle, calling his manager by saying “yo, we got a problem up in some theater in the back, go check on it” – thats all. It wasn’t fixed, I didn’t want to sound snobby and get into the importance of mise-en-scene in a movie like that, but… as a young person myself though I take offense to that last comment, I’m ussually the first person to go out and tell them the pictures out of focus or framing. Some chains are high quality, customer driven and they do care (National Amusements), other chains are trying to get you in and out (Regal Cinemas and Clearview). N/A’s aproach is interesting – make going to the movies an event, by doing so they charge significantly more but it’s worth it for the high quality snacks and atmopshere, they encougage you to hang around (and spend some money).

With that said I’d love to see the return of the intermission. Peter Jackson has enough clout, if he said “mandatory 10 minute intermission” they’d do it, even though chains themselves are reluctant to. Bollywood movies ussually have one built in to the story, National Amusements choses it off and keep the film going, but if they did offer an intermission I probably would be inclined to get candy for the next half of the show. If anything Peter Jackson can be unfair to the bladder after that Pepsi you upsided because it was only a quarter more than the medium.

ArchStanton007
ArchStanton007 on January 9, 2006 at 4:39 am

Pretty good piece and similiar to the popcorn-thirst theory, some theaters don’t have any water fountains. Discovered this yesterday at Loew’s 34th St, NYC. Is this legal ???

Having restrooms on one floor is very stupid.
But the screens are nice and big with good projection.

www.laedc.org ( Los Angeles Economic Development Corp) has a good downloadable piece on the state of the film business in general.

ArchStanton007
ArchStanton007 on January 9, 2006 at 4:44 am

P.S.—I totally agree with the comment about Clearview and how crappy a chain it is. Just last night I walked past my formerly beloved Central Plaza Cinema, Yonkers, NY and their outdoor poster cases still have paint stains on them from months ago. I kid you not !!! What the hell kind of management and employees ( gulp !) do they hire?? Has a district manager ever visited this theater?

This theater during General Cinema’s heydey, was the best new single screen theater in the entire county. See my detailed comments under the theater thread itself. CLEARVIEW BITES !!!!

Happy Movie going to all.

StanMalone
StanMalone on January 9, 2006 at 11:02 am

I enjoy reading EJE’s articles on the movie studio business, but before writing on the theatre end of this industry he needs to learn more or get a better researcher. Just a few random thoughts on some of his points:

The last time I changed a reel in a projection booth was 1987 when the last reel to reel house in Atlanta (the GCC Northlake Triple) was converted to platters. I doubt if there is still a grind theatre in America of more than one screen still using reels. Of course he may have been talking about platters and did not know the correct name. If so, his comment about running up to 8 screens is also off. Other than Thursdays (build up and tear down day) most multiplex projectionists usually run twice this many by themselves. Besides, even when the world was full of single screen sites using 2000 foot reels, I do not know of any projectionists, (including myself) who sat there watching the screen all day.

This theory regarding film gate tension is just plain goofy. I guess it might depend on what make of equipment you are using, but the only time I ever had a problem with loose film gate tension, the result was not poor focus, but the film starting to jump, or “jitter.”

As for unattended projectors, I am sure that 99% of projectors running right now are not attended. Once the film hits the screen in frame and in focus it is almost certain to run for its entire length without problems. Don’t get me wrong. This is not the perfect practice. However, given the economics of exhibition these days one look and perhaps another one during the show is about all many projectionists have time for these days.

The main problem here is that many theatres do not have a projectionist at all, but instead add this duty to the managers job, who usually trains the most promising doorman or concession attendant to thread up the projectors so the manager can keep an eye on the concession stand. Many megaplexes have booth “managers” who have the job of maintaining the equipment and seeing that a cadre of “film threaders” is available to do the grind labor. And lets face it. If the job is done right on Thursday night, i.e. properly splicing the print and previews together in frame, the rest of the week should take care of itself. With the post 1995 film stock that does not break, even when you need it to, which is another story, and with the vast majority of theatres playing new prints, if a print runs through on the first showing it will probably run OK for its entire run.

I do not like this state of affairs as it has cost me more than a few jobs over the years. However, there is no denying the reality of the situation. Besides, most theatre companies are still haunted by the memory of the days when projection was considered a trade or craft. As both a manager and later as a projectionist, I knew of owners and supervisors who hated the fact that they needed a competent, dependable projectionist and thus had to pay someone (especially union, but non union as well) a decent wage to keep the picture on the screen. With the advent of automation and platters, they are determined not to let this happen again. I have seen several examples of theatres that have a film threader working the booth one day but tearing tickets or cleaning up auditoriums the next just to make sure no one gets the idea that their only job is to work the booth. Even when running the booth they were usually called downstairs to do floor work when there was no threading to be done.

As to the ownership end of theatres, I have no direct knowledge. However, even I know that the 50 / 50 take between theatres and distributors is way off. 75 / 25 is more like it, and that is over the course of the entire run. For the first week or so it is 90 / 10, and it is not the theatre that gets the 90. 30 years ago in the age of limited prints and long exclusive runs, theatres could make a nice profit showing a movie with “legs”, that is one that would still be doing good business after 6 or 8 weeks when the split might be closer to 50 /50. Now things are different. In this age of 4000 print releases playing on multiple screens in every megaplex in town, everyone who wants to see a movie before the DVD release has seen it by the time the second weekend is over. The print then moves down to the end of the hall where the 110 seat houses with mono sound and tiny screens are located to finish out the balance of their contracted for run. By that time they are usually alternating a single screen with some other washed up four week old former blockbuster or playing at night while a played out childrens movie plays in the afternoon. Or vice versa.

As for the rest of the article, I found it pretty accurate in its description of the relationship between the concession stand and the theatre and where the priority is, but nothing that common sense would not tell the average movie-goer. I am sure the same general theme would apply to the fast food or discount retail business or any other that relies on large volume, quick turnover, use of minimum wage employees, and an obsession with keeping expenses to a very bare minimum.

dabutcher
dabutcher on April 16, 2006 at 8:57 am

I just joined this site recently and am catching up on what, for most of you, is old news and comments. Without rehashing all of the above comments(although most, while sometimes differing, were cogent and interesting)I would like to boil some of it down to this; almost everyone in the motion picture business forgets at one time or another that they are involved in both a product industry as well as a service industry. Ideally, a perfect balance between the two would result in an equally ejoyable experience everytime you went to a movie. Unfortunately, this is the real, human-run world and quality varies as much in theatre experiences as it does anywhere else in life. That is not to say we should settle for our disappointing experiences as “That’s to expected sometimes”. We should always keep a keen and diligent eye on individual movies and theatres that are shoddy in any sense of the word and do our utmost to correct it and protest it through forums such as this, as well as to the individuals responsible,whether they be producers,chain owners,distributors,theatre owners, or simply the manager. If a manager (and I was one for years) is diligent, most often the problem lies with the quality of the film, which is usually beyond his or her control. If he is made aware of problems, he will do his best to correct them, unless his hands are tied by his employers. Then it is up to the individual to go ever higher in establishing just who is responsible and dealing with them. Some of this is obvious, but it has always bothered me when I was not made aware of a problem so I could attempt to fix it. Training is usually the key, but one of you was right when you said low pay can reflect lower service standards. It was one of the reasons I left a job I loved for a job I could live on. Anyway, I look forward to any responses there might be.

Mike Rogers
Mike Rogers on December 4, 2010 at 9:43 am

Nothing I didn’t already know.

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