How do movies make money from theatres

The attention and interest generated by the article I put up the other day on Why Commercials Before Movies Is Worse Than Piracy continues to generate a lot of tjeatres and so the topic. Who gets that money? Most of the money that a theatre takes in from ticket sales goes back to the movie studio. The studio leases a movie to your local theater for a set period of time. It can get even worse. This percentage will vary from movie to movie depending on the specifics of the individual leasing deal. Can you imagine that? That almost seems criminal. Teatres is an obvious inherent problem with this arrangement.

What happens to the money when two friends decide to go to the movies? But for almost all movies, the money starts down a well-worn path. Profits, if any, come later. How the Money Is Divided. The manner in which income is distributed changes from week to week. During the first two weeks, generally, the theater owner’s expenses — the cost of labor, the electricity to run the popcorn machine, taxes, mortgage, depreciation, new carpets — are deducted from the box-office receipts, then the distributing studio gets 90 percent of the remainder and the theater keeps 10 percent. However large the expenses, the distributor is guaranteed at least 70 percent of the box-office receipts. The ticket money that is returned to the distributor is called film rental. The percentage returned drops each week a movie plays, and the average major-studio movie ends up earning about 45 percent of the box-office gross in film rentals.

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Since smaller studios have less clout with theater owners, their movies will earn less than 40 percent of the box-office gross. There are always exceptions. Universal earned 60 percent on the top-grossing picture of all time, »E. But Universal also earned 60 percent on last summer’s »Howard the Duck,» an eagerly awaited film that collapsed at the box office after Universal had obtained high advances and guarantees. It was also surprisingly well-liked by many critics, with several suggesting in reviews that Mr.

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I have heard people on both sides wax lyrical about how they have the raw end of the deal. The second question of how much money ends up with the filmmakers presents a different challenge: namely that the economics of each film are unique. However, most films go through the same basic steps of recoupment, meaning we can trace the common route between box office income and profit for the filmmakers and investors. It might help us to look at the second question first, i. Income comes in from a variety of sources and the money is then handed back to the filmmakers via a number of third parties. Along the way, these third parties can recoup the money they spent up front promoting the film and also charge a pre-agreed fee for their work.

Studio accounting, designed to make sure people don’t collect on back-end deals, is a marvel. Major studios and indie filmmakers alike now spend much of their days looking for new sources of revenue, because ticket sales are no longer the be-all and end-all for films. Perhaps because of piracy or the popularity of Netflix, DVD sales aren’t keeping pace with ticket sales any more. Your Practice. A shocking number of releases did better abroad than in North America, which makes sense when we consider population numbers. Compare Investment Accounts. The highest profile example of a film that bombed in the U. Tools for Fundamental Analysis. The studios seldom release accurate production budgets — and they’re even more leery of revealing how much they spend on other stuff, like promotion. But from common sense and alot of newspaper reading I will state what I know why they can produce so much income. Brexit Definition Brexit refers to Britain’s leaving the European Union, which was slated to happen at the end of October, but has been delayed again.

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Cop suspended for troubling video of ex-NBA player. If they’re given an incentive to shoot a film in Canada or Louisiana or Georgia, producers will usually hustle to do so. Filed to: Movies. As for VOD, revenue from these deals should add hundreds of millions to a studio’s bottom line. For any type of film, whether a blockbuster or an indie production, things like tax incentives and revenues from product placements can help pay down the budget. In the previews you see, the only thing that the companys who produced the film have to do is produce it. And a similar thing happened with the previous Narnia movie, Prince Caspian. They have those famous tidbits at the end of Movies like Monsters Inc. The percentage of revenues an exhibitor gets depends on the contract for each film. Also, some people buy movies for the extra features.

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If you really liked a particular movie, and you’re hoping it made enough money to warrant a sequel, then the wealth of box-office news can be confusing. How can you tell when a movie’s a hit? We asked the experts. If you even pay a little attention to what’s going on in the entertainment industry, it’s easy to get snowed in with box office information that seems meaningful, but is hard to interpret.

If a movie’s number one in its opening weekend, does that mean it’s automatically a hit? Or is the percentage drop between the first and second weekends the important number? And so on. News outlets tend to report lots of box-office data without giving that much context. As Phil Contrino, editor of BoxOffice. They look at the opening weekend — and instantly a movie is a success or a failure.

Sometimes, a film can do well in its first weekend and then stumble in later weekends. Or a film can develop «legs,» like Christopher Nolan’s Inceptionand win a few weekends in a row. Studio accounting, designed to make sure people don’t collect on back-end deals, is a marvel. So how do you know if the box-office gods have smiled enough on your favorite movie that studios are likely to greenlight similar films? The short answer is, it depends on a number of factors, but a rule of thumb seems to be that the film needs to make twice its production budget globally.

For the longer answer, read on. There’s a lot more, although studios are loath to give out numbers. The studios seldom release accurate production budgets — and they’re even more leery of revealing how much they spend on other stuff, like promotion. That’s because those films are often romantic comedies or kids’ movies, which are cheap to make but still need a lot of promotion. And the numbers only go up with bigger films. Of course, the promotional expenses are different for each film — Contrino points out that Fox didn’t seem to waste much money promoting Gulliver’s Travelsonce it was clear they had a dud on their hands.

