09 March 2007

The Popcorn Economy

"On the way to Las Vegas, Stephenson, an energetic, peppery-haired man in his early forties, gave me a quick course in the economics of his business. Of the fifty million dollars customers paid for tickets last year, he said, Hollywood Theater kept only twenty-three million; most of the rest went to the distributors.

But, he continued, since it cost $31.2 million to pay the operating costs of the theater, his company would have lost $8.2 million if it were limited to the movie-exhibition business.

Like all theater owners, though, he has a second business: snack foods, in which the profit margin is well over eighty per cent. Last year, Hollywood Theater made a profit of $22.4 million on the sale of $26.7 million from its concession stands. 'Every element in the lobby,' Stephenson told me, 'is designed to focus the attention of the customer on its menu boards.'


Soft drinks are an important part of the movie business. All the seats in Stephenson's new theater, and most other multiplexes, are now equipped with their own cup holders, a feature that theater executives consider one of the most ground-breaking innovations in movie-theater history. With cup holders, customers can not only handle drinks more easily in combination with other snacks but can store their drinks while returning to the concession stand for more food.

As we walked around, a theater executive, who was assessing different popcorn-topping oil, said that salt was the secret to financial success since it drives customers back to the concession stand for drinks--where they buy more popcorn."
-The Hollywood Economist-