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» Film-Tech Forum ARCHIVE   » Operations   » Ground Level   » Tickets vs Concession Profitability for the 4 biggest chains (Page 1)

 
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Author Topic: Tickets vs Concession Profitability for the 4 biggest chains
Mike Frese
Master Film Handler

Posts: 465
From: Holts Summit, MO
Registered: Jun 2007

- posted 02-22-2015 10:28 AM      Profile for Mike Frese   Author's Homepage   Email Mike Frese   Send New Private Message       Edit/Delete Post 
So we still want to promote the idea that movie theaters do make much money off of ticket sales?

Regal
Average ticket price: $9.07
Cost of Movies: 53.1%
Net per ticket : $4.25
Per Cap: $3.83
Cost of Concessions: 13.2%
Net Concession income per person: $3.32.
56% of the operating profits come from ticket sales

Cinemark
Average ticket price: $6.79
Cost of Movies: 53.5%
Net per ticket : $3.16
Per Cap: $3.63
Cost of Concessions: 15.9%
Net Concession income per person: $3.05
51% of the operating profits come from ticket sales

Carmike
Average ticket price: $6.98
Cost of Movies: 54.6%
Net per ticket : $3.17
Per Cap: $4.35
Cost of Concessions: 11.7%
Net Concession income per person: $3.84
45% of the operating profits come from ticket sales

AMC
Average ticket price: $9.47
Cost of Movies: 52.8%
Net per ticket : $4.47
Per Cap: $4.29
Cost of Concessions: 14.4%
Net Concession income per person: $3.67
55% of the operating profits come from ticket sales

Oh......which chains have more big screens and fancier seating? Looks like people are paying for those.

Sources of information: Most recent 10-Q SEC filings

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Lyle Romer
Phenomenal Film Handler

Posts: 1400
From: Davie, FL, USA
Registered: May 2002

- posted 02-22-2015 11:02 AM      Profile for Lyle Romer   Email Lyle Romer   Send New Private Message       Edit/Delete Post 
You are WAY oversimplifying the financials. You are not quoting operating profits, you are quoting gross profits (sales-cost of goods sold).

There are a lot more operating costs involved in showing the movies than there are in selling concessions. All of the projection and sound equipment CAPEX must me amortized over tickets sold which cuts into the "real gross profit."

Then you have the lease (or mortgage) and payroll to pay for. The gross profits are used to pay for these expenses and then get you to a net profit.

If you take the concession sales out and tried to operate solely on ticket sales, you'd be hard pressed to stay in business for 6 months.

Regal reported a net profit of $105.6 Million on $2.99 Billion in revenue. That's a 3.5% margin. If you remove the approximately $700 Million in gross concession profit, they would have LOST $600 Million.

Wal-Mart, which is a low margin business, had an approximately 5.7% margin.

I don't know what you set out to prove with your post. Nobody ever said that exhibitors don't get any income from ticket sales. They are only profitable because of concession sales.

Look at it this way. If Regal took out concession sales, they'd have to make up $3.32 per patron in gross profit. This would require increasing the ticket price by $7.08, making the average ticket price $16.15 to make the same profit.

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Terry Lynn-Stevens
Phenomenal Film Handler

Posts: 1081
From: Toronto, Ontario, Canada
Registered: Dec 2012

- posted 02-22-2015 12:37 PM      Profile for Terry Lynn-Stevens   Email Terry Lynn-Stevens   Send New Private Message       Edit/Delete Post 
quote: Mike Frese
Oh......which chains have more big screens and fancier seating? Looks like people are paying for those.
Why not post Cineplex Canada's numbers? Their CPP is somewhere close to $5.50 per person.

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Mike Blakesley
Film God

Posts: 12767
From: Forsyth, Montana
Registered: Jun 99

- posted 02-22-2015 02:46 PM      Profile for Mike Blakesley   Author's Homepage   Email Mike Blakesley   Send New Private Message       Edit/Delete Post 
I think the whole "movie theaters make all their money on concessions" belief arose from the "90/10" deals that are still existing in the industry. Some people were led to believe that the theaters were paying 90% of the ticket sales to the film companies, so it's just logical for them to think that most of the profits come from concessions.

What they miss is that the 90% only applies to the gross after the house allowance is deducted, which results in the more realistic 50 to 60% actual cost to the exhibitor.

