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Author
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Topic: Looking for advice, first-timers thinking of opening a small cinema.
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Alan Gouger
Jedi Master Film Handler
Posts: 501
From: Bradenton, FL, USA
Registered: Jul 2000
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posted 05-19-2019 01:21 AM
Looking for advice for first-timers thinking of opening a small cinema.
The list of questions are endless, please jump in regardless the catagory as you see fit. Consider this thread ongoing, work in progress for anyone thinking of jumping into the cinema exhibition business.
Some topics that immediately jump to mind.
How do you see the future for cinemas? Is there still money to be made if considering an art house, independent cinema or first run cinema. Regarding profit, what are the trade-offs, what do you recomend?
How difficult is it to obtain first-run titles. What might have an impact on what is available to you.
Any pointers regarding location?
Insurance, liability? What kind of coverage is required and common to this industry? How important is having a liquor license? Does it affect the insurance rate?
Advice regarding the Food/concession stand? Your not just running a cinema your also in the food business.
If you had your choice do you see one more profitable, indoor cinema verses outdoor, drive-in?
Advice regrading emploees?
Welcome any advice that may help maximize the bottom line!!
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Marcel Birgelen
Film God
Posts: 3357
From: Maastricht, Limburg, Netherlands
Registered: Feb 2012
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posted 05-19-2019 01:08 PM
There are so many factors involved with this, it's hard to start anywhere specfic.
quote: Alan Gouger
How do you see the future for cinemas?
Nobody here has the definitive answer for that. What's clear is that the exhibition industry is changing, but it has been changing all along its history. You're competing with a lot of stuff out there, trying grab your potential customer's attention span and dollars and the stuff you're competing with, seems to increase every single day.
quote: Alan Gouger
Is there still money to be made if considering an art house, independent cinema or first run cinema. Regarding profit, what are the trade-offs, what do you recomend?
There is still money to be made. But, unless you come up with a total revolutionary product no-one has ever seen and everybody wants, it's no license to print money. You usually need to put in some considerable efforts to make it work.
quote: Alan Gouger
Any pointers regarding location?
Location is key, almost everything else is secondary...
But what the right location is, is highly dependent on what product you want to offer. Opening a "first run" single screen in an area already served by multiple big-brand multiplexes is a potential recipe for disaster. Opening a single screen in a rather rural community, where there is a base to support your business and the next screen is 70 miles away may just work.
Art houses, sub-run all have their specific markets, but usually require more than just a small rural community to be profitable.
quote: Alan Gouger
How difficult is it to obtain first-run titles. What might have an impact on what is available to you.
- Don't try to deal with the big studios yourself, use a booker.
- What you will be playing highly depends on what commitments you want to take from those studios and how many rooms you have available to play it in.
- Competition in your neighborhood may still limit the titles available to you...
quote: Alan Gouger
Advice regarding the Food/concession stand? Your not just running a cinema your also in the food business.
This is where your margin is. A local art house cinema thought they could survive on film alone, now they're a restaurant that happens to play movies too...
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Mike Blakesley
Film God
Posts: 12767
From: Forsyth, Montana
Registered: Jun 99
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posted 05-19-2019 05:06 PM
All these thoughts are from the perspective of a small town (1800 people) cinema owner for just over 40 years.
quote:
Advice regrading employees?
Always have at least one "adult" in the building. Meaning, somebody about 25 or older. (Not 18.) And pick the adult carefully, if it's somebody besides yourself. And, make sure you're there a lot -- people love the "owner in the store" aspect of an indie theater. If you only go in once a week to review the reports, you'll probably be out of business eventually.
Other random thoughts:
Have at least 3 screens.
Don't fall into the trap of "we're not going to gouge you for your tickets and concessions like those big chains do." Movies and concessions are priced the way they are for a reason, regardless of what the media (mainstream and social) will tell you. The theater graveyard is full of people who thought they were avoiding ripping people off, but what they were really doing is ensuring they would never make enough profit to keep the doors open. It's OK to be priced somewhat less than the big chains, after all you're not sending your profit to the home office, but don't give away the store. And make sure your product is worth what you're charging. That means quality at every angle. Don't skimp on anything. You're in a serious battle for people and you're competing with their couch, easy chair and refrigerator. Give them a reason to come to you.
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Martin Brooks
Jedi Master Film Handler
Posts: 900
From: Forest Hills, NY, USA
Registered: May 2002
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posted 05-19-2019 11:27 PM
While an independent arthouse might be able to attract a specific and loyal audience, you have to work the numbers. And this is going to sound pessimistic, but I think one has to be real about this.
