I’m a big movie fan, and I especially love going to see a film on the big screen. What I don’t love, however, are those prices at the concession. A medium bag of movie popcorn costs about 60 cents to make, but can retail for as much as $6, a whopping 900% markup. But according to The Globe and Mail’s Susan Krashinsky and John Sopinski, concession profits can actually mean survival itself for movie theatres.

“A Canadian movie theatre’s profit margins on a movie ticket are roughly 48% of sales, but that theatre gets to keep about 80% of what you pay for food. In the United States, those margins are closer to 90%.” 

Take Cineplex, for example, which is the largest operator of movie theatres here in Canada. Previously known as Famous Players Canadian Inc., the company was a subsidiary of Paramount Pictures when it was founded back in 1920.

The Globe and Mail’s recent feature on the movie theatre business, The Film Game: Hits, Snack and Global Screens, explains that the range of food items available at Cineplex concessions in Canada are far wider than the limited popcorn-Coke-Good & Plenty menu at most U.S. movie theatres:

“Cineplex has become a franchisee, opening up Tim Hortons, Yogenfruz and Burger King outlets in many theatres.”

The cost of doing that is higher than popping some kernels and running a soda fountain. But while profit margins are lower, those extras (bagels, donuts, yogurt, burgers, fries) bring in more cash overall, as Cineplex CEO Ellis Jacob told the Globe and Mail.

“We do a lot more money per person than [the U.S. chains] do, and the reason is we’re giving you more choice.”

Jacob added that another growing concession trend is self-service, which is already big in Australia:

“Customers pouring their own drinks and processing their own payments don’t just save the cost of paycheques to surly teenagers behind the counters. With lines surging during previews, the more people that theatres can move through the concessions stand before the movie starts, the more money they make.”

Since the 1950s, theatre owners have realized more income from popcorn sales than from the movies.

In fact, Richard McKenzie, an economics professor at University of California-Irvine and author of the 2008 book Why Popcorn Costs So Much at the Movies, And Other Pricing Puzzles, says:

“A lot of theatre owners tell me, ‘I consider myself working in concessions, not movies.’ Popcorn is what pays for a lot of stuff in the movie theatre.”

But he also defends the poor beleaguered movie theatre owner accused of price gouging at the popcorn stand. For example, he wrote last year in the Wall Street Journal:

“If movie popcorn is such a raw deal, why are the concession lines so long?”

McKenzie describes as an “erroneous notion” that movie popcorn costs some multiple of homemade popcorn:

“True, the kernels bought at a grocery store, and stove-popped at home to make a tub of popcorn, cost about 55 cents. The most consequential cost, however, comes in the time spent popping and cleaning up, and then smuggling the result into a movie theater. The fact that BYOP is rather easy to get away with, but very few people even try, is another indication that movie popcorn is not as overpriced as the grousers say.

“If a person figures the value of her time at $20 an hour: and the time needed to pop the equivalent of a tub of popcorn (about two poppers full) plus clean-up at 30 minutes, the cost of home-produced popcorn is at least $10.55 ($10 in time value and $.55 in kernels and oil).”

There may, however, be another factor influencing why most moviegoers are resistant to smuggling in our own healthier and cheaper home-popped corn. As author and popcorn historian Andrew F. Smith writes:

“The smell of popcorn that pervades every movie theatre can bubble up nostalgia in even the most curmudgeonly customer”.

But here’s one reason (true confession time here) that I’m not one of those smuggling-averse moviegoers.  According to Two Thumbs Down For Movie Theatre Popcorn’, a November 2009 report from the Center for Science In The Public Interest:

“An average medium popcorn tub at the movies has 1,610 calories, 1,500 mg of salt, and 60 grams of saturated fat, thanks to being popped in artery-clogging coconut oil.  That’s roughly the saturated fat of a stick of butter and the calories of two sticks of butter. Asking for ‘topping’ on movie popcorn is like asking for oil on French fries. Even in theatres that pop corn in canola oil rather than coconut oil, a tub of popcorn without topping may be less likely to clog your arteries but more likely to elevate your blood pressure because of the salt content.”

And it gets worse: even the smallest movie popcorn with “buttery” topping has about 600 calories, about the same as a quarter-pound cheeseburger (550 calories). You could have three slices of thin-crust cheese pizza or three milk chocolate candy bars for about the same number of calories. Or a slice of cheesecake – only 410 calories.

Edward Jay Epstein, writing in Slate, reminds us that one important benefit of salty movie popcorn to the industry’s profit margins is that it makes customers thirsty for sodas, another high-margin product (supplied to most theatre chains by Coca-Cola, which makes lucrative deals with theatre owners in return for their exclusive “pouring” of its products).

One theatre chain executive, in fact, told Epstein that he considers the cup holder mounted on each seat (which allows customers to park their soda while returning to the concession stand for more popcorn) as “the most important technological innovation since sound.” He also credited that extra salt added into that buttery topping on popcorn as the secret to extending the popcorn-soda-popcorn cycle throughout a long movie.

For this type of business, Epstein says, theatre owners don’t benefit from movies with gripping or complex plots, since that would keep potential popcorn customers in their seats. One theatre owner told him:

“We are really in the business of people-moving. The more people we move past the popcorn, the more money we make.”

To keep their people-moving enterprise going, Epstein explains that theatre owners prefer movies whose length does not exceed 128 minutes. If a movie runs longer than that, and the theatre owners do not want to sacrifice their lucrative pre-show advertising time onscreen, they will reduce the number of their evening audience “turns” or showings from three to two, which means that 33% fewer people pass their popcorn stands.

“Even so, if a long movie promises to bring in a big enough audience—a promise King Kong made but did not deliver—the theaters will play it. Indeed, the ultimate test for the popcorn economy is: Will a movie attract enough consumers of buckets of popcorn and soda to justify turning over multiple screens to it? Theater owners know that the popcorn audience is mainly teens, who prefer movies with action over dialogue.”

Read more about the business of this salty delight from Bloomberg Business Week, or read Microwave Popcorn: (Still) Bad For You