The Economics of Hollywood: Movie Theatres

The video discusses the business model of movie theatres, highlighting that they primarily earn from food and beverage sales rather than ticket sales. AMC is used as an example to illustrate financial performance, showing that despite high food and beverage margins, overall profitability is low due to revenue-sharing agreements with studios. The video explains how these agreements work, with theatres receiving a small percentage of ticket sales initially, which increases over time. Disney's pricing power is examined, showing how their popular films can dictate terms to theatres, emphasizing the dynamics of free market economics.

What is the primary source of revenue for movie theatres like AMC?

• Merchandise

• Food and beverage sales

• Advertising

• Ticket sales

How does the revenue-sharing model between theatres and studios typically change over time?

• Theatres receive a decreasing percentage of ticket sales over time.

• Studios receive a decreasing percentage of ticket sales over time.

• The revenue share remains constant throughout the movie's run.

• Theatres receive all ticket sales revenue from the start.

Why are concession prices, like popcorn, typically high in movie theatres?

• To compete with other theatres

• To compensate for low ticket sales revenue in the initial weeks

• To pay for celebrity endorsements

• To cover the high cost of movie production

What was the controversy surrounding Disney's revenue-sharing practice with theatres?

• Disney demanded a 100% share of ticket sales for all movies.

• Disney charged theatres for showing their trailers.

• Disney refused to share any merchandise revenue with theatres.

• Disney offered theatres a 0% share of ticket sales during the premiere week of a Star Wars film.

What is the main reason Disney is able to exert significant pricing power in the movie industry?

• They produce high-quality films that attract large audiences.

• They own all major movie studios.

• They have a monopoly on all movie theatres.

• They control the global distribution network.