Monday, January 16, 2006


This is Hollywood economics at its changing best. Theatre chains are in three businesses: fast food; movie exhibition and advertisements. Of them the most profitable in fact are fast food and advertisements, not the resource-costly movie exhibition!
selling popcorn, soda, and other snacks. ... is an extremely profitable operation in which the theaters do not split the proceeds with the studios (as they do with ticket sales). Popcorn, for example, because of the immense amount of popped bulk produced from a relatively small amount of kernels—the ratio is as high as 60:1—yields more than 90 cents of profit on every dollar of popcorn sold. It also serves to make customers thirsty for sodas, another high-margin product (supplied to most theater chains by Coca-Cola, which makes lucrative deals with theater owners in return for their exclusive "pouring" of its products). One theater chain executive went so far as to describe the cup holder mounted on each seat, which allows customers to park their soda while returning to the concession stand for more popcorn, as "the most important technological innovation since sound." He also credited the extra salt added into the buttery topping on popcorn as the "secret" to extending the popcorn-soda-popcorn cycle throughout the movie.
Read The Popcorn Palace Economy for a glimpse into the economics of running theater chains and what the future may hold. More on the economics of expensive popcorn here.

This happened during a visit to a PVR in Bangalore. I bought a cup of Pepsi, and requested an additional empty Pepsi cup to share it with a friend. (Kya kare, student habit!) I was vehemently refused and consequently angry. But there is a reason to it. Try it at your movie theatre. Most probably he will refuse. The question is why does he do it, and more interestingly, why are there no alternatives followed for the particular reason?

If you want to hear comments on this issue from people who have worked in theatres, read The economics of movie popcorn pricing.

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