The reason why is food at the movie theatres so expensive is because theaters charge higher prices for concessions in order to provide their services and make a profit.
Movies theatres use high food prices and the profits to cover the costs of running the business.
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Summary
To answer the questions of why is food at the movie theatres so expensive can be summarized by the fact that concession and food sales are the products that movie theaters actually make money on and are used to offset the many costs of running a movie theater.
These sales can account for as much as 85% of the profit margin for a movie theater, making it an essential part of the theater’s revenue stream.
Without high priced concessions movie theaters would not be profitable and likely not be as widely available and also less advanced than they are today.
Convenience and Location
Most move theater locations typically require a large space and are located in prime locations. This makes for real estate that is costly to rent and maintain.
Theaters are typically customized spaces that also require a significant investment to construct and maintain which all must be payed for.
Local Monopoly and Limited Competition
Given the costs associated with real estate and most theaters are not located close to competitors and therefore have a local monopoly.
They operate in a monopoly market where the audience is captive, which allows them to charge more than in a competitive market. However, the theater doesn’t keep all of the revenue from ticket sales. On average, for the first few weeks that a movie is playing in a theater, 70% of the revenue will go to the distributor/studio and 30% will be kept by the movie theater. This means that for the theaters, the bulk of their revenue comes from concessions, such as popcorn and soda.
Operating Costs
Running a movie theater is expensive, with high air conditioning bills, cleaning costs, and constant technology upgrades. Theaters need to constantly upgrade their technology to keep up with the latest advancements in the industry such as digital projection, 3D, IMAX, and surround sound.
These upgrades require huge investment and are essential for the theater’s survival. Additionally, the buildings themselves take up a lot of space, often in high-demand areas, meaning high rent.
The combination of these expenses makes it key for movie theaters to maintain high profit margins on concessions.
Stagnant Movie Ticket Prices
Raising tickets prices often isn’t the best solution for movie theaters. If they raise ticket prices, they might lose customers before they enter the doors and become a captive audience.
70% of the ticket increase will go to the studios, in the prime weeks. Therefore, movie theaters rely on high profit margins on concessions to survive, with an overall profit margin of 4.3%.
Sinking Attendance
This changes over time, but by the time the theater can start keeping most of the money, the audience has shrunk. This means that the bulk of the revenue from the movie ticket sales goes to the studios and distributors, leaving the theater with a relatively small percentage of the revenue. This is a common practice in the movie industry, as studios and distributors want to recoup their investment as quickly as possible, while theaters need to maintain their operations and make a profit.
Premium Brands
Movie theaters often sell premium snacks and drinks, such as gourmet popcorn, special candies, and premium soft drinks, which are priced higher than traditional snacks.
To maintain the high profit margins necissary for the business the price of the snack is much more than what it would retail for elsewhere.
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