Why Might Movie Theaters Want You to Movie Hop?

Movie hopping is the act of buying a ticket for one movie and staying in the theater to see multiple movies. Since movie hopping deprives movie theaters the ticket sales on the unpaid movies, it is a crime. If caught, hoppers may face charges of theft of service, trespassing, and burglary.

Interestingly, most movie theaters don’t even try to prevent movie hopping. An obvious explanation is that the cost of preventing movie hopping exceeds its benefit. To prevent it, movie theaters need to hire extra employees and may need to implement new security and monitor programs. These changes may very well cost more than the recovered revenue. Therefore, movie theaters usually turn a blind eye to movie hoppers. Another explanation, rooted in the economics of movie theater business, suggests that movie theaters may even want to encourage movie hopping.

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Movie theaters have high fixed costs. Regardless of the number of movie-goers, a theater needs to lease movie licenses, rent, maintain, and air-condition the building, and run food and game facilities in the lobby. These mount to a huge fixed cost. The movie theater has two revenue sources: movie tickets and concessions. Between the two, ticket sales is a poor revenue source, because movie studios take 80%-100% of all ticket sales. If the movie theater sells a ticket at the regular $22 price, it gets to keep only $4.4 at most. Meanwhile, the movie theater keeps all revenue from sales of concessions, mostly food and beverages. Nowadays, a large popcorn costs about $8.00 and a large soft drink about $6.50. Clearly, the theater gets more revenue by selling a cup of coke than by selling an extra ticket.

Suppose a movie hopper decides to watch three movies, he needs to spend at least six hours in the theater. In the six hours, he’s likely to get thirsty and hungry. At this point, the movie theater would rather let him stay and get him to buy concessions than kick him out for not buying tickets. The key here is that hoppers and theaters have the same relative preference. If hoppers have to spend extra money, they want to spend on concessions rather than on tickets, because concessions’ prices are lower than ticket prices. If theaters have to make hoppers buy something, they want them to buy concessions rather than tickets, because concessions revenue is higher than ticket revenue. Therefore, both sides have incentives to ignore tickets and just focus on transactions over food and beverages.

How, then, can movie theaters get hoppers to buy concessions? Maybe through the refill policy. Most theaters allow movie-goers to refill their popcorn and drinks. But how many people would walk out in the middle of a movie just to get refills? Not that many. Most people refill in between movies. Therefore, the refill policy mainly benefits people that intend to watch more than one movie. It’s possible that movie theaters implement the refill policy to lure movie hoppers into buying concessions.

A question arises naturally at this point. Why don’t movie theaters charge a flat entrance fee and let movie-goers watch as many movies as they want. That way, theaters can attract more movie-goers and the movie-goers will stay longer and are more likely to buy more concessions. Theaters don’t do it, because it would anger movie studios, whose main revenue source is ticket sales. Any theater that tries to implement the flat entrance fee policy will have a tough time leasing movie licenses.

Why Might Movie Theaters Want You to Movie Hop?