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The Junior Mints Are Too Damn High!

A Michigan man is taking a major movie theater chain to court over the high cost of its concessions:

Joshua Thompson loves the movies.

But he hates the prices theaters charge for concessions like pop and candy.

This week, the 20-something security technician from Livonia decided to do something about it: He filed a class action in Wayne County Circuit Court against his local AMC theater in hopes of forcing theaters statewide to dial down snack prices.

“He got tired of being taken advantage of,” said Thompson’s lawyer, Kerry Morgan of Wyandotte. “It’s hard to justify prices that are three- and four-times higher than anywhere else.”

American Multi Cinema, which operates the AMC theater in Livonia, wouldn’t comment on the suit. A staffer at the National Association of Theatre Owners in Washington, D.C., angrily hung up the phone when asked about industry snack pricing practices.

Although consumer experts predicted that the case will be dismissed, it struck a chord Friday with area moviegoers, who said they’re tired of being soaked on movie munchies.

“The prices are ridiculous,” Rebecca Motley, 55, a self-employed Southfield physician, said while leaving the AMC Star Southfield 20.

Motley said she and her office manager spent $5 each for morning movie tickets and $11 each for soft drinks and popcorn.

“When I was a kid, $1 could get you into the movies and buy you a pop and popcorn. But not anymore,” Motley said. “I don’t know how kids can go on their own to a movie anymore.”

Now in the grand scheme of things, this is hardly the most important issue in the world. It ranks right up there with reduced portion sizes at Applebee’s on the priority list. But, it’s also one that we can probably all relate to. Who hasn’t gone to the movies lately only to be gouged on snacks? And, if you’re bringing kids along, in which case snacks are pretty much mandatory, it can get pretty expensive. But, still filing a lawsuit over this? Really?

I’m not going to comment on the legal merit of the case since I’m unfamiliar with the Michigan statute at issue or the case law interpreting it, but it strikes me that it really shouldn’t be the business of a court to decide what “fair” price is? How do you determine what’s fair? The response of a lay person would likely be that you can just go down to the local drug store, or Wal-Mart for that matter, and see what they’re charging for similar items there. Even if you could do that, though, it wouldn’t be a valid comparison. The retail economics that govern pricing decisions by a drug store or a major big box retailer are far different from those that govern operation of a movie theater. Most importantly, one needs to be mindful of the fact that movie theaters get very little revenue from ticket sales:

Movie theaters make a lot of money from the concession stand, and some estimates put their profit margin at 85%. A $30 bag of raw popcorn could be worth as much as $3,000 to movie theaters, the Hollywood Reporter noted.

(…)

The movie industry has cause to be worried though, since theaters make most of their money from concession sales, not from tickets. The majority of money from ticket sales goes to the studios in the first weeks of a release, with first-week runs generating as much as 90% for the studio.

If Thompson’s suit is successful, it could spur copycat suits across the country. Add into the equation that movie attendance in 2011 was at its lowest level in 16 years, and you can see why even the threat of a suit like this would make theater people squirm.

There’s actually a theory that the high price of movie concessions is a benefit to the public. A study from Stanford Graduate School of Business and University of California Santa Cruz says the higher concession costs help keep ticket prices low, which means more customers in general come to the theater, and the smaller segment of that group buying concessions adds to the theater’s profit.

Such is the bizarre economics of the movie theater industry, which in part goes back to the fact that some 60 years ago the Supreme Court sided with the government at the end of a long dispute which contended that direct ownership of theaters by the movie studios themselves was a violation of the Sherman Antitrust Act. In any case, the important question really is how you decided what a “fair” price is in this type of situation, or in the similar situation of concessions at a football and baseball stadium. One of the reasons that the prices are so high at these venues, as compared to what you’d pay elsewhere, is because you’re part of a captive audience and there’s only one supplier. Adam Smith would’ve understood it perfectly.

There is one solution to all of this, of course. Like Bruce McQuain, I don’t really see many movies in the theater any more. For one thing, the closest theater to me is quite a drive away and sometimes just not worth the trouble. For another, in most cases the movies that Hollywood is putting out these days simply aren’t worth the ticket prices they’re charging these days (and don’t even get me started about the price they charge for those silly 3-D movies). It’s usually more convenient, and cheaper, to wait until the DVDs come out. A buck at RedBox versus seven at the theater? No-brainer really. But, if you do decide to go to the theater just remember they’ve got you there, and if you want one of those snacks they’re going to gouge you. That’s capitalism, and there’s nothing wrong with it.

Movie Theater Food Bar image via Shutterstock

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About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May, 2010 and also writes at Below The Beltway. Follow Doug on Twitter | Facebook

Comments

  1. Ron Beasley says:

    People still go to movie theaters?

