The real cost of a cinema ticket

[tigertron]

If like me you wondered why it is that our tickets (in the UK at least) are so expensive and why the prices keep rising.

Back when I was a kid in 2000, it cost about £5 and I've seen a steady increase in the price, and now at my local cinema it's about £8.50 for a standard 2D ticket.

This article is quite interesting and gives us an insight as to what we're really paying for.

[Show spoiler]

A family trip to the cinema can easily end up costing a small fortune these days once you’ve paid for tickets, 3D glasses and all your snacks. The price of getting into the screen alone has rocketed in recent years.

Back in 2000 we were paying an average of just £4.40 to see Russell Crowe fight for his life in ‘Gladiator’. Now prices are almost 50% more expensive with the average ticket costing £6.53 in 2013. Although if you made the mistake of visiting a central London cinema last year you could have ended up parting with more than double that.

So, what exactly are you paying for?

The film

First up, and making up the largest part of your ticket price, is the cost of the actual film. This is the money the cinema pays to the film studio to rent the film. This will make up 40% - 60% of your ticket price depending on what the film is and how close to the release date you are seeing it.

Film studios charge cinemas the most if they want to show the big blockbusters as soon as they are released, which is why some smaller cinemas won’t have the latest films until a few weeks after their release date.

The studios also don’t take a percentage of whatever price the cinema charges for a ticket – it takes a percentage of what it believes the cinema should be charging. So, for example, if the studio believes the ticket price should be £7.50 they will take 60% of that regardless of whether the cinema actually runs a discount promotion.

So, of your average cinema ticket price at least £2.61 goes to the film studio. That money covers the cost of making the film, paying the stars, and distributing the film. That is a big bill to cover – for example, 2012’s Avenger’s Assemble cost $220 million to make, it had a further $150 million bill for marketing, and as for paying the stars – Robert Downey Jr is believed to have walked away with $50 million. So, it is no surprise that the bulk of your cinema ticket price goes to the film studios rather than the cinema.

The people

The next largest portion of your ticket cost goes to paying the staff at the cinema. With everyone from the managers, the projection staff and the people you actually see needing paying, wages make up a large chunk of any cinema’s expenditure.

As a result 20% of your ticket price goes towards paying the people looking after you during your cinema visit. That’s £1.31 a visit, based on the average ticket price.

The building

Unless you are enjoying an outdoor cinematic experience you also need to pay something towards the bricks and mortar you are sitting in. Around 15% of your ticket price contributes to covering the costs of the building.

This would explain the higher ticket prices in city centres and London in particular.

The power

Just like the rest of us cinema companies are having to pay ever increasing energy bills. These days 5% of your bill goes towards paying the utility bills. This includes keeping the cinema heated and the power going to bring the film you are seeing to life.

New technology

After all that the cinema is left with 10% of your money to cover additional costs and make a profit. This is just 65p out of the average ticket. With most of that going towards making sure the cinema has the latest technology the cinema makes a tiny profit, if anything at all from ticket sales.

As you may well suspect, cinema owners actually make their big profits selling something other than films. The big money comes from the snacks you buy once you’ve bought your cinema ticket. “When we bought [Odeon]”, Guy Hands of private equity group Terra Firm said at the time, “the management team really believed they were part of the film business. I had the difficult job of explaining to them that they were in the popcorn selling business.”

The sales of concessions – that’s snacks and pop to you and me – make up around 20% of a cinema’s revenue. Economists estimate that for every £1 you spend on food and drink at the cinema around 85p is pure profit – no wonder some cinemas ban people from bringing in their own food.

Yahoo!