Topic: WSJ: One small theater struggles to survive in the Netflix age
From: Forsyth, Montana
Registered: Jun 99
posted 12-02-2019 10:25 AM
I know there's a reason why the link at the end won't format properly but I don't know what the reason is, so maybe a moderator can fix it?
JOURNAL REPORTS: SMALL BUSINESS
One Independent Movie Theater Struggles to Survive in the Netflix Age
By Chris Kornelis
Updated Dec. 1, 2019 10:07 pm ET
At noon on a Friday last spring, Craig Smith did something not many movie-theater owners do. He had a chat with his audience.
Before the showing of “A Star Is Born,” Mr. Smith asked the six patrons in the 48-seat auditorium at the Firehouse Theater if they had seen the movie before. Then he told them a bit about the film, as well as a few other movies he’d be showing soon.
“Thanks for coming,” he said before he stepped away. “I’ll go start your movie.”
That brief chat sums up Mr. Smith’s vision for his two-screen cinema in Kingston, Wash., outside Seattle: a place that emulates the boutique, small-town theater experience he grew up with. He or one of his employees introduces each film most of the time. As a courtesy, he starts movies at their advertised showtimes, running previews in advance. And—one of the biggest draws—there is real butter on the popcorn.
But the chat also reflects the difficulty of owning an independent movie theater these days, as the vast bulk of moviegoers flock to large multiplexes with big, comfortable seats and other amenities. Mr. Smith has to win his audiences one customer (or in this case, six) at a time, focusing primarily on the movies themselves.
Mr. Smith, 65, is still paying off the projectors he bought a decade ago. Rent and labor costs eat up most of his revenue each month. To cut overhead, he works alone for most weekday matinees, as he did that Friday, and for later showings he relies on film-buff volunteers to help out his paid employees.
For all those efforts, Mr. Smith comes away with slim margins. He says he sells about 2,000 tickets a month—in a town of roughly 2,000 people—and he grossed $300,000 last year, throwing off about $18,000 in net profit, or 6%. He pays himself a $1,000 bi-weekly salary, but only cashes his checks when the business can afford it—he’s been holding back a lot lately—so he leans on his wife’s income as a teacher and his own pay as a soccer coach to cover the household bills.
The theater’s survival depends on a mix of customer loyalty, frozen Junior Mints and real butter.
“People travel to come here,” he says, “because it reminds them of when they were a kid.”
It is a tough time to be in the theater business, of course, for big names as well as independents, in large part because of the increasing number of options people have for watching movies outside the theater. Box-office grosses are growing thanks to higher ticket prices, but fewer people are going to the movies.
The National Association of Theatre Owners clocked 1.3 billion tickets sold in the U.S. and Canada last year, down 17% from the peak in 2002, even though the figure was up almost 5% from the year before. Fewer tickets sold means fewer customers at the concessions stands, which operators like Mr. Smith count on for their profits.
Of the approximately $210,000 to $220,000 of Mr. Smith’s ticket sales last year, most of that goes to the movie companies. Mr. Smith says that if he sells $1,000 of tickets for “Captain Marvel,” $650 or $700 goes to Disney. The rest gets eaten up by labor and utilities.
“I am really a concessionaire,” he says. “I make my money on popcorn, not on the movie.”
Soda is the biggest moneymaker at the concession stand. A medium goes for $5, and he pockets about $4 of that. Theater-size servings of candy, such as Milk Duds, Mike and Ike and Kit Kat, cost him about $1.15, and he sells them for $3.50. His biggest seller is frozen Junior Mints.
As for the movie staple—popcorn—Mr. Smith goes out of his way to make it as appealing as possible.
“I have people who walk in here and buy it and don’t see a movie,” he says.
He uses Orville Redenbacher’s kernels, which he believes taste best, even if they don’t pop up as big as others. He uses coconut oil instead of canola, he says, because it tastes better and he believes it is healthier.
Critically, he uses real butter. Each month he goes through as much as 100 pounds of the stuff, which he buys at Costco. It is a pain to keep warm and it is more expensive than butter-flavored topping, but, he says, you can’t beat the taste.
All told, Mr. Smith sells a bucket of popcorn for $9.95, and after paying for his ingredients (and the bucket), he clears around $8, he says. But he sells four times as many small bags of popcorn as he does buckets; at $4.95 a bag, he clears a bit more than $4.
Extra butter costs patrons 75 cents. He’ll also sell bucket refills for $2, and gives families plastic cups for easy sharing.
“I came from a large family, and I know it’s expensive,” he says. “It’s just an economical way for them to enjoy the experience.”
Mr. Smith isn’t so understanding about customers who sneak concessions in—which is a constant problem, as he sees from the wrappers in his garbage cans.