    Like or Dislike: Thumb up 0 Thumb down 0

  2. mantis says:

    Most importantly, one needs to be mindful of the fact that movie theaters get very little revenue from ticket sales:

    Indeed. If movie theaters didn’t overcharge on concessions, they would be out of business.

    Or they could charge less for concessions and charge $25 per ticket instead. I’m sure everyone would love that.

    Like or Dislike: Thumb up 4 Thumb down 0

  3. Dave Schuler says:

    I haven’t actually studied it but I wouldn’t be surprised if most of the profits of the theater came from the concessions. That’s true in some similar businesses.

    Like or Dislike: Thumb up 1 Thumb down 0

  4. David says:

    They still make movies?

    Like or Dislike: Thumb up 0 Thumb down 0

  5. Neil Hudelson says:

    @Dave Schuler:

    As I understand it, most theaters make very little money on the ticket price. It’s almost all from the concessions.

    Like or Dislike: Thumb up 1 Thumb down 0

  6. PD Shaw says:

    Who hasn’t gone to the movies lately only to be gouged on snacks? And, if you’re bringing kids along, in which case snacks are pretty much mandatory, it can get pretty expensive

    This is something I don’t get. And before I go to far, I think Roger Ebert has also identified high snack costs as one of the reasons people go to the movie less. Clearly, purchasing snacks is strongly associated with going to the movie, but it never has for me. The snacks don’t seem appealing, the price too high, and they tend to distract from watching the movie. I don’t think my kids have ever had snacks at the movie theatre. We just say ‘no.’

    So what is the origin of this linkage, that has clearly driven Thompson to the edge of insanity? Does the smell of popcorn excite an irrepressible Pavlovian response? Is it deemed socially unacceptable to appear cheap at the theatre? Are people so accustomed to snacking every few hours that not satisfying the biological urge distracts from watching the movie?

    Like or Dislike: Thumb up 0 Thumb down 0

  7. Herb says:

    That’s capitalism, and there’s nothing wrong with it.

    Well, maybe wrong isn’t the right word. The theaters could reduce prices and sell more refreshments, which would also be capitalism, but they’ve chosen to wring every little bit of profit out of what refreshments they do sell. That’s not wrong, per se, but is it a better kind of capitalism than the Walmart low-prices move-the-product kind? I dunno. Are they equal?

    Fact is, the theater business is still very profitable, and it’s not because they’re gouging you on refreshments. It’s the novelty and exclusivity if nothing else. That’s why some theaters have taken refreshments to a whole new level, like some of these places that serve steak dinners with beer. They could probably get away with selling the $10 tubs of popcorn but i think they recognize there’s more money in giving your customers what they want rather than taking advantage of their “captive audience” status.

    Like or Dislike: Thumb up 1 Thumb down 0

  8. ernieyeball says:

    Last flick I saw at the theatre was the Simpsons Movie. It was as much fun to listen to the (small) audience laugh and crack up as it was to watch (spoiler alert) Spider Pig walk on the ceiling!
    I knew before I attended the event how much popcorn costs so it wasn’t an issue.
    Get a grip people!

    Oh yeah. When I was a kid you could smoke in the movie theaters in San Francisco.

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  9. J-Dub says:

    5 tickets, popcorn and drinks to see The Lorax in 3D ran me over $80 on Saturday.

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  10. Dave Schuler says:

    BTW, I posted on a closely related subject not long ago. I’ve come to the conclusion that most of the complaints about prices either of tickets or snacks are mostly misplaced nostalgia. The cost of a movie ticket, a bag of popcorn, and a pop is about the same, relative to median income, as it was 70 years ago.

    There are lots of other reasons that people don’t want to go to the movies anymore but mostly I think it’s just that the experience just isn’t pleasant enough. You walk a half mile or more from your car to the theater, buy your ticket and snacks from surly 16 year olds, go to your seats in a dirty, messy theater, and are surrounded by loud, ill-mannered, slovenly people. We could go into a lengthy exposition about why all these things are the way they are but why put up with it when you can get a better experience at home?

    Like or Dislike: Thumb up 6 Thumb down 0

  11. James Joyner says:

    @Dave Schuler: Agree completely. I’m annoyed every time I go to the theater. And by that, I mean annoyed beyond my standard base levels.

    Like or Dislike: Thumb up 1 Thumb down 0

  12. PD Shaw says:

    @Dave Schuler: Dave, I remain skeptical of that $8 average movie ticket price. Take, for example, ticket prices at the AMC East in Chicago. The only tickets that are less than $8 are before noon and on Senior Citizen Tuesday (for age 60+) I think the $8 average is arrived at by including (1) unpopular hours, (2) special pricing for children and senior citizens, and (3) ticket prices at second and third run theatres, or other alternative venues.