AMC, the largest chain, averages only 92 people per day, per screen. So the question becomes, do you think you can do better than that and if not, is the business viable? IMO, a business that only does business on the weekends is not usually viable.
92 admissions per day at $10 per is $920 per day plus concession revenues, but your film rental costs will be at least 50% so your gross net is $460. Their per cap on drinks and food is $4.66, but if you're in a location with moderate incomes, you'd probably have to charge far less. Figure $2 per cap. So that's another $184 per day. Let's say you make a 70% margin...that's $1.40. So $589 a day after food, rental costs, That's $215K a year. So can you make a profit after salaries, insurance, building rental, equipment, construction loans, marketing, maintenance, etc?
Now if you buy a building that has viable rental opportunities for other businesses, you might be able to make it, but you won't be making it from the theater - you'll be making it from those other businesses.
While 2018 was a record year in terms of gross revenues for the domestic movie business, it was most definitely not a record year in terms of admissions. Even if it were, it was the big popcorn movies that drove the business and if you're an art house, you're not going to be booking those movies.
If you're going to be an arthouse, many such films are streaming day and date with the theatrical run. If not, you have to evaluate the competitive situation. So you need to check with the local distributors to see exactly which movies you can book.
Depending on whose numbers you believe, the average person saw 3.5 to 3.7 movies per year in 2018. So multiply your local population by those numbers to see if they work.
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Scott Norwood
Film God
Posts: 8146
From: Boston, MA. USA (1774.21 miles northeast of Dallas)
Registered: Jun 99
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posted 05-20-2019 12:00 AM
I'm on the "slightly pessimistic" side as well.
I would have felt differently in the late '90s or early 2000s, but some aspects of the business have changed since then that make it harder to succeed than in the past:
- distributors have changed their fee structures in the last few years, and the average "film" rental rates have gone up in that time; in the '90s, one could book late-run art-house titles at 35%, which (I am told) is unheard-of now
- the average quality of movies has gone down, and the "shelf life" of a film has been reduced significantly--this is somewhat subjective, but nothing plays for three to six months now (I can think of several films that did in the early 2000s), and the public is less interested than ever in non-first-run titles, yet distributors still want a month-long (or at least two-week) playdate for first run titles
- digital cinema has hurt the business model of cinemas, and will be expensive to maintain over the long term
- entertainment options for consumers have continued to expand, and in-home entertainment has become more popular (and better, since the average consumer now has access to HD, Blu-Ray, more cable channels than ever, streaming content, etc.)
- consumer tastes for out-of-home entertainment seem to have changed--for example, people seem to be going "in" earlier (9pm screenings used to be packed, but now rarely are)
- advertising costs have increased, particularly for cinemas which advertise in newspapers and other local publications
I would love to say otherwise, but I'm not just convinced that owning a cinema is a great business proposition in 2019. Not that it ever really was a great business in the post-TV era, but it seems to be a harder business than ever at the moment, at least from what I have observed and heard from talking to cinema owners.
Otherwise, I agree with what else has been posted in this thread. A small town is probably a better location now than larger suburbs or cities (many of which are over-screened). Most people will patronize the nearest cinema which is showing what they want to see; presentation and customer service are always important, but even a cinema with the best of both will have trouble if it is not playing titles which interest its customers.
Drive-ins are a different business altogether. I don't understand the economics as well I do for indoor cinemas, but the biggest issue for them in my area is the land value and the seasonal nature of the business. If I were to consider buying or opening one, I would look for a location with a climate that would allow for year-round operation (or nearly so) and in an area with inexpensive land and minimal light pollution.
Something that I would suggest considering if you have a suitable venue in your area (perhaps a live theatre that is closed on weekdays) would be to host a film series in an existing venue. A curated program of repertory films or recent hits, presented in conjunction with one or more community groups and advertised with a mailing list and a printed calendar of titles could probably be made to work in many areas. That said, I have tried to pitch this for years to people and no one has really taken me up on the idea.
Edit: One more thought: something that could change the economics for an indoor theatre would be if the building could be used for something else during the day. If there is a college nearby that needs lecture space, a church group that needs space, or a business that wants to hold meetings in a large-ish venue, then owning a theatre becomes easier to justify.
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![[Eek!]](eek.gif)
. AMC and Regal have that entire area locked up. I've been to that AMC before. That might actually mean not even having a theater anywhere in Florida for that matter... 
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