Cinema Economics

There's an good little post over at the Freakonomics blog about cheap tickets for old people at the cinema, but I thought that maybe the whole subject of cinema economics might be interesting to people.

The first thing is that cinemas aren't particularly in the business of making money from films. They're really in the overpriced popcorn and sugar water business. When a cinema is showing Iron Man 3 or Star Trek: Into Darkness, the distributor has spent a fortune promoting it, there's a lot of audience goodwill based on the franchise, and the distributor knows it. People will come to whereever is showing the film. So, the distributor often gets to keep most of the box office, for at least a short time. The cinema owner profits by selling overpriced sugar water and popcorn to some patrons. Once a film has been running for at least a few weeks, then the cinema starts taking more of the box office (at which point there isn't much left, generally).

With smaller films, it's different. The cinema pays to rent the film, but gets more of the box office. The cinema is doing the distributor a favour by showing it.

You then have older films that are shown for kids saturday mornings and seniors afternoons. These are older films that aren't in much demand. The cinema puts these on because well, the cinemas are empty, but have fixed costs so you might as well have a promotion, almost give away the tickets and sell people lots of overpriced  sugar water and popcorn.

And if you want to know why cinemas are very keen on digital projection, it's not just that it saves melting films, it's that it makes management of films easier and more flexible. You can stick a Pixar movie on for the afternoon showings and a slasher horror movie on the same screen in the evening.