$35 for a Movie Ticket?

DebSF -- April 7th, 2008

Locally, the movie market is mostly served by #1 US theater chain Regal Entertainment (over 6,300 screens and 531 sites.  Second is AMC Entertainment, counting 5,586 screens, with Cinemark USA coming in third, with 3598). Right now, the biggest audience for films is teenagers, too young for bars, but still needing and wanting to get out of the house. So, that’s the demographic at which the largest portion of studio movies are aimed. But econ blogs have been buzzing over the last few days about this report from Variety about the long-awaited reaction of movie theater owners to increase competition from DVD’s and rental markets: go for the grownups:

Village Roadshow Ltd., Act III, Lambert Entertainment and the Retirement Systems of Alabama pension fund have partnered to bring the luxury cinema circuit Village Roadshow Gold Class Cinemas to the U.S.

The partners will spend $200 million to build 50 theaters nationwide over the next five years, with the first two venues set to open in South Barrington, a suburb of Chicago, and the Seattle suburb of Redmond in October. Others are planned for Fairview, Texas, near Dallas-Fort Worth, and Scottsdale, Ariz.

Each complex will sport theaters featuring 40 reclining armchair seats with footrests, digital projection and the capability to screen 2-D and 3-D movies, as well as a lounge and bar serving cocktails and appetizers, a concierge service and valet parking.

But the circuit will especially push its culinary offerings — made-to-order meals like sushi and other theater-friendly foods from on-site chefs (a service button at each seat calls a waiter). Moviegoers will have to pay extra for any food they order, however.

Ready to pony up $35 for a movie ticket— the cost of a ticket at one of these high end theaters — plus food, valet parking, etc. to see the Other Boleyn Girl or, even, say, No Country for Old Men?

As of 2007, there were more than 38,000 indoor movie screens in the US. Dan Ackman, writing for Forbes a few years ago concluded that, on average, movie theaters are working at 12% of capacity or less. That’s no surprise given that 80% of the revenue comes in the three weekend days, meaning four days a week most theaters are nearly empty, hardly earning enough to cover fixed costs.

You might think that this large number of theatrical screens across the country would allow for a wide variety of films to be available at one time.

You’d be wrong.

The opposite has happened. At this point, all the chains (Regal is a prime example) have the same business model – show the biggest hits as soon as they are available. If they are megahits, show them on two or more screens in the same cineplex, with staggered starting hours. The best moneymakers bring in a quick-decision making crowd who wants to be in the theatre as soon possible to see the hottest films, generally films that are already pre-sold thanks to: 1) big stars, 2) remakes/sequels and/or 3) enormous marketing campaigns. Those are the ones that the theater chains want; it’s why the same set of 15 to 20 movies plays in every theater at the same time.

So maybe they just need better movies to get the grownups back. I don’t know that I’d pay $35 for a recliner and sushi to see Dark Knight at the Regal Stadium 14 behind the mall. On the other hand, throw in one of these and, damn, you’ve got yourself a deal.

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