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Transcript

building an indie business in the center of venture capital I am Alex Edmonds also known as supreme rom ham on the internet and this is the building and indie business podcast ok still love that intro um today I'm gonna be going out of the usual format of me talking about podcasting or what I'm doing or about the book and I'm gonna talk about finance I'm gonna go into finance a little bit I'm going to talk about movie theaters the reason why I want to do this episode is because originally in October of 2018 when I had the idea to start a podcast I was gonna start a finance podcast about how different industries make money I was going to talk about like majors they're professional sports and other things and so this is a preview of what I would have done clearly I went in a different direction so yeah movie theaters they have five ways of making money they have preview ads they've concessions they've tickets still sales they have memberships and there are few other ways so I'm gonna be talking about all five of those things so let's get into it preview us so preview ads are the ads that you see right before a movie and these ads are very powerful there are many ways why they're powerful many reasons why they are powerful it's because these ads are playing on the theater where people are waiting for the movie to start and they do these ads for anywhere from 30 minutes to 15 minutes and you have these people sitting in a theater and these loud ads are playing and they have nothing to do right or well now they could check on their phone but you even then there's a loud ad with a screen glaring at them and shining a light in their face they will eventually look up and I have experience with seeing the effectiveness of these ads so I used to live with someone and they watch a lot of TV and this was when Deadpool was coming out and they've seen the Deadpool ad on TV hundreds of times hundreds literally hundreds and we're at the movie theater and the ad for Deadpool plays and then after the ad finishes they turn to me and they ask me hasn't he played that role before so they were paying attention enough to ask me a question about the ad which they've seen over a hundred times but now they're finally noticing it so it is effective another thing about these ads if they're highly targeted it's either movie trailers or something about movies and they're at a movie theater so they're more likely to convert someone to watch the movie or buy the DVD of the movie not DVD but now stream it and the other ads are very local at my movie theater the ads that play are like the ad for the restaurant next door so when I get out of the movie I will have that restaurant in my head and I don't even have to get in the car to go to that restaurant so it's very effective right okay the next way a movie theater makes money is concessions so some movie theaters don't even allow you to bring in your own food so people know this they don't bring any food to the movie theater but they want to snack during the movie so they have to buy it at the theater and they the theater makes money that way and how the theater maximizes their profit is by having a high volume of stuff of food and this allows them to lower the cost of the amount of food lower the expenses of the food sorry not cost ya cost and expense they're the same thing okay and then charge a high price so like for example the amount of popcorn they make is like 50 scoops right and then one bag is one scoop and then they're able to charge four dollars for that one scoop and that the cost of the making those scoops is like a dollar so they're making four times they're making two hundred dollars on that scoop that costs them a dollar to make right so and they do this with soda they do this with candy they do this with everything there so yeah okay the next thing that's way they make money is ticket sales and how the ticket sales work is very interesting so for the ticket sales a movie theater has to split the price the amount of revenue that they get with the movie studio and the split is very uneven so the movie theater gets a percentage of the ticket sales depending on how many what week it is in the release of the movie so let's say a Star Wars movie comes out the opening week weekend the movie theater might make one percent of every sale that they get from the tickets so it's if it's a hundred dollars that they make they'll get one dollar and the movie studio gets ninety nine dollars but as the week's progress the movie theater makes a higher percentage so the next week it might be two percent the week after that it might be five percent and it keeps going every time so this is why the Titanic was out for so long in movie theaters back in 96 and 97 is because it doesn't cost them much to run the movie and they're getting so much money at the end of it they were probably getting like nineteen ninety percent of every ticket so if people are still watching the movie why not just run you know what I mean okay so the fourth way a movie theater makes money is through memberships so how a membership would work is someone signs up and then they get discounts on tickets or discounts on food the one I used to go to as a kid the discount would know so every time so it was like a punch card that the membership was when I was a kid so like every three movies that we saw we'd get a medium popcorn which could be like half a scoop of popcorn and so that way they would get but the thing they wanted was the ticket sales and then they'd give us 50 cent 50 cent reward for going in the movies and we were going to the movies like every week so yeah that was a good deal for them and we got free popcorn for it okay so onto others so one way that is different of how a movie theater may money is they usually have like an arcade or like one of arcade games and then this is the way they make money is by having all these games and then after the movie or while the kids are waiting for the movie they go play these games and this is something that the movie theater doesn't have to split with anyone and essentially an arcade is kind of low maintenance so they're not spending much money to maintain the arcade they just have to clean it up every once in a while and make sure the the games are working right yeah and then another way is gift cards and how gift cards work is someone is pre paying for those movies and so they get that money right away and then sometimes even people don't use gift cards or they leave in amounts of money on the card so that's free money that the movie theater is getting so yeah okay thank you for listening if you liked this episode please let me know I know it's very different if you would like to talk to me I am supreme rum ham on Twitter on telegram supreme rum ham at gmail.com if you would like to join the open podcast network or open podcast community I have the the open podcast community podcast where members can host their own podcast episode if you want to reach out to me and there's the open podcast blog where I'm looking for people to become authors on the blog if you have something to write about related to podcasting reach out to me I'll give you authors access and you could post it on the blog thank you for listening have a nice day bye