“The theatergoing experience is having something to eat when you watch the movie,” Mr. Smith says. “And if you just can’t afford it or you feel that we’re overpriced for some reason, then go without. Respect us. When I catch people, I say: ‘Hey, you know, this is how I make a living, I don’t appreciate that.’ ”
Mr. Smith got into the independent-theater business after a long career running video and DVD rental stores.
It was a natural fit: He has been a fan of the movies and movie theaters since he was a child. He used to walk to a local theater in the area when he was a teenager and go into Seattle to catch the latest art-house film. He also studied acting and earned a degree in theater from the Evergreen State College in Olympia, Wash.
“I believe in the art of cinema,” he says.
It is an experience he says helps distinguish him from the juggernauts, including the Regal Cinemas outpost 10 miles away.
Mr. Smith initially planned on showing independent and art-house films exclusively, and they continue to make up a little more than half of the films he shows. But he started showing blockbusters because there are so many people who want to see them. It just makes financial sense.
“I don’t want to compete against the big corporate guys,” he says. “But certain blockbusters you’ve just got to bring in, the big tentpole movies, like ‘Star Wars.’”
Though Mr. Smith had some experience with movies, he struggled through his first year as a theater owner. So Mr. Smith hired a consultant at the urging of his landlord. In addition to suggesting he freeze Junior Mints, the consultant offered a lot of recommendations that Mr. Smith continues to deploy today.
The consultant taught him how to package combos so that, for example, couples who once bought a medium and small soda buy two mediums. He also encouraged Mr. Smith to spread out evening show times by a few extra minutes to relieve tension and traffic in his parking lot.
In the years since he has opened, Mr. Smith has also figured out what show times his theater can support and staff accordingly. He used to run a lot of midafternoon showings, for example, but they weren’t very popular. Cutting them saved him labor and utilities. (When he works alone, however, he can often break even with a tiny crowd, if they buy concessions.)
He also noticed that blockbusters are big popcorn sellers, but art-house fans don’t buy as many buckets. So, he widened his concessions to include craft beer, wine and higher-end chocolate.
Another big lesson that Mr. Smith has taken away: The business is cyclical. In early summer, he’ll have days when nobody will come for a showing, preferring sunshine to the inside of a theater. Then there is late summer, when customers are drawn to the air conditioning.
The winter brings its own peaks and valleys. A freak storm last year shut down the theater (and much of the town) for a full day, and he didn’t show movies in the evenings for a week. For Christmas, though, “I’ll have a $10,000 weekend or something,” he says.
All of the seasonal ups and downs make it hard for Mr. Smith to predict his monthly revenue. His costs, though, are fairly locked in.
His rent is $4,600 a month, and he spends about $4,000 a month on labor, which includes his own intermittent bi-weekly $1,000 salary. Utilities set him back another $700 a month.
He starts his handful of employees a little over minimum wage—$12 an hour in Washington state, climbing to $13.50 the first of the year. There is also a bookkeeper who works 20 hours a week for more than minimum and handles other jobs as well, such as ticket sales. A few community members who enjoy the theater volunteer to help him behind the counter in the 40 minutes or so between showings when things get crazy. They refuse payment—other than the occasional movie.
Over the years, the work has taken a toll on Mr. Smith. Several years ago, he had a heart attack while alone in his projection room. He made his way to the lobby, but his employee was in shock and couldn’t call 911. Someone from the adjoining restaurant did.
“I ended up dying on the gurney. My heart stopped,” he says. “I think I had been stressing for a long time.”
The heart attack forced him to slow down, he says, but his health issues didn’t go away; he ended up in the hospital twice for congestive heart failure. Mr. Smith says that he has tried to make mental adjustments to keep the pressure from getting too high.
“Don’t sweat the small stuff,” he says. “It’s only money. You know what I mean? Manage your stress.”
Ultimately, Mr. Smith is happy with his work—even though it is a low-margin business that hasn’t been as lucrative as he’d hoped.
Besides “free” popcorn and Diet Dr Pepper, “I get to see movies,” he says, adding, “And I get to entertain people who are very appreciative.”
Mr. Kornelis is a writer in Seattle. Email firstname.lastname@example.org.
[URL=https://www.wsj.com/articles/one-independent-movie-theater-struggles-to-survive-in-the-netflix-age-11575256020?emailToken=b65652682f03c681ce3dd42de9b5740fWWMuwoy9qifaBxd9JcV8%2FlcgFaFVsCVEuc0x1AIAh4nSbVVgkv3dktoA6LsyaMv1k%2Fdg9QmUWdyo9%2FR4Gkod4 Ga+ZlW7DuOKg8gFEAcrgb%2F23X6BgDAcao5uGvfFgEL4i+7i8vAxYQeJ0IZjhlvHlA%3D%3D&reflink=article_copyURL_share&fbclid=IwAR1hogmZTIONLOqDGESDnKuPDCI2UReM4637HUnM-aY53CTrXXRidxabHGM]Wall Street Journal link[/URL]
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