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Small Business  
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Why does that popcorn cost so much?
Think you'd like to run a movie theater? Better butter up on snack sales.
March 12, 2002: 2:07 PM EST
By Annelena Lobb

It's huge! It's gigantic! It's the biggest box of Snowcaps you've ever seen! And it's got a price to match.

What is it with movie theater snacks, anyway? There's got to be something wrong when a "small" popcorn bag is the size of the average movie-goer's head.  graphic

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What's wrong is that you thought you were going to a movie theater. When you go to the movies, you're really going to a candy store.

"Owners joke about being in the candy business," said theater owner Howard Edelman, proprietor of Movieland Cinemas, an independent string of cinemas in the Long Island, NY-area. "If you didn't have concessions at a movie theater, there would be no movie theater. We have movies just to get people in to buy popcorn and candy, where we make our money."

Tickets

Most of the money from ticket sales goes back to the movie studio. A film booker leases a movie to a particular theater for a set period of weeks. The percentage of ticket sales that the studio takes decreases on each week that a movie is in the theater. If the screening was arranged by an independent middleman, he also takes a slice. So the movie has to pull in sizeable audiences for several weeks in order for theater owners to make any serious profits.

  graphic  Where movie theaters make their money  
  
Movie tickets: From 20 to 55 percent of ticket price, increasing the longer the movie is shown there.
Snack sales: For theater owners, this is where the real money is made. Concession companies may pay up front to run this part of the business.
Trailers: Movie studios pay theaters to show trailers based on how many people saw them.
Adverstising: Theaters split the $50 to $100 fee for ad slides before movies with local advertising agents.
  

During the film's opening week, the studio might take 70 to 80 percent of gross box office sales. By the fifth or sixth week, the percentage the studio takes will likely shrink to about 35 percent, said Steven Krams, president of International Cinema Equipment Co.  graphic

If you've got a blockbuster like Titanic or The Lord of the Rings, with audiences that keep streaming in for weeks, everybody's happy -- especially theater owners.

The munchies

That's why the extras -- especially the concession stand -- are so important. Without pricey snacks, most theaters couldn't stay in business.

Studios also pay theaters to show trailers, Edelman said. But they pay for them after the fact, based on the number of people who saw them.  graphic

"Studios send a couple of new trailers every week and they send new commercials. We have to call in our numbers every night to the film companies, and they give you 'x-amount' per person," Edelman explained.

Finally, tidbits like local advertising can generate revenue for the theater as well. Most theaters have slide projectors with ads that play before the movie begins. An advertising agency charges local businesses about $50 to $100 a month to show their ad, and the movie theater takes half, Edelman said.

Costs

The costs of running a theater include the price of building the theater (or leasing it), utilities, equipment and maintenance, the cost of leasing the actual films, and the cost of paying their employees.

And theater owners have to weigh the benefits of certain cost-reduction strategies. Concession companies, for example, may give $25,000 to $50,000 to the building of a new screen, if the theater will contract with them for several years and split profits made on snacks, Krams said.  graphic






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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.