For a sense of how costs relate to each other, here is a rough itemizing of estimated costs from a sample theatre. (These are for illustrative purposes; naturally, figures vary from theatre to theatre and location to location.) The "Misc." item includes telephone, mail, postage, protective services, film delivery, checking services, arcade expenses and tickets. Remember, these figures are percentages of total theatre gross, not box-office gross:

Running the numbers for a sample week, let's say that a company with 400 screens has an overall box-office gross of $3,150,000.00, while total revenue (adding concessions and other items) is $4,403,000.00. Box-office gross in this example is 71.5% of total theatre gross, confirming the rule of thumb that roughly 70% of gross revenues is box-office; 30% is concession and "other". To illustrate more statistics, the U.S. national ticket average is around $4.00, and the concession expenditure range per patron is between $1.50 and $1.70. Two key indicators used to track progress in exhibition are revenue per square foot and patronage per square foot.This example grosses in the area of $120. per square foot and plays to an average of twenty people per square foot.

Moviegoers sometimes wonder about how ticket prices are set. Pricing is solely the province of exhibition, which backs into it, based on normal costs of doing business compared with revenue projections. For example, with every rise in the minimum wage, payroll costs escalate. Also, supplies cost more over time. Added to that is the subtle but constant pressure from distributors to extract higher film rental for their product because of escalating production costs. The result is an ever-increasing pressure on exhibition's bottom line, which must be serviced by the price of admission. When the pressure becomes too great, theatres back into a price increase.

Concession sales are central to exhibition, since profits are solely ours and not shared with distributors. The concession supply business, in effect a trucking business, has changed dramatically in recent years, becoming highly centralized and automated. In earlier times regional concessionaires were the norm. Today many exhibitors turn to national companies, based on their ability to truck supplies from regional warehouses to theatres in a timely and cost-effective manner, thus offering a lower price to the exhibitor. Concession supply orders are generally made on a per-multiplex basis, via computer, each Monday for the following weekend.

Pricing of concession items is market-driven, but with an eye toward value-pricing; that is, the larger the size, the lower the per-ounce price the consumer pays. In an attempt to attract and satisfy the more upscale frequent moviegoer, special attention is paid to offering the finest movie going experience in terms of theatre amenities (wide screens, stereo sound and plush seats) coupled with a wider variety of quality foods and snacks. For example, some cinemas operate cafes in many of their multiplexes. These are a sort of eclectic concession stand, many with seating, which sell an assortment of desserts, bottled water, truffles and other upscale, specialized goods.

In the future we will be seeing a wider variety of foods in the larger multiplexes, even possibly fast foods, in a more self-service, cafeteria-style environment. In an effort to meet the demands of our customers, this is intended to promote "ease of transaction" while minimizing costs.

Outside the exhibition industry it should be noted that distributors and theatre owners have never worked as closely together as they do now, with mutual respect, in a kind of basic compact: We provide the screens, they provide the product. We welcome a continuing supply of films not only from the major studios but from independent distributors as well. In the face of this, it is vitally important that we operate our theatres more efficiently. Our operating schedules must reflect the best utilization of our seating capacities so that revenue per seat and patrons per square foot are maximized.

This calls for very close cooperation between our two main corporate entities: Film, which handles negotiations and booking of pictures, and Operations. (Other functions within the company include marketing, training, finance, management information and accounting.) What kind of emergencies can arise? On the film side, a booking may be pulled at the last minute by a distributor; conversely a late booking will need immediate advertising support. On the operations side, daily crises could involve a delayed print delivery, which might lead to canceled performances, in which case angry customers must be placated. Other types of emergencies can occur; perhaps the janitorial crew arrives late or concession orders are incomplete, jeopardizing a primary revenue item.

Theatres contract for films in the form of licensing agreements as a result of direct negotiation or bidding. In the case of negotiations the terms may be reviewed after the conclusion of the run. In the case of bids they are firm, immutable. Either way a distributor will contact an exhibitor to announce that a certain picture will be available on a certain day.

The decision to negotiate directly with theatres or to solicit bids is a business judgment made by the distributor. The decision of the theatre owner as to what to offer in a negotiation (or how much to bid) is hardly an exercise in scientific precision, since no one can really predict the performance of a movie - even after seeing it. After all, conventional wisdom said that westerns don't perform, yet "Dances With Wolves" enjoyed strong box-office results. And no one predicted a $200-million gross for "Home Alone". If one begins with the savvy premise that "you just don't know" how a picture will gross, it makes no sense to bid, since the exhibitor is held to that deal. In a non-bid situation there is generally an opportunity to renegotiate the terms after the fact in the form of a settlement if a picture performs poorly. The unpredictable elements of the movie business make it exciting.