How Movie Theaters Make Money

Do you have any views on how movie theaters make money? Once the projectionists started to run the projectors and you begin eating the pop corns, maybe you are wondering on how movie theaters work in making money from this business, to give you some sort of ideas let us explain to you how it really works.

Movie theaters serve as a venue for viewing our favorite movies.

The movie industry started at the turn of the 20th century, thus making it more than a century of existence. It began with just short motion pictures showed in some small venues, very much different from the current movie houses today. Perhaps you are wondering how it systematically works, let us show it step by step.

Before a movie theater can show the movie to the viewing public it undergoes certain procedures. First, the movie theater chain will conduct negotiation to the distributors to ask for permissions to show the film to the public legally. These distributors can be independent or part of a bigger studio system. Independent distributors are also known as middleman who can take the film to the movie theater from the film studio. Formerly, the movie theaters bid for the rights of showing the film by paying a certain amount; while at present the deals are usually by way of percentage of the box office which favors a lot to the distributor, especially in the first two weeks of its showing. Then the movie theater will return the film to the distributor once the agreed period of time is through. Schedule is essential to the operation of the movie theater which involves the screening of the previews and commercials. They are scheduled evenly in order for the theater staffs have time to handle the flow of customers and in cleaning out the theater for used snack containers left by the customers.

A Viewpoint on How Movie Theaters Make Money

Now that you have an idea on how a movie theater works, let’s talk about on how it makes money. There are three sources of revenue for the movie theater to make money; concessions, onscreen advertisements, and the movie itself. Concessions are the main source of revenue of a movie theater, that’s why their prices are a little bit higher than the normal price. Concessions also serve as the lifeline of the movie theaters, since they can’t usually sure if they will earn from the movie itself. Just as we have mentioned earlier, the distributor is charging a percentage of the box office, which normally will get 70 percent up to 80 percent within the first two weeks and gradually it will decrease down to 35 percent on the succeeding weeks. And also, the onscreen advertisements provide another share of profit to the movie theater.

This is how the movie theater makes money, despite of the fact that they are now competing with the blue rays and online movie services.


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