Skip to main content

Movie Theaters Profit from Food, Drink, Ads

While Hollywood is suffering from a box office slump and rapid de-acceleration of video growth, the movie theater business is holding up well despite travails for its suppliers. However, the latest market research indicates that U.S. theater-owner profit has little to do with the sale of movie tickets to consumers.

Kagan Research calculates that cash flow margins for leading theater circuits was a healthy 17.6 percent for the first nine months of 2005. With publicly-traded theater companies still to announce full financials for 2005, the nine-month data through September is the most recent period available.

The 17.6 percent cash flow figure�good for a mature business like exhibition � is better than the 15 percent generated by Hollywood film distributors, although less than cable TV, broadcasters and cell phone operators that top 30 percent, according Kagan data. Cash flow is an indicator of core profitability.

Kagan Research senior analyst Wade Holden says theaters augmented box office revenue with higher takes from sale of food/beverages (also called concessions) and on-screen advertising. For example, the largest U.S. circuit Regal Cinemas � with 6,537 screens � posted a $15.3 million revenue increase in the first nine months of 2005 from food/beverages and $13.1 million more revenue from �other� operations � mainly screen advertising before the featured movie starts.

Historically, theaters earn about three quarters of their profits from the one quarter of their revenue that comes primarily from the high-priced junk food and carbonated beverages they sell -- and to a lesser extent the on-screen advertising. Therefore, the theater business model has apparently moved away from being entertainment-centric, and become more like a typical convenience store.

Popular posts from this blog

How Cloud Fuels Digital Business Transformation

Across the globe, many CEOs invested in initiatives to expand their digital offerings. User experience enhancements that are enabled by business technology were a priority in many industries. Worldwide end-user spending on public cloud services is forecast to grow 21.7 percent to a total of $597.3 billion in 2023 -- that's up from $491 billion in 2022, according to the latest market study by Gartner. Cloud computing is driving the next phase of digital transformation, as organizations pursue disruption through technologies like generative Artificial Intelligence (AI), Web3, and enterprise Metaverse. Public Cloud Computing Market Development "Hyperscale cloud providers are driving the cloud agenda," said Sid Nag, vice president at Gartner . Organizations view cloud computing as a highly strategic platform for digital transformation initiatives, which requires providers to offer new capabilities as the competition for digital business escalates. "For example, generativ

Mobile Device Market Still Awaiting Recovery

The mobile devices market has experienced three years of unpredictable demand. The global pandemic, geopolitical pressures, supply chain issues, and macroeconomic headwinds have hindered the sector's consistent growth potential. This extremely challenging environment has dramatically affected both demand and supply chains. It has led to subsequent inflationary pressures, leading to a worsening global cost of living crisis suppressing growth and confidence in the sector. In tandem, mobile device industry stakeholders have become more cautious triggering market uncertainties. Mobile Device Market Development Operating under such a backdrop, the development of mobile device ecosystems and vendor landscapes have been impacted severely. Many of these market pressures persisted throughout 2022 and now into 2023, borne chiefly by the smartphone market. According to the latest worldwide market study by ABI Research, worldwide smartphone shipments in 2022 declined 9.6 percent Year-over-Year

Subscription Payments will Exceed $15.4 Trillion

The recurring subscription payments market is undergoing significant growth, primarily driven by the acceleration of consumer adoption. The market deals with periodic subscriptions to a variety of goods and services offered as an alternative payment model. While subscriptions have existed for a long time, their use in the consumer products marketplace is still evolving. Despite the usage being relatively new, the proliferation has been rapid and has spanned many different vertical markets. Recurring Payments Market Development According to the latest worldwide market study by Juniper Research, the transaction value of recurring payments will exceed $15.4 trillion globally in 2027 -- that's up from $13.2 trillion in 2023. This relatively slow growth of 17 percent reflects that recurring payments are a well-established market, but also disguises a rapid change of payment methods in the space, with Open Banking and Digital Wallet payments outstripping overall growth. As more retail me