Movie Theaters
Description
Companies in this industry exhibit motion pictures at indoor movie theaters, film festivals, and drive-in theaters. Major US companies include AMC Entertainment and Cinemark; leading companies based outside the US include Canada's Cineplex, the UK's Cineworld, and China's Wanda Cinemas.
The global box office market is expected to reach $43.3 billion by the end of 2025, according to Statista. The US and Canada together, followed by China, are among the largest markets.
The US movie theater industry includes about 5,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $16 billion.
COMPETITIVE LANDSCAPE
Personal income and leisure time drive demand. The profitability of individual companies depends on securing access to popular movies and sales of high-margin food and beverages. Large companies have advantages of scale in negotiating with movie distributors, marketing, and purchasing. Small companies can compete effectively by specializing in movie type or audience, or by providing better service and amenities. The US industry is highly concentrated: the top 50 companies account for more than 80% of revenue.
Movie theaters compete with other forms of entertainment and leisure activity, including sports, hobbies, concerts, and amusement parks. Further competition comes from other forms of movie exhibition, including DVD, TV, video on-demand, and internet streaming. With recent advances in home theater technology, including 4K Ultra HD TVs and Hi-Res audio, consumers are able to create high-quality viewing experiences in their living rooms that rival those available at the local multiplex.
PRODUCTS, OPERATIONS & TECHNOLOGY
Ticket sales account for more than 60% of US industry revenue; food and beverage sales for more than 30%. Other sources of revenue include retails sales of candy, prepackaged cookies, and snack foods.
Movie theater operations center on licensing and showing (“exhibiting”) films to customers, and obtaining and selling concession items. Theaters license from distributors the rights to show a movie in specific geographic zones for a determined duration. Distributors define the zones, which typically vary from two to 15 miles in radius. Theater companies that are the only exhibitor in a zone have an advantage in negotiating and selecting which new (“first-run”) films to exhibit. Distributors typically rank zones by their population density, audience demographics, and potential box office revenue.
Most theaters license films from independent distributors, although large theater chains rent directly from distributors owned by the major movie production companies. License contracts typically are on a theater-by-theater and film-by-film basis. Theaters negotiate license fees with distributors using one of three types of formulas: a percentage-of-revenue rate set prior to exhibition ("firm term"); a rate set at completion of the engagement ("review or settlement"); or an agreed "sliding scale" formula that will apply decreasing rates to successive weeks of an engagement. Most contracts involve a sliding scale arrangement. Sliding scale rates are typically 70% of box office revenue at the start of a film's run. Theaters pay more to license potential blockbuster movies, which typically have longer engagements.
Major operational metrics are ticket sales (“box office revenue” or “admissions”); food and beverage (“concession”) sales; and revenue-per-customer. Metrics for size of business are total number of screens (auditoriums) and ratio of screens to theaters. The majority of US screens are located at venues with five or more screens, according to the Motion Picture Association of America, and the largest companies have a screen-to-theater ratio of over 12 to 1. A multiplex theater has 12 to 16 screens; a megaplex, more than 16. The largest company has more than 8,000 screens in its US circuit. Most companies locate theaters near areas of high consumer traffic, such as shops and restaurants. Theater facility formats include the older sloped-floor auditorium or modern stadium seating.
Because concession items have higher margins than ticket sales, theaters focus on food and beverages to increase the average purchase per customer. Theaters encourage concession staff to increase sales and service speed. Theaters buy food and beverages from concession distributors, which make weekly or as-needed deliveries. Chains negotiate bulk rates and order directly from manufacturers, but receive the shipments from distributors, paying them a percentage for warehouse and delivery services.
The global box office market is expected to reach $43.3 billion by the end of 2025, according to Statista. The US and Canada together, followed by China, are among the largest markets.
The US movie theater industry includes about 5,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $16 billion.
COMPETITIVE LANDSCAPE
Personal income and leisure time drive demand. The profitability of individual companies depends on securing access to popular movies and sales of high-margin food and beverages. Large companies have advantages of scale in negotiating with movie distributors, marketing, and purchasing. Small companies can compete effectively by specializing in movie type or audience, or by providing better service and amenities. The US industry is highly concentrated: the top 50 companies account for more than 80% of revenue.
Movie theaters compete with other forms of entertainment and leisure activity, including sports, hobbies, concerts, and amusement parks. Further competition comes from other forms of movie exhibition, including DVD, TV, video on-demand, and internet streaming. With recent advances in home theater technology, including 4K Ultra HD TVs and Hi-Res audio, consumers are able to create high-quality viewing experiences in their living rooms that rival those available at the local multiplex.
PRODUCTS, OPERATIONS & TECHNOLOGY
Ticket sales account for more than 60% of US industry revenue; food and beverage sales for more than 30%. Other sources of revenue include retails sales of candy, prepackaged cookies, and snack foods.
Movie theater operations center on licensing and showing (“exhibiting”) films to customers, and obtaining and selling concession items. Theaters license from distributors the rights to show a movie in specific geographic zones for a determined duration. Distributors define the zones, which typically vary from two to 15 miles in radius. Theater companies that are the only exhibitor in a zone have an advantage in negotiating and selecting which new (“first-run”) films to exhibit. Distributors typically rank zones by their population density, audience demographics, and potential box office revenue.
Most theaters license films from independent distributors, although large theater chains rent directly from distributors owned by the major movie production companies. License contracts typically are on a theater-by-theater and film-by-film basis. Theaters negotiate license fees with distributors using one of three types of formulas: a percentage-of-revenue rate set prior to exhibition ("firm term"); a rate set at completion of the engagement ("review or settlement"); or an agreed "sliding scale" formula that will apply decreasing rates to successive weeks of an engagement. Most contracts involve a sliding scale arrangement. Sliding scale rates are typically 70% of box office revenue at the start of a film's run. Theaters pay more to license potential blockbuster movies, which typically have longer engagements.
Major operational metrics are ticket sales (“box office revenue” or “admissions”); food and beverage (“concession”) sales; and revenue-per-customer. Metrics for size of business are total number of screens (auditoriums) and ratio of screens to theaters. The majority of US screens are located at venues with five or more screens, according to the Motion Picture Association of America, and the largest companies have a screen-to-theater ratio of over 12 to 1. A multiplex theater has 12 to 16 screens; a megaplex, more than 16. The largest company has more than 8,000 screens in its US circuit. Most companies locate theaters near areas of high consumer traffic, such as shops and restaurants. Theater facility formats include the older sloped-floor auditorium or modern stadium seating.
Because concession items have higher margins than ticket sales, theaters focus on food and beverages to increase the average purchase per customer. Theaters encourage concession staff to increase sales and service speed. Theaters buy food and beverages from concession distributors, which make weekly or as-needed deliveries. Chains negotiate bulk rates and order directly from manufacturers, but receive the shipments from distributors, paying them a percentage for warehouse and delivery services.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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