Everyone has a Boss. Ours is Hollywood

I’ll let you in on the dirty little secret of the ‘Hollywood’ film industry… the vast majority of your ticket price goes back to the film…

I’ll let you in on the dirty little secret of the ‘Hollywood’ film industry… the vast majority of your ticket price goes back to the film company, and the way movie theaters can make any money is mainly by selling concessions. I hear many complaints about how expensive going to the movies is for anyone, and especially for families. It is common for ticket prices and cost of concessions in many cities to add up to $100 for a night out at the movies. Most of the ticket cost goes into the pockets of the film company. Theaters, especially independent theaters, only get a very thin slice of that pie. So concession sales are key to making the business show a profit. With detrimental impact on US agriculture due to global heating, costs for items which contain corn syrup, sugars, chocolate, and of course the popcorn itself, have risen in cost dramatically over the past five years. Theatre owners are presented with either raising concession prices to keep up with the cost of goods, adjusting ticket prices, or making up for the drop in volume of sales in order to compensate. A steady creep of terms from film companies has limited the latitude available for adjusting ticket prices without hurting business, so fewer and fewer options to the theatre owner are up for consideration. This is how the industry has been run for many years, and the bad news coming down the pike for theater owners is that it is going to get worse.

My wife’s family has owned and operated a movie theatre in my hometown for over 45 years. I help run the theatre, and over the course of any given week, everything under the roof can be managed, fixed, scheduled, and cleaned. The business side of running a movie theatre was explained to me years ago as “taking care of the biggest toddler you’ll ever have”. Add in the factor of working at the family business, and it really does make it feel like you are caring for one of your own. But everyone has a boss, and ours is ‘Hollywood’. I’ll just label the film industry as such for simplicity. ‘Hollywood’ is made up of a cast of thousands; from the people who produce and create the films, to the studios, the companies associated with the film, the distribution companies, booking agents, and on and on.

I realize there are many things about the theater industry that most folks don’t know, or understand, because a lot of it is done behind the scenes. Hollywood runs the show. Owning a theater is not like owning a giant streaming device where you get to pick your favorite movie and put it on screen. There are many many hoops to jump through, and many people who hold out their hand for a piece of the pie. So there is a understandable disconnect between many of the moviegoers who come in our doors. We constantly get comments and questions like, “You know what you should show?”, “Why don’t you have the movie I want to see?”, and “Six dollars for a movie ticket? Why is it so expensive?!”, or despite being closed down for five solid months with no income due to the pandemic, “You know what you should do? You should open a Drive-in!”. As for the complaint on the cost of a ticket, and considering that we are almost half the price of an AMC location only 15 minutes away, I am dumbfounded by the lack of comparison shopping, and reasonable conclusion by the customer. Maybe they only go out to the movies once or twice in their lives? It was $3 to go see Cannonball Run, maybe we should fire up the Plymouth Reliant and head over to the show and see what they’re playing now? Sheesh. And as for the common request of showing something specific that we don’t have, a movie theatre has many limitations to what gets on screen. We cannot secure contracts to play certain films if the film company does not consider our theater to be in it’s ideal market. We (the theatre or the exhibitor) also do not make the movies, nor do we control if it’s funny, or entertaining. But we are on the hook if customers don’t like the movies. The paradigm shift in how many consumers interact with movies and online content has been slowly changing the industry for years. People have been making the shift from going to movie theatres, to watching movies on their computers and smart televisions, or their smartphones and tablets as many movies became available at lower prices. The pandemic only accelerated this habit, and also set the expectation for consumer choices going forward. What a slippery slope this has become.

Only mega corporations like AMC, Regal, or Cinemark get to drive many of the factors in the market, set their own terms, or make some sweetheart deal for streaming-on-demand revenue share. The little guys, like our family owned theatre, or even some smaller regional theatre chains, are getting buried by the competition who can out-spend, or consolidate debt, or through sheer number of available screens across the county, leverage access to more product (films). With 18+ screens per location, IMAX and large format screens, fully immersive sound systems, and Barcalounger seating — you become the 800 pound gorilla who gets its way.

Our movie theater was closed for almost five months exactly. We held off reopening due to Indiana’s Back on Track plan to reopen businesses and facilities impacted by COVID-19. We had to tell our staff of roughly 30 people that we would close on March 16th, with no idea of when we would be able to show movies again. After numerous false starts, and weeks of waiting in limbo while we scrambled to put new safety procedures in place, PPE secured or installed, adjusting our ticketing and concessions systems to include as much touch-free transactions as possible, etc. — only to find out we couldn’t open. The process would repeat again and again. We finally opened for movies in August with a number of films from the 1980s and 90s like Back to the Future, Jurassic Park, The Terminator, and Thelma and Louise because no new films were being released yet. Just be patient, we were told by Hollywood. The new films are coming, and we need your help to make them a success. But Hollywood would not release films nationally with so many states still not open, and especially the very important market locations of California and New York. Without these key states being part of the market, Hollywood is very hesitant to take the financial risk of releasing a film. Out theatre, and many others like us were stuck. Stuck waiting on the shipment of product to arrive; and without it, there was no solid business plan to support the model.

As of the last weekend in August, we were open for business with guidelines for customers to wear masks in all public spaces, observe social distancing, and the theatre cannot seat more than 50% capacity in any auditorium and not have more than 250 people in a single space. We can serve concessions without limitations. Some states have imposed lower capacity limits and restricted sales of food and beverage, so our situation could be much worse. The big problem is that the business model for movie theatres is built around mass capacity and getting as many people in seats for multiple shows per day. The pandemic sabotages the entire business model. Before the state allowed movie theatres to be open, we sold popcorn to customers by way of drive-through popcorn pick-up, and then later by opening the building for concession sales only. But after a month of showing older films and some new releases, the moviegoing public has been slow to return. The Hollywood release schedule is proceeding haltingly, and not without some major body blows to theaters. Both Universal and Disney decided to buck the industry model of theatrical release followed by a respectable window of time before making a film available for Video-on-Demand (VOD), or streaming via a platform like Netflix or Amazon. Disney completely pulled the ‘blockbuster’ summer movie release (is there such a thing now?) for Mulan and released the film in China as well as on its own content platform, Disney Plus. Hollywood giants like Disney, who also owns 20th Century Fox, control so much of the product in the market, that small exhibitors rely on their films in order to make a living. So it was a shock to find out that AMC had made deals with Disney to get a part of the earnings from Disney’s streamed content. Is there is no end in sight to the bad news? Disney can take its shows to Disney Plus, and cut out theaters. Netflix, Amazon, and others eat away at the market share, and film companies who are releasing films can dictate steep terms in contracts because they are one of the only people providing content. Remember the pie analogy mentioned at the beginning of this post? We, the small guy, are left standing here to collect the crumbs.

Each of the major films on the release slate this summer has been delayed or removed, for very pertinent reasons due to the pandemic and laws of economics, but small theaters hang their hopes on the possibility that the next film will do it for them. The next big one will save the summer, the quarter, the year… and with each film that’s pushed back or released direct to VOD, our theatre dies a little more. It’s a death by a thousand cuts, and we are just left to stand there and watch it happen.

So if you live in a place where a small local theater is still open, please consider giving them your business. Hollywood gets the majority of the pie, and now, especially now during the pandemic, they get to dictate what flavor of pie is available, how much it will cost, and where folks can eat it. Hollywood is not your friend.