Movie theaters undergo a specific process to bring consumers the films that are shown every week. These deals are negotiated in two ways--bidding and percentage. In today's society, percentage is the most widely-used method to lease movies from distributors and bring them to the big screen for public viewing. With bidding the owner pays a set amount for the right to show the movie for a length of time. With percentage the theater and distributor come to terms on a split of the ticket sales.
The Bidding Method
Locate a reputable distributor that has movies you would like to show in your theater. Keep in mind movies that will gross the most money and will properly serve the interests of the demographic that patronizes your theater.
Agree upon a fixed payment and length of time to show a particular movie. For instance, you and the distributor might agree you can buy the rights to show the movies for six weeks for $125,000.
Calculate profits from box office or ticket sales. Once the term of the agreement ends, any money earned for the movie after paying additional investment is considered profit. For instance, if you paid $125,000 for the rights to the movie and earned $175,000 during the six-week run, you have earned a profit of $50,000.
The Percentage Method
Locate a reputable distributor to receive films from. Once again, keep in mind the demographics and interests of your consumer base.
Negotiate a contract for the agreement. In this contract you must set an amount for the house allowance, percentage split and length of agreement. Money the distributor pays the theater during the length of the contract to cover weekly expenses is called the house allowance. The amount of ticket sale profits split between the distributor and the theater is the percentage split. Distributors often take the majority of ticket sales. The time frame the theater plays the film is called the length of agreement.
Calculate and distribute profits based on percentage. Depending on the success of a movie, distributors might opt to extend the contract.
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