But the fact does remain that if you took the concessions away, most theaters wouldn't be able to stay afloat.

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Justin Hamaker
Film God

Posts: 2253
From: Lakeport, CA USA
Registered: Jan 2004

- posted 02-22-2015 04:08 PM      Profile for Justin Hamaker   Author's Homepage   Email Justin Hamaker   Send New Private Message       Edit/Delete Post 
What's interesting is my theatre has significantly lower concession prices, yet our concession per capita is significantly higher than any of these. However, I am not willing to make a direct correlation between lower prices and higher per cap because our other theatre has the same concession prices and their per cap is more in line with AMC's.

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Mike Frese
Master Film Handler

Posts: 465
From: Holts Summit, MO
Registered: Jun 2007

- posted 02-22-2015 04:16 PM      Profile for Mike Frese   Author's Homepage   Email Mike Frese   Send New Private Message       Edit/Delete Post 
Relax Lyle. I have never said that theaters should NOT be selling concessions but that they need to be honest with the public.

Mike B. is talking about what my main point is: The continued allowance of letting people believe that movie theaters HAVE to charge high prices on concessions since they do not get to keep much of the ticket grosses. I have seen many theater owners in the crowd sourcing initiatives say the same thing.

I see new stories on a regular basis mentioning that belief.

I was only looking at where the profits are coming from.

BTW, Capex is a pretty small amount for the big chains. Most only spend between 6-8% of their revenues. The landlords are fitting a good part of the bills for the re-seating initiatives that the chains are undertaking right now.

Terry -I do not care about Canada for this project. Your population is what 10-15% of the US? And your currency is different too. Sorry man.

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Lyle Romer
Phenomenal Film Handler

Posts: 1400
From: Davie, FL, USA
Registered: May 2002

- posted 02-22-2015 08:24 PM      Profile for Lyle Romer   Email Lyle Romer   Send New Private Message       Edit/Delete Post 
quote: Mike Frese
The continued allowance of letting people believe that movie theaters HAVE to charge high prices on concessions since they do not get to keep much of the ticket grosses. I have seen many theater owners in the crowd sourcing initiatives say the same thing.
They don't HAVE to charge high prices on concession items but if they don't then they will HAVE to charge more for tickets in order to make the same (or any) profit. Plus, if you cut the concession prices in half and you double sales (which won't happen but for argument's sake let's say you do), you will make less profit. This is because your margin goes down.

quote: Mike Frese
The landlords are fitting a good part of the bills for the re-seating initiatives that the chains are undertaking right now.
You have obviously never run a business that involves a lease with a landlord. Landlord's don't just foot the bill for something. They will give "Tenant Improvement" money but in return, they will increase the rent, increase the guaranteed term length or both. The expense might not show up directly in CAPEX but I can assure you that the theatre pays for those upgrades.

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Mike Blakesley
Film God

Posts: 12767
From: Forsyth, Montana
Registered: Jun 99

- posted 02-22-2015 09:34 PM      Profile for Mike Blakesley   Author's Homepage   Email Mike Blakesley   Send New Private Message       Edit/Delete Post 
quote: Mike Frese
I have never said that theaters should NOT be selling concessions but that they need to be honest with the public.

Mike B. is talking about what my main point is: The continued allowance of letting people believe that movie theaters HAVE to charge high prices on concessions since they do not get to keep much of the ticket grosses.
I don't think there's any big conspiracy by the movie industry to hide the facts from the public. I don't remember any article from NATO, for example, that makes the "90% of tickets go to the studios" claim. It's always from some semi-connected source, like Entertainment Weekly.

But it is a fact that theaters need concessions to survive. It wouldn't make any sense for NATO to put out a big article explaining that the 90% thing is somewhat of a misconception -- all it would do is confuse people.

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Andrew Thomas
Master Film Handler

Posts: 273
From: Pearland, TX, USA
Registered: Jun 2012

- posted 02-22-2015 11:25 PM      Profile for Andrew Thomas   Email Andrew Thomas   Send New Private Message       Edit/Delete Post 
We have made some pretty detailed posts about how movie theaters make money. We are always truthful, that tickets do generate profit, but each dollar you spend at the concession stand generates more profit than each dollar you spend on tickets.

I've explained per-cap on concession, where we are, where we want to get.

And we have seen a gradual increase in our per-cap each quarter we have been open (finishing our 5th quarter next month). And we are soon to add some "premium" food options that we expect to help continue that growth.

