In The Popcorn Palace Economy Edward Jay Epstein explains that “the thirsty moviegoer fuels the business”:
Once upon a time, movie studios and movie theaters were in the same business. The studios made films for theater chains that they either owned or controlled, and they harvested almost all their revenue from ticket sales. Then, in 1948, the government forced the studios to divest themselves of the theaters. Nowadays, the two are in very different businesses. Theater chains, in fact, are in three different businesses.First, they are in the fast-food business, selling popcorn, soda, and other snacks. This is an extremely profitable operation in which the theaters do not split the proceeds with the studios (as they do with ticket sales).
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Second, theater chains are in the movie exhibition business. Here they are partners with the studios. Although every deal is different, the theaters and the studios generally wind up splitting the take from the box office roughly 50-50. But, unlike the popcorn bonanza, the theaters’ expenses eat up a large part of their exhibition share.
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Third, the theaters are in the advertising business. They sell on-screen ads. And some advertisers are paying more than $50,000 per screen annually, especially to theaters willing to pump up the volume to near ear-shattering level so that seated customers will pay attention. Since there are virtually no costs involved in showing ads, the proceeds go directly to the theater chains’ bottom lines.