Coming to a Theater Near You: Pricier Popcorn

May 27, 2008— -- Families turning to the movies this summer for a little distraction from the economic drama in the own lives might not find the relief they were seeking.

The cost of movie tickets and those tubs of popcorn are starting to creep up in some theaters across the country.

Part of the problem: the rising price of corn resulting from the increased ethanol production and more countries around the world seeking the grain. Corn prices are up 58 percent from where they were last year at this time.

Just in time for the Memorial Day weekend, AMC Entertainment increased the price of its popcorn 25 cents nationwide. The company operates about 290 theaters in the United States.

It is also increasing ticket prices in some markets. In the Kansas City area, for instance, weekend shows after 4 p.m. will now cost $10 for adults, up $1.

Nationally, the average price of a movie ticket during the first three months of the year was $7.08, up nearly 3 percent from $6.88 in 2007, according to the National Association of Theatre Owners. And 2007 prices were up 5 percent from the year before. (The price average includes all children and senior citizen tickets and any matinee discounts.)

Ricard Gil, an economics professor at the University of California-Santa Cruz, who studies the movie business, said it is only logical that some movie theater chains would want to pass those costs on to customers.

Gil said that movie theaters mark up the price on soda, candy, popcorn and other snacks by an average of 80 percent. The profit margin on popcorn is probably higher, he said.

But that money is used to keep movie ticket prices down. His research found that profits from the concession stand subsidize about 25 percent of the ticket price.

(And the movie theaters get to keep all of that food and drink profits for themselves. Patrick Corcoran, a spokesman for the National Association of Theatre Owners, points out that 55 percent of the movie ticket price goes back to the film distributors.)

Gill said, "Some of these theaters already are barely breaking even. They might have a tough call to make. Given the markups on popcorn, they may have to increase the prices on movie tickets."

Larry Etter, chairman of the National Association of Concessionaires and vice president of theater services for Malco Theatres, based in Memphis, Tenn., said that theaters are paying more for items like popcorn but that Gil's assumptions about pricing are simply wrong.

"Typically, in a theater business model, the box office operates separately from the concession revenue stream," Etter said. "If popcorn goes up, you don't increase the price of the ticket. You increase the price of the popcorn &:#133; Why would I go up a dollar on the movie ticket when I have to give [the film distributor] 50 cents?"

Etter said that besides rising corn prices, theaters are dealing with higher paper pulp prices, which drives up the cost of soda cups and popcorn bags and tubs. Also, higher fuel costs mean that it costs more to have all the food delivered to the theater.

And don't forget higher electricity costs to run the projectors and the air conditioning.

Ticket prices might be going up in some theaters, but Etter said that has more to do with upgrades to new digital projectors.

"There are two things going on and they are not connected," Etter said.

If theaters do raise prices, moviegoers already facing rising food and gas costs might not be so willing to go along with the price hikes.

Clearview Cinemas, a New York area movie chain, recently said it would stop offering reduced-price tickets for children and seniors at one of its Manhattan cinemas. The next day the company did an about-face and restored its discounted tickets.

Gil said that some older theaters with less amenities will probably be forced out of business while others are going to need to upgrade their seats and sound and projection equipment. Others are also experimenting with special, more-expensive sections of the theater that also offer dinner, alcohol or both.

Corcoran, the theater owners' association spokesman, said that theaters are feeling some pressure on popcorn prices because of the rise in corn demand for ethanol.

"Whether theaters transfer that to the consumer in terms of popcorn prices is going to be a market-based decision that each theater is going to have make on its own," Corcoran said. "I think Dr. Gil is making assumptions that theaters will definitely raise their prices on popcorn. They may, they may not. I don't know."

Corcoran takes issue with Gil's assumption that if higher popcorn prices lead to a decrease in snack sales that theaters will automatically be forced to raise prices.

"It's within the realm of possibility," Corcoran said, "but I don't think it's as guaranteed as he seems to think it is."

Regardless, Corcoran points out that a night at the movies is still more affordable than going to a Major League Baseball game — or any professional sporting event — or a concert or live theater.

"It's traditionally been that movie theaters have been the most affordable form of out-of home entrainment," Corcoran said. "They want to be the first choice of entrainment for a mass audience and that means keeping it affordable."