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Negotiations over what movies to choose and how much to pay have long been part of the relationship between exhibitors and distributors. Just as distributors have to set up a slate of films to show to the public, exhibitors must have pictures that will fill the seats of their theaters. Executives who book movies want popular films to come out on a schedule that allows the chains to maximize the use of their theaters on a year-round basis.
This desire has created tensions with the major distributors, who have traditionally tried to release most of their films during the summer and during the Thanksgiving and Christmas vacation periods. Nevertheless, because distributors and exhibitors need each other, distributors try to adjust some of their release strategies to accommodate theaters' needs, and theaters try to help distributors get screens for hoped- for blockbusters during times of the year when every studio, it seems, wants to have a place in theaters.
The relationship typically works this way. A theater chain often has booking divisions in different areas of the United States, depending on where it concentrates its screens. AMC, for example, has three booking divisions—one handling the Northeast, one the South, and one the West. Each division has a number of bookers. Say you work as a booker for a chain of movie theaters in a particular region of the United States. Movie distributors inform you months in advance of what films they intend to release, and when. That information allows you to begin thinking about the kinds of movies you might have in your theaters at different times of the year. As a particular film's release date gets closer, the distributor sends you publicity material about the film, and you also have the opportunity to see uncompleted versions. These uncompleted versions of films (often without music) are called rough cuts. Based upon this information and what you know about the other movies that are coming out around the same time, you make an estimate of how well you believe the film will do at the box office compared with the others.
The distributor of the movie, for its part, has an interest in getting the movie into theaters that fit its sense of audience interest in the film. If the film will have a limited or exclusive release, the distributor will want to place it in locations where the target audience for the film lives. Executives may try to place a movie aimed at African-American moviegoers, for example, in areas where many African-Americans live. If distribution executives anticipate that a film will be a blockbuster, they will insist that an exhibitor that wants to carry the film place it in the largest theaters within its multiplexes. In areas where a couple of exhibition chains have competing theaters, the distributor may try to satisfy them all in order to keep its long-term business relationships solid. The distributor may offer the film exclusively to one chain in one area and to another in another part of the neighborhood. Or it may offer one potential hit to one company and another potential hit to the other company.
FINANCIAL AGREEMENTS BETWEEN DISTRIBUTORS AND THEATER CHAINS Negotiations on the issues that are important to distributors and exhibitors may continue until just a few weeks before a movie's opening. Eventually, distribution and exhibition executives negotiate an exhibition license for each theater, specifying the date the distributor will make the picture available to the theater, the number of weeks the theater agrees to play the picture, and when and where competing theaters can show the same film. The exhibition license also sets the financial arrangements between the distributor and the theater chain. These arrangements take into consideration the distributor's huge expenditure on the film, on the one hand, and, on the other, the exhibitor’s need to cover its costs and make a profit.
One common approach is for the distributor to take a certain percentage of the ticket revenues from the film, with the exhibitor keeping the rest. Another approach is the percentage-above-the-nut approach. It works this way. The executives of the theater chain and the distribution firm come together to agree on what it costs to operate each theater (the electricity, salaries, rent, maintenance, and the like). That break-even point is called the nut. For each picture, the theater chain negotiates what percentage of the amount “above the nut'' it will pay to the distributor. Typically, an exhibitor will return around 90 percent of ticket revenues above the nut to the distributor. That percentage may get lower several weeks into the run of a film. “Discount” theaters, which may show movies a few months after they were first released, typically pay a substantially lower percentage above the nut to the distributor.
In the end, distributors typically get back about half the box office receipts. As a general rule, the 50 percent that exhibitors get covers their costs, plus about 10 percent. Although a 10 percent return isn't bad, theaters typically make a lot more money than their cut of the admission take through their concessions—popcorn, soft drinks, candy, and other food. Big theater chains, such as AMC, fully control their concession operations and do not have to share the profits of these operations with other firms. Selling food can be quite a lucrative proposition, particularly in view of the high prices the chains charge. (Remember the last time you bought a soft drink at a movie?) An increasing number of theaters now sell pizza and other noncandy foods.
TECH & INFRASTRUCTURE MOVIES STILL START WITH FILM
It is safe to argue that digitization has caused a revolution in moviemaking over the past decade. Entire films can now be shot and edited digitally, reducing costs and making anyone with skill and a good idea a potential moviemaker. For instance, box office hits such as Star Wars: Episode II and James Cameron’s Avatar were shot entirely on digital cameras. But it isn’t only big-budget films that embrace digital capturing. David Lynch’s much-touted Inland Empire is an example of another type of film to take advantage of digital cameras. Moreover, entire film schools are going digital, thereby providing a cheaper alternative to film for students trying to make their final projects.
Digitization has also begun to replace the traditional methods when it comes to post-production. When a movie has finished being shot the negatives need to be treated to enhance and clean up colors. The traditional method is a photochemical process; however, this is quickly being replaced by a device called “digital intermediate,” or DI. Although many industry observers are suggesting the medium of “film” is at an end, to be replaced by digital capturing, those who work with DI continue to argue for film’s superiority to digital photography. Indeed, as trade magazine Variety notes, “DI has proved to be so effective at bringing out the subtleties of film that some feel it’s extending the life of film as a capture medium.”
Moreover, film continues to be an essential part of many companies that specialize in post-production, such as UK-based Deluxe Laboratories. And although Deluxe has been improving its digital offerings, “film remains a vital business” for the company, according to Variety In fact, in 2003, when involved in post-production with such films as The Lord of the Rings: The Return of the King and Master and Commander, “Deluxe saw its total film footage output grow by 3% ”
The logic behind this has to do with information: 35mm film contains much more information than a digital image. Moreover, “film has a big advantage over digital in its ability to capture wide extremes, particularly the highlight extremes, which tend to be a downfall for a lot of digital cameras,” says Ingrid Goodyear, general manager of Kodak’s image capture business. As such, when it comes to color and texture manipulation, many post-production personnel still prefer movies shot on film and then digitally manipulated, rather than the alldigital route. According to Variety, most digital intermediate suite projects are rendered in 2K resolution, with the higher end movies done in 4K. But as John Baily, director of photography for such films as Groundhog Day and He’s Just Not That Into You, notes, “a 35mm film negative can contain a resolved image equivalent to up to 8K... that’s far superior to the best digital capture available today.” Those behind the camera, such as Steven Spielberg and M. Night Shyamalan, also continue to espouse the virtues of shooting a movie using film.
The debate between digital and film will no doubt continue to rage on, with purists on both sides vying for supremacy.
Sources: Michael Behar, “Analog Meets Its Match in Red Digital Cinema’s Ultrahigh-Res Camera,” Wired Magazine, August 18, 2008. http://www.wired.com/entertainment/hollywood/mag- azine/ 16-09/ff_redcamera?currentPage=all (accessed August 23, 2010); David S. Cohen, “The Digital Divide,” Variety, March 14-20,2005, Section B, p. 1.
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