So Gulliver didn’t lose as much money as it could. And in some cases, a studio will actually have less money at stake than the film’s production budget — sometimes, the distributor will just acquire an already-made film for a small fee, plus marketing costs, says Gitesh Pandya with BoxOfficeGuru. In those cases, the studio can make a profit even if the film doesn’t make back its production budget.

You might have noticed that studios are pushing a lot harder lately to make a film as big a hit as possible in its opening weekend. And films tend to open on more screens right away — a typical big film will open on 4, screens, instead of the hundreds of screens it would have opened on in the s. And it used to be true across the board that the opening weekend was when the biggest percentage of profits went to the studios.

In the past, studios «strong-armed exhibitors into these front-loaded deals, wherein the overwhelming majority of the opening weekend take goes to the studio,» says David Mumpower with Box Office Prophets. Eventually, by the fourth week, the studio’s cut has fallen to around 52 percent in most cases. But after a bunch of theater chains declared bankruptcy in the early s, these frontloaded deals started to fall out of fashion, says Doug Stone with BoxOfficeAnalyst.

Nowadays, with many of the bigger Hollywood blockbusters, the theater chains just get a standard cut of the whole revenue, regardless of which weekend it comes in. The percentage of revenues that the exhibitor takes in depends on the individual contract for that film — which in turn depends on how much muscle the distributor has, according to Stone.

These deals often protect the theaters from movies that bomb at the box office by giving the theaters a bigger cut of those films. You can actually look at the securities filings for the big theater chains, to look at how much of their ticket revenues go back to the studios, points out Stone. So for example, the latest quarterly filing by Cinemark Holdingsshows that So as a ballpark figure, studios generally take in around percent of U.

The highest profile example of a film that bombed in the U. And a similar thing happened with the previous Narnia movie, Prince Caspian. Another big film that made way more money overseas than domestically was Terminator Salvation.

So if a film does incredibly well overseas but flops in the U. As with everything else to do with box office, the answer is «it depends. According to the book The Hollywood Economist by Edward Jay Epstein, studios take in about 40 percent of the revenue from overseas release — and after expenses, they’re lucky if they take in 15 percent of that number. Domestic revenue just counts for a lot more than overseas revenue, says David Mumpower with Box Office Prophets:.

The reason for this is simple. Collecting revenues abroad is a trickier proposition since the dollar fluctuates against foreign currencies. There are also tariffs from these governments in place in order to keep as much money as possible from leaving their countries and going abroad, which is an understandable practice. While the global conglomerates such as Fox, Disney and Time-Warner that run major Hollywood studios can secure sweetheart deals with various local governments, it doesn’t happen for each film.

As such, international box office revenue is much less reliable than in North America. But still, overseas box office does matter, more and. And stars who have a huge global following are more likely to open a movie than ones who are only famous in the U.

A shocking number of releases did better abroad than in North America, which makes sense when we consider population numbers. It’s just a relatively new phenomenon for the industry. Avatar’s performance is a great demonstration of global expansion. That’s how important the global picture has become to Hollywood studios. And the studios get a much bigger cut of DVD revenues than they do of theatrical revenues, because the retailers aren’t as «significant of a middle man» as the theater owners, according to Paul Dergarabedian, president of Hollywood.

There are a lot of costs that go into running a movie theater, and showing movies is all the movie theater does — unlike most places where DVDs are sold. There are some genres of film that do especially well on DVD — like horror films, which are often cheaper to make than other genres to begin with, says Dergarabedian.

A horror movie might or might not break even at the theaters, but it’s sure to make lots more money when it hits DVD. But actually, the trend towards studios depending on DVD sales may have peaked already — infor the first time in a decade, theatrical box office revenue was bigger than home-video revenue, says BoxOfficeAnalysts’ Stone. And this seems to be continuing into Perhaps because of piracy or the popularity of Netflix, DVD sales aren’t keeping pace with ticket sales any.

Says Stone, «Studios can no longer rely on as robust an ancillary market to prop up a failure at the box office. That’s one reason why you’re hearing so much about 3-D — those higher ticket prices are a way to plug the revenue hole from disappointing DVD sales.

And studios are going to start investigating premium video-on-demand services more, as another way to shore up their earnings, says Stone. The A. Charlie Jane Anders. Filed to: Movies.

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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. Popcorn 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.

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Looking at rfom price discrimination graph below, Doo theaters markups in their concessions are reflective of second tbeatres 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 discrimination 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. Thus, high margins under a movie theater framework. Usually towards the end of the movies lease, the audience number starts to really decrease and the higher mqke allocation towards theater at that time means really little. Different films make different deals with theaters, so the exact percentage is different from film to film, but it always involves theaters agreeing to a small cut at the start and an ever growing percentage over time. Ultimately, the real money for theaters comes how do movies make money from theatres their concession stands, despite their actions to generate revenue from ticket sales. Categories: Uncategorized. As I read your blog post, I was mzke much reminded of my hometown movie theater. After buying theatrees ticket, customers walk into a large room, most of which is occupied by a concession stand. Two small hallways on either side of the concession stand lead to the actual theaters. When customers walk into the area with the concession stand, they makr met with large, colorful displays and no easily accessible exit.