New research from Stanford and the University of California, Santa Cruz suggests that there is a method to theaters’ madness–and one that in fact benefits the viewing public. By charging high prices on concessions, exhibition houses are able to keep ticket prices lower, which allows more people to enjoy the silver-screen experience.
The findings empirically answer the age-old question of whether itâ€™s better to charge more for a primary product (in this case, the movie ticket) or a secondary product (the popcorn). Putting the premium on the “frill” items, it turns out, indeed opens up the possibility for price-sensitive people to see films. That means more customers coming to theaters in general, and a nice profit from those who are willing to fork it over for the Gummy Bears.
Indeed, movie exhibition houses rely on concession sales to keep their businesses viable. Although concessions account for only about 20 percent of gross revenues, they represent some 40 percent of theaters’ profits. That’s because while ticket revenues must be shared with movie distributors, 100 percent of concessions go straight into an exhibitorâ€™s coffers.