Why are Movie Tickets So Expensive?

Twenty-five cents. That was the average cost of the whole movie-going experience—bus fare, ticket, and popcorn--in Wisconsin in the 1930’s. Granny Ginny never failed to remind my brother and me of this fact as we readied ourselves to head to the theater, a ritual that usually also involved shoving plastic bags of popcorn and Hershey’s minis down the fronts of our Starter jackets.

This was 1995, when the average ticket price was a measly $4.35. I can only imagine what Ginny would say if faced with the average $7.83 it now costs to see a movie in the US according to NATO (An attack on one theatergoer’s wallet is an attack on all).

Here in Hollywood’s home court, I parted with twice that to see The Amazing Spiderman. It was a painful separation that left me wondering what warranted such outrageous prices and whose pockets my money would be lining.

With any other product we could follow markups and costs backward to answer these questions. Movies are a different story; they aren’t like any other product because Hollywood isn’t like any other industry.

Studios’ magical bean counters can pull off feats of creative accounting that would make grown auditors weep (Harry Potter 6 grossed $1 billion but conveniently lost money) and studio execs are notoriously tight lipped about money matters anyway.

Still, a look at the costs of producing today’s effects-laden blockbusters would seem to uphold the basic logic that movies are expensive to see because they’re expensive to make.

The Avengers, for example, supposedly had a production budget—including story rights, crew, actors, equipment, locations, sets, editing, VFX, etc.—of about $220 million dollars. This doesn’t even approach the total amount Disney spent on the film.

For that figure you’ve got to factor in P&A—“prints and advertising”—which includes cost of making the physical prints of the film and launching a full-scale marketing assault on the general public to ensure long lines on opening weekend. P&A tacks on another 50% of the production budget, bringing our (theoretical) Avengers grand total to $330 million.

A fair chunk of change, but don’t go cueing the sad violins for Disney (or any other studio) just yet.

First, consider that many films recoup a portion of their costs before they even open thanks to government grants and tax breaks (ever wonder why they shoot everything in Louisiana?), as well as product placement and certain licensing deals. Already the studios aren’t hurting quite as much as you’d expect.

Next, look at the way studios and distributors (which are often owned by the studio anyway) split ticket revenue with theaters. It varies, but considering theaters still rely on their 900% markup on popcorn to make a profit, there’s no mistaking who gets the raw deal.

Lucky for theaters, there are cases like The Avengers and its $1.5 billion worldwide ticket revenue that fatten everyone’s pocketbooks significantly (especially that of savvy dealmaker Robert Downey Jr.), though they’re few and far between.

Theaters still face falling demand for movie tickets and competition from VOD and Netflix, both of which cause them to jack up prices and lose customers. It’s a vicious cycle that has many predicting gloom doom for theaters.

For a second and hopefully less depressing opinion, I turned to Mike Neelsen, who managed theaters for both Marcus and Regal before co-founding StoryFirst Media.

“Well, the old model has to change,” he said almost as soon as we’d begun talking about the fate of the American movie theater.

He pointed out that some theater chains, like Austin-based Alamo Drafthouse, aren’t struggling at all—they’re selling out seven nights a week and expanding.

“They’ve figured out how to make the experience worth it…they’ve built a community around it,” he says, pointing to the restaurant-style food and alcohol service at chains like Ipic and the aforementioned Drafthouse. “It really feels like an event every time you go.”

So maybe there’s hope for these new theaters, but what about the Cinemarks and AMC’s that dot our landscape?

“I wouldn’t say there’s no hope, but the big ship turns slowly,” he said.

-- Francesca Brumm is a writer who lives and works in Los Angeles.