Examining the Economics of Movie Theaters
With the popularity of streaming services as a result of the COVID-19 pandemic, which saw many movie theaters close, the flock to cinemas has been challenging. CNBC notes that due to consolidation and location closures, total screens in the U.S. have declined by 3,000 since 2019. There are 40,000 screens today.
How is 2023 shaping up for the movie theater industry?
Audiences have begun coming back to the theater as several movies this summer helped propel their movement to the big screen. The top three movies of 2023 thus far include Barbie, The Super Mario Bros, and Oppenheimer. According to Box Office Mojo by IMDbPro, the worldwide box office gross revenue for Barbie is $1.44 billion, The Super Mario Bros. Movie is $1.36 billion, and Oppenheimer is $949 million.
Where does revenue come from?
Revenue is not solely from ticket sales, as much of those sales go to the studios. One may be surprised to find out how important concessions are to movie theaters these days. CNBC states that although ticket sale revenue is one-third higher compared to concession sales, concessions are more profitable. Moreover, CNBC states that 44% of total revenue at Marcus Theatres, 39% at Cinemark Theatres, and 36% at AMC comes from concessions. Additionally, theaters are getting creative with their concessions and offering higher-quality food items in addition to specialized cocktails and craft beers in order to increase their profits. According to Time Out, traditional snacks such as popcorn, candy, and chips have been tossed aside for more gourmet items like seafood tacos, specialized pizzas, sushi, and milkshakes
Additionally, several theaters are offering theme-based food and beverage specials or promotions to encourage audiences to purchase items in order to boost margins. Such ideas have included father-daughter nights, pajamas and popcorn events, and other festive experiences.
What are cinemas doing to entice audiences?
Since movie theaters are competing with streaming services, as some people do not feel the need to rush to see movies that they can watch in their own homes, theaters have taken creative measures to gain traction from audiences. For example, movie theater owners are using extra space at locations for entertainment purposes such as arcades, bowling alleys, rock climbing walls, bumper cars, ropes courses, ziplines, and other games. Sophisticated bars serving superior food options also take up the footprint of the theater locations. The hope is that the customer will stay longer and spend money on additional experiences or refreshments.
Also, theater operators are investing in such extras as more comfortable seating (even reclining options), better sound systems, projection devices, and higher-quality screens in an attempt to get repeat customers. The New York Times notes that heated lounge chairs that “have built-in trays and buttons to summon waiters” have been installed in theaters. Further, theaters have seats that “move in sync with the movie’s action or provide special effects such as a blast of air during a windy scene”.
Other clever options have seen theater operators move away from traditional movie showings by live streaming concerts and sporting events or hosting trivia nights, exercise events, comedy shows, and other live entertainment.
Final thoughts
Although the pandemic was challenging for the movie theater industry, a recovery is taking place. All in all, audiences have come back to movie theaters in 2023. As director Christopher Nolen wrote in The Washington Post in March 2020, “the combination of that pent-up demand and the promise of new movies could boost local economies and contribute billions to our national economy”.
Sources:
https://www.cnbc.com/2023/02/25/movie-theaters-evolving-not-dying.html
https://www.boxofficemojo.com/year/world/
https://www.cnbc.com/2023/02/08/movie-theaters-upscale-food-empty-seats.html
https://www.nytimes.com/2023/05/31/business/movie-theater-upgrade-pandemic.html