    The $8 average appears to originate from a movie theatre ass’n annual survey that regularly reports its conclusions to demonstrate that movie ticket prices are less than professional sports and rock concert tickets. I think the comparison is silly, but the whole thing suggests that the cost of movie tickets are perceived as high, either in absolute terms or compared to watching a movie at home. The pricing of extras like popcorn just underscores the economic problems of the theatres; they have to disguise the costs.

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  13. EMRVentures says:

    Since a base level of revenue needs to be raised from each customer through the doors, I prefer they do it by gouging the snacks rather than the admission. I’m glad that they priced me out of Gummi Bears and popcorn rather than out of going to the movie in the first place.

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  14. PD Shaw says:

    @Neil Hudelson:”most theaters make very little money on the ticket price.”

    I think the movie theatres make money the longer a given film is shown. The studios get 90% of the money from the first week,* and that percentage drops, so a blockbuster that brings in several weeks or months of customers (either repeat or new) will make the theatres a lot of money, there have not been any Avatars of late, so popcorn prices have to go up.

    * IIRC 25% of ticket sales [global?] ticket sales are in the first week.

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  15. Racehorse says:

    Before we go to a movie, we stop at a local WalMart and load up on candy bars at great prices. Then we go in with them in our pockets.

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  16. Dave Schuler says:

    @PD Shaw:

    The figure was the one produced by the theater owners association. It’s possible that the key words are “average ticket price”.

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  17. Steve Verdon says:

    Adam Smith would’ve understood it perfectly.

    Actually, no. Smith’s notion of a monopolist is that he’d charge the highest price he could. This is wrong.

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  18. Steve Verdon says:

    @Dave Schuler:

    And

    @James Joyner:

    There are lots of other reasons that people don’t want to go to the movies anymore but mostly I think it’s just that the experience just isn’t pleasant enough. You walk a half mile or more from your car to the theater, buy your ticket and snacks from surly 16 year olds, go to your seats in a dirty, messy theater, and are surrounded by loud, ill-mannered, slovenly people. We could go into a lengthy exposition about why all these things are the way they are but why put up with it when you can get a better experience at home?

    This is why I frequently go the Graumann’s Egyptian theater in Hollywood (ok, Hollywood is not a theater, but it is what can loosely be called Hollywood, it is near the El Capitan theater where Jimmy Kimmel shoots his show, and near Graumann’s Chinese Theater). Unlike the Chinese the Egyptian shows older movies, is considered an historical landmark, is run by the American Cinematique foundation or whatever they are. The people working there are volunteers, the prices of tickets and the concessions are considerably lower (still high for concessions vs. grocery store prices, but what the heck it supports a great historical landmark). So far in the last 12 months or so we’ve seen:

    Lawrence of Arabia,
    Caddyshack,
    Ben Hur,
    Gone With the Wind,
    It’s a Wonderful Life
    Nausica of the Valley of the Wind (an early Miyazaki movie).

    Sometimes living in So. Cal. has its advantages. Plus being in Hollywood even if the movie gets out late and you are hungry you can find a place that is selling pizza by the slice no problems.

    Now that is worth the little bit of a walk, the price, and the people going to see these movies really are excited to see these movies–i.e. they aren’t going to be jerks.

    So….neener neener neener.

    :p

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  19. Steve Verdon says:

    @J-Dub:

    Back in 1955 that $80 would have been around $9.46 according to the BLS. Or the $16/person would be $1.89/person. Or, based on a quick Google search you’d spend $0.50 on the ticket/person and then $1.39/person on concessions…assuming prices are basically the same except for inflation.

    I think Dave is right, overall the price of going to see a movie hasn’t really gone up except in nominal terms–i.e. misplaced nostalgia.

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  20. PD Shaw says:

    @Steve Verdon:

    A movie ticket in 1959 cost 51 cents. Link
    Using an inflation calculator, I come up with that being the equivelent of $3.97 today.

    (Notice the link says the price fell to 51 cents in order to compete with television)

    I think the price is high enough that its reducing frequency of moviegoing; I don’t disagree that there are other factors such as competition from other related entertainment forms.

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  21. PD Shaw says:

    What I don’t get about the economics of the movies is why the price of a ticket is the same if I watch a big budget or low budget movie at the same theatre?

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  22. Racehorse says:

    @PD Shaw: I simply can’t refuse the popcorn at the theater: that’s half the fun of going. We try to go as a group so we can share the cost – free refills at our theater.

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  23. @PD Shaw: They have different sized theaters for each movie, blockbuster or not. Rather than competing on price, they use the different sized theaters. At least that’s the way it looks to me.

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