So how do theaters make their money? Concession Margins. Theaters can stay in business because the profit margins on drinks and food is so high. Mke is likewise really cheap, and they also charge a huge markup for it. Their fixed costs with employees also leads to zero marginal costs for movie theaters in regards to selling concessions. Looking at the price discrimination graph below, Movie theaters markups in their concessions are reflective of second degree price discrimination, meaning that the theaters charge a different price for different quantities. Price discrimination is the action of selling the same product at different prices to different buyers, in order to maximize sales and profits. The tickets are a form of price moneey as well for their are different ticket prices for certain age demographics. In the case above, the seller charges a higher per-unit price for fewer units sold and a lower per-unit price for larger quantities purchased hence why theaters still implement family deals to attract customer initiatives.
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In March of , Justin Thompson, a year-old security technician from Livonia, Michigan, decided to go to the movies. We dug through concessions data from AMC, Cinemark, and a number of other theater chains to compile rough averages of how much certain items cost. Then, we compared these prices to the typical street price you might pay at a convenience store. It should be said that movie food and beverage prices vary widely by geographic region, theater size, and a number of other factors. The figures you see here are rough, non-definitive industry averages — but they still paint a bleak picture. Allen Michaan was just 19 when he built his first movie theater in the s. When a theater wants to show a film, it must agree to pay the distributor a percentage of all ticket sales. Instead, they think of movies as a loss leader : their primary goal is to get as many people through their doors as possible, even if it means breaking even or losing money on the price of admission. And this revenue generates much higher profits. This strategy of selling a primary good at cost or at a loss and making the bulk of profit on a complementary good like popcorn is a form of the widely employed razor and blades business model. Microsoft, for instance, will sell its Xbox consoles at a steep loss to get people to buy them, then make healthy returns on games and accessories. Profits from popcorn, he says, are used to pay off the high overhead costs of running a theater: staff, rent, AC, utilities, and the constant upgrades Surround Sound, IMAX, 3D that consumers demand. And those who do go are attending less: In , the average moviegoer paid for only 3. Consumers have cited the high cost of tickets and concessions as a main deterrent to seeing a movie. In turn, theaters have made efforts to lower these prices, ranging from refillable popcorn buckets to annual subscription models. You should check out our new premium publication called Trends. And each week we reveal our findings in a newsletter update. Click here to learn more. Why is movie theater popcorn so outrageously expensive? BY Zachary Crockett.
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Narrator: So, I just saw the new «Spider-Man. Movie theaters are like theme parks or carnivals. Once inside, you play by their rules. And if you’re like me, you spend way more than you expect to. AMC isn’t really selling you a movie ticket. They’re selling you this food. You can’t get in here without spending money. It all starts with the ticket. Going to see a movie means you have to spend at least the cost of admission. But if you think that money is going to the theater, you’re wrong. The bulk of that ticket price goes back to the distributor. And if you want to see a higher-quality format, you have to pay a huge premium. But it doesn’t really matter how much your ticket costs, because if you’re going to a movie theater, chances are you’re buying some food.
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The only thing nicer than enjoying buttery popcorn and a new film is doing so while saving money. Through these programs, you can earn free concession upgrades, free refills and free snacks. You can check some of the best credit cards for rewards to find the right one for you. Make sure your credit score is high enough to qualify before applying for a new card. You can check two of your scores for free on Credit. This is an especially good option for families with children. Bonus sharing hack: Eliminate fighting over the popcorn, and the need to pass it around, by bringing your own bags to divvy it up.
Top 10 Sneaky Ways Movie Theaters Get You To Spend More Money
And now that another major movie house chain has announced it is officially banning patrons from bringing in outside snacks, movie goers will face the choice of either paying up or struggling to hear the film over the sound of their rumbling stomachs. SmartMoney reports on just how much the theaters make at the concession stand:. Instead, customers are there to eat and buy, obviously soda and junk food, at seriously marked-up prices to justify the money the theater paid to the movie studios and distributors for the right to show the concessiin. Will theaters try to stop, say, a mom from feeding her kid a few animal crackers, some Goldfish, or a couple slices of apple? Things could get ugly if ushers start policing the aisles, pointing theatrrs at patrons, and asking where that suspiciously normal-sized box of Raisinets was purchased. A recent report said that one of those monster tubs of movie popcorn covered with that creepy yellow butter-like syrup contains as much salt as you should consume in a full day.
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