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Jesse Skeen
Phenomenal Film Handler

Posts: 1517
From: Sacramento, CA
Registered: Aug 2000

- posted 02-22-2015 11:55 PM      Profile for Jesse Skeen   Email Jesse Skeen   Send New Private Message       Edit/Delete Post 
For theaters that show advertising, where does the revenue from that factor in?

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Justin Hamaker
Film God

Posts: 2253
From: Lakeport, CA USA
Registered: Jan 2004

- posted 02-23-2015 01:31 AM      Profile for Justin Hamaker   Author's Homepage   Email Justin Hamaker   Send New Private Message       Edit/Delete Post 
Jesse, ad revenue is just part of the equation. You have to remember that many theatres are heavily leveraged in debt right now with the digital conversion. Ad revenue just helps pay the bills.

While it may be false that 90% of box office revenue goes to the studios, the reality is the percentage is constantly creeping up in the studio's favor. If I remember correctly, my theatre was about 56% in 2014. It's also almost universal that theatres are paying an aggregate percentage rather than a sliding weekly scale. There is very little advantage in playing a movie that few extra weeks to take advantage of the more favorable percentages.

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Steve Guttag
We forgot the crackers Gromit!!!

Posts: 12814
From: Annapolis, MD
Registered: Dec 1999

- posted 02-23-2015 06:40 AM      Profile for Steve Guttag   Email Steve Guttag   Send New Private Message       Edit/Delete Post 
And quite the contrary. If you look at the numbers for the VPF plans...one is "rewarded" for more titles played so there is a "desire" to move movies in and then move them out with a VPF payment for each new title. Furthermore, presuming a new movie will do more business than an older one, that is more people to go past the concession stand. Certainly there are exceptions and good movies will still hang on but the incentive for running a movie longer as attendance drops has dramatically reduced.

Now in the post VPF world, the need to swap movies out strictly on that incentive will go away but a theatre will still do what it can to get as many people past that concession stand (or ordering off the menu in the theatre).

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Matt Fields
Jedi Master Film Handler

Posts: 545
From: Ohio, United States
Registered: Jun 2005

- posted 02-23-2015 06:53 AM      Profile for Matt Fields   Email Matt Fields   Send New Private Message       Edit/Delete Post 
Steve -

Studios seem to be trying to fight that by wanting more weeks upfront.

I have a small four screen and used to be able to book most movies on a two week deal, almost everybody is three weeks now.

I have no VPF deal, but doesn't seem to matter.

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Mike Blakesley
Film God

Posts: 12767
From: Forsyth, Montana
Registered: Jun 99

- posted 02-23-2015 09:26 PM      Profile for Mike Blakesley   Author's Homepage   Email Mike Blakesley   Send New Private Message       Edit/Delete Post 
I haven't noticed an increase in the 3-week requirements around here yet, but it could be because we're one screen. I think the last 3-week deal we had was the most recent Hunger Games movie. I guess with 4 screens it's not surprising they want 3 weeks from you.

I'm dreading the Star Wars movie... Wouldn't be surprised to see them wanting 4 weeks on that.

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Manny Montes
Master Film Handler

Posts: 270
From: United States
Registered: Feb 2010

- posted 02-24-2015 02:04 AM      Profile for Manny Montes   Email Manny Montes   Send New Private Message       Edit/Delete Post 
As others pointed out, changing the 90% number is just confusing to the public. As is they still complain ever after being explained that majority of box goes to the studios.

In addition you've got the idea that by lowering concession prices you will sell more, it just doesn't pan out that way. I think that you've got a set % of people that won't visit the stand no matter how cheap it is, they just don't need to eat for those 2 hours, or perhaps don't like popcorn, soda, etc (yes, they exist).

I think as movie theaters continue to improve, home theater improves, etc we're going to see a fundamental shift in the industry, where less theaters operate (not saying the sky is falling, but I doubt the current theater count can be sustained), but the ones that do will be decided by guest service, not just amenities. I've seen it first hand as well as through research that guests now are as discerning as ever and their prior experiences rank highly depending on how they feel their treatment will be. Especially now with digital and being able to interlock in weird ways we could never do with film. If I look online AMC and Cinemark both have almost the same showtimes, so convenience is becoming a smaller and smaller part of a guest decision on where to go.

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