The Movie Theater: The Most Suicidal Business Model in America

The Movie Theater: The Most Suicidal Business Model in America

When we were kids, for some of us still now as adults, the concept of a movie theater is nothing more than a place to escape, and sink to a different form of entertainment, leaving behind our trials and problems, if not just for two hours. We see everything as overpriced, the quality as subpar and for the better part, the customer service lacking. With the average ticket price at an all-time high of $8.57, and the boom of digital media, and higher quality home entertainment systems, one could safely assume that the whole idea of movie theaters themselves, was a flawed and dying premise. We saw these results in 2017, which featured the worst box office summer in at least a decade, brandishing only $3.8 Billion, a 14.7% decrease from the previous summers earnings. Any expert could say this is the end of the movie theater, and we are bound to see a crash in the market unlike any we’d seen before for this industry. However, I am going to show you why they’re wrong.

My History with Cinema

I’ve been a part of the movie-going industry for six years now, working at a small three-plex. Throughout my first four years, I’d gotten a taste of plenty of angles, from cleaning, to projection maintenance, and even interacting with studio executives, and seeing how they run things behind doors. I was very fortunate to be working in a theater with staff that cares about customer experience, and of the quality of the workplace. Because of this, when I would defend the industry against anyone who had poor experiences, I would cite the theater that I worked at, assuming other theaters had the same understanding of what going to the movies should be like. In early 2016 I was proven dead wrong. I began working at a six-plex, one that suffered from a litany of issues. It was a theater more akin to what your average theater looks like and what your average theater costs. This opened my eyes to reality, where seeing movies in the theater was gross, costly, and not worth the trip. Why see something like Solo: A Star Wars Story in the theater, when you can effectively spend less money watching it at home in only a few months. In my experiences at both theaters, I began to learn just how toxic this industry was.

 
Solo: A Star Wars Story , Photo by Jonathan Olley, Courtesy of Lucasfilms Ltd.

Solo: A Star Wars Story, Photo by Jonathan Olley, Courtesy of Lucasfilms Ltd.

 

Prices and Payments.

The rise in ticket prices is not something that movie theaters across the country just decide all at once. It’s brought on by trying to maintain that same profit line that was met at the end of the previous year. As a small number of people have stopped going to films, prices needed to increase. The concept of raising a ticket price is null and void, as with every passing year, studios continue to take off a higher percentage, leaving cinema owners with one choice; concession prices. There has been a widespread disdain from patrons about the comparison between the prices of candy and water at a movie theater, versus the gas station two doors down. Consider it from this perspective: when a gas station buys in a stock of candy, they purchase in bulk, getting up to hundreds at a time, as they know they will sell out of it before it has a chance of reaching expiration. With a movie theater, however, they buy in much smaller quantities, garnering a much higher rate per order. Compounding this, with the knowledge we have that theaters make as little as 30% on movie tickets, the only place where profit can be made is on concession, leaving an already high price to break even, to soar even higher.

Oversaturation. In 1977, Star Wars: A New Hope opened in cinemas across the country and took America by storm. Lines down the street, people seeing the film six, seven, eight times in a week, and spending so much money, that it’s a wonder they could afford it. People will go on about how there was almost never a seat in the theater by the time the film hit opening credits, but it’s important to remember, at its widest release in 1977, Star Wars was in as little as 1047 screens across America. To compare, Star Wars Episode VII: The Force Awakens opened its very first weekend in 4134 screens. As a result of this, many areas with several theaters close together failed to see more than one or two sold-out shows over its entire run. It’s a very deflating feeling, but not a sign of a dying industry at all, but of one that has too much in too little of a space.

Home Media and Streaming.

We live in a time where Netflix and Amazon produce more original content in a year than most studios will in ten years, where convenience has more sway over consumers than quality. In the modern era, it’s rare to see a wide release film remain in theaters for more than ten weeks, with most dropping down to as little as fifty screens by that point. And even the titans of the box office, such as Avengers: Infinity War, only remained on screen for eighteen weeks. This is because Infinity War released on Blu-Ray and 4K on August 14th, just 109 (Less than four months) after its release in theaters. This space becomes even smaller when you consider that Infinity War was able to release on digital on August 7th, inspiring users to make the switch to digital with the reward of seeing the film at home a whole week before anyone else. Compare this now to Jurassic Park, released on June 11th, 1993. It stayed on screen in cinemas for 71 weeks, an astounding four times as much as the largest films of today! This can be attributed to Jurassic Park being released on VHS on October 4th, 1994; 478 days after its opening release in theaters. This rush to release films on home media has created a pressure on movie theater owners, with large chains like AMC and Regal pushing back. Roma, a recently released Netflix film that garnered ten Oscar nominations, including Best Picture, was barred from AMC’s best picture marathon, as it did not abide by the 90 day window, stating that theatrical releases must only be shown in cinemas until after a ninety day point, to avoid cutting into cinema profits. A window that is now four times as short as it was twenty years ago. Some larger studios, such as Disney and 20th Century Fox push to preserve the moviegoing experience, with Disney CEO Bob Iger going on record saying they would “We wouldn't make a Star Wars movie for this [Disney+] platform.” and both studios including short “Thank you’s” before their films play in theaters. Several studios and large theater chains have also pushed to destroy planned agreements to shorten the ninety day theatrical window to as short as twenty-one days, with corporate owned studios claiming that there is no money to be made by movie theaters after the end of the third week of engagement, an arguable, but overtly untrue claim.

Roma,  Photo by Carlos Somonte, Courtesy of Netflix

Roma, Photo by Carlos Somonte, Courtesy of Netflix

The Undying Power of Crowd Entertainment.

It’s difficult to compare modern moviegoing to early AD gladiatorial combat, but at it’s basest form, they aren’t that different. You get a drink with the boys, have a night to kill, so you goto the box office, pick up some tickets, buy some food and drink from somebody who you start to think is too young to work there, and then sit down and watch some high-quality entertainment. For as long as humans have existed, and for as long as they do, they will always travel in crowds. We have a unique suffrage of loneliness, that compels us to go out and see something together. Some people do this because they like seeing unique reactions from other moviegoers, others because they just don’t want to be alone. While of course, gladiatorial combat phased out, it became something new in modern sports. You see hundreds of people in the audience of every football, baseball and basketball game. It’s hard to find a popular Broadway show that isn’t sold out, and whenever you go to the movies, there’s always somebody else there. And everything else I’ve listed has had a moment where the populous thought it was over. Tennis and golf used to lead as prevalent sports, and as their popularity fell, it was assumed they were done for, but, while the crowds have fallen, they’re both still very sought after sports to watch. And in the late 2000s, people thought Broadway was over for, but now, with the rise of musicals like Book of Mormon and Hamilton, Broadway is as popular as ever. The same will be valid for movie theaters. There will always be a franchise that brings in customers. Regardless of income or economy, if people want to see a movie, then they will come. I imagine in ten years time, there may be as few as 75% of movie theaters open, as there are now, but the moviegoing experience is not something that will be going away for a long time.

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