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How are cinema owners charged for print costs?


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#1 Mark Wilson

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Posted 11 November 2006 - 12:54 AM

Last night overheard an interesting conversation between (I presume) the owner of a cinema and one of his customers, who was wondering when the theatre was going to be "converted to digital". The customer seemed rather taken aback to hear that the cinema owner had no immediate plans to do this, although he said he might consider installing a small projector for the pre-program ads.

When the customer brought up the subject of print manufacturing costs, apparently around A$2,000 to $3000 for the average feature, the owner somewhat tiredly and stroppily said:

Look, you see those rows of seats? There's sixty seats in each row, at $17 per adult bum on each seat that's a thousand bucks a row. Three rows tops, there's your print cost. And that's not counting the money they spend on popcorn, ice cream and post-mix soft drink, which is where the real money is.
You've only got to lose three rows worth of customers OVER THE ENTIRE SCREENING RUN because your competitor is still showing film which they think is better, and that's the end of that advantage, plus, you're still making payments on a digital projector that you've got bugger-all chance of fixing yourself if it breaks down, while your competition is using a projector he's most likely paid off several years ago.

He suddenly dashed off before I could ask him any questions myself, but what I wanted to know is, how exactly is the cinema owner charged for a film print. Do they pay a fixed fee, a percentage of the takings, or both? And what happens to the prints once the run is ended?
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#2 Dominic Case

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Posted 11 November 2006 - 07:30 AM

The cinema pays the distributor a pecentage of the box office takings. That percentage varies through the course of a run - it's generally higher for the first couple of weeks, arguably because the cinema gets the benefit fo the distributor's publicity. Figures around 60% going down to 50% or 40%may be typical, I think.

Your exhibitor friend is quite correct to say that a print is paid for in the first few rows of seats in the first couple of screenings. But the flow of cash isn't quite as straightforward, and it will get even more complex for digital distribution and exhibition.

When a run finishes, the print is returned to the distributor or the film exchange/distribution centre,, where it will probably be re-used for later runs (eg in provincial cinemas). If other territories still haven't had the film at all (eg in Australia we sometimes get films 2-3 months later than in the US, occasionally earlier), then the returned prints are rejuvenated, the most damaged reels are thrown out (so 100 copies might yield 60 rejuvenated ones), and the second territory gets the second-hand prints for the premier season.

WHen the film is finally dead, the unwanted copies are destroyed, either going back to a recycling plan where the polyester base is reclaimed, or as landfill.
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#3 Mark Wilson

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Posted 11 November 2006 - 09:19 PM

The cinema pays the distributor a pecentage of the box office takings. That percentage varies through the course of a run - it's generally higher for the first couple of weeks, arguably because the cinema gets the benefit fo the distributor's publicity. Figures around 60% going down to 50% or 40%may be typical, I think.

Your exhibitor friend is quite correct to say that a print is paid for in the first few rows of seats in the first couple of screenings. But the flow of cash isn't quite as straightforward, and it will get even more complex for digital distribution and exhibition.

So basically, changing from film to electronic projection is of no real benefit at all to the exhibitor. At premium adult pricing levels he still pockets at at least $8 - $9 for each bum on each seat, and that's before any sales of overpriced popcorn, ice cream, sweets and bulk soda pop.

When you put it that way I can see why there are new multiplexes popping up everywhere, and also why they can make money even when there's hardly anybody in them most of the time.

I can appreciate that the above cash flow description is probably a little bit simplistic, but nonetheless, you can't get away from the fact that 60 less patrons is still $1,000 less money changing hands, no matter how you slice it.
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#4 Dominic Case

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Posted 12 November 2006 - 06:21 AM

At premium adult pricing levels he still pockets at at least $8 - $9 for each bum on each seat

Ah, but only a suprisingly small number of people pay that top rate. The average ticket price is much less than that. Generally cinema owners will tell you that they don't make money on the films - only on the popcorn.

And don't forget that most cinemas are not owned by the operators these days. They have to pay rent to the shopping mall they are located in - and that is regardless of whether the movies are making money or not.

But then anyone you ask will point out how tough their particular business is.
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#5 Oscar Godfrey

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Posted 15 November 2006 - 03:23 PM

this is a video i like of Paul Thomas Anderson talking about digital projection.


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#6 K Borowski

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Posted 15 November 2006 - 04:14 PM

I'm really surprised that they have those Kirstie preview projectors installed at theatres. I think that studios should continue to pay for prints and leave it at that. You're making 10s of millions on these films while theatre owners are barely eeking by. The studios aren't the ones that need to figure out how to make bigger profits, it is the theatres. I think theatres should band together and try to get studios to delay DVD releases. Hell, make it a year so that people really have a hard time just waiting until it comes out on disc. I also think they really need to crack down on piracy. At my college's film society, they had a guy show up with the fiml and snoop around with a night-vision scope and try to spot people videotaping the movie. If studios offered theatres incentives (lots of money) to catch pirates along with one of those scopes, I"m sure that they could seriously curtail this practice. Theatres right now, seem to be dying. Digital is onlyl going to make it worse by lessening the quality difference between big screen and small(er) screen. That not only goes for DIs and digital projection, but SFX heavy action films that seem to pervade the big screens these days.

Regards,

~Karl Borowski
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#7 Paul Bruening

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Posted 16 November 2006 - 10:01 AM

Hey Karl,

Both the movie industry and the theatre business have had many near misses on the survival side. However, like all business, they have changed to meet the challenges. The entertainment world has always been this way. It's not like housing or transportation. It's just entertainment.

This early DVD release thing definetly hurts an already dubious profit margin in the theatre business. I have to admit, as well, that my little Infocus home projector has kept me home watching DVDs instead of going to the theatre. I don't have to listen to someone talking on their cell phone in my home theatre.

My understanding is that 4K digital projectors are on the way towards affordability for theatre owners. Mailing a stack of returnable, striped SATA drives to the theatres is WAY cheaper than making film prints. Digital projection (at 4K) may be a new way for the theatre business to survive. It probably won't impact the production end of movies as much since so much of the cost is in production and promotion.
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#8 Richard Boddington

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Posted 17 November 2006 - 11:59 AM

While film projectors from the 70s are still clicking away in many theatres.

What guarantees will the "industry" be able to offer theatre owners that they won't need to upgrade their digital projector every 2-4 years?

The same thing will happen with the digital projectors that happens with the digital cameras, they will go obsolete fast. Sony and the other big makers of this sort of stuff will be engaged in an endless arms race to out do each other.

Then there's the format the movies will be shown on, there will be tape and hard drives, and of course there will not be one universal standard for the globe. Different tape formats and different hard drives, digital will bring a mish mash of formats and projectors.

Where as 35mm 24fps is 35mm 24fps, it's the same all over the world.

R,
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