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Don’t Mess With The Mouse

Just in case there’s a movie theater operator somewhere in America who hasn’t caught on, Disney has offered a helpful reminder: You are not in the business of selling tickets.

Theater operators are in the business of selling snacks, sometimes augmented by meals or booze. What plays on the screen is simply there to attract customers to the concession stand.

In a way, this reminder might even be doing exhibitors a favor. As channels for watching movies multiply and improve, theaters need to offer something besides talking pictures to continue to draw a crowd. A better food and beverage bargain might just do it. AMC seems to realize this, as does the smaller but beloved Alamo Drafthouse chain.

Yes, theater operators will counter that, aside from concessions, they offer a gazillion-pixel image and 423 channels of booming surround sound. And I don’t mean to imply there is no value in seeing a beautifully crafted film on a giant screen with all of the image and sound quality its creators intended. Far from it. The best films are amazing tapestries of visual and performing arts, interwoven to provide a truly immersive experience. No smartphone is likely to provide that any time soon – or ever.

But just as most visitors to the Louvre look at the Mona Lisa and simply see a famous painting of a woman – possibly smaller than they expected – most moviegoers are not focused too intently on the artistic integrity of the creation on the screen. They just want a couple of hours of entertainment.

Disney knows this, and it knows that for a blockbuster like “Star Wars: The Last Jedi,” customers will have no shortage of choices for where to screen that entertainment. The power in this case lies almost entirely with the studio.

Using that power, Disney has decided to help itself to an unprecedented chunk of ticket revenue: 65 percent. Exhibitors must also commit to a set of “top-secret terms,” according to The Wall Street Journal, and must agree to show the movie on their largest screen for a minimum of four weeks. If theater operators ignore these terms, Disney will take an additional 5 percent of ticket sale revenue. While other films have had similar ticket sales splits – the previous Star Wars installment, “The Force Awakens,” reportedly gave Disney 64 percent – the 5 percent penalty is unusual.

Given that 2017 has been an especially rough year at the box office, even by recent standards, many exhibitors are likely to grit their teeth and accept the new normal. “The Last Jedi” is projected to bring in more than $500 million domestically; “The Force Awakens” is the reigning domestic box office champion (and still number 11 if you adjust for inflation). Overall, Disney accounted for 26 percent of total domestic box office in 2016, even without a new Star Wars film last year. And Disney has, at least so far, bucked the trend of shortening the window between theatrical release and home viewing, making it a studio that theater owners are especially interested in keeping happy.

In the early days of the 20th century, major movie studios owned the theaters where movies played outright and set terms as they liked. While the U.S. Supreme court put an end to Hollywood’s “vertical integration” in 1948, we have now returned to an era when most theaters need the studios much more than studios need theaters. Disney, which counts the lucrative Marvel and Star Wars franchises among its extensive (and well-defended) intellectual property portfolio, has more sway than most.

Some small independent theater owners may go their own way and decline the “Last Jedi” terms, but most will give Disney the control it craves. If they want crowds excitedly arriving to buy popcorn, Junior Mints and ICEEs on Star Wars’ Dec. 15 release date, theater owners simply have no other choice.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book Looking Ahead: Life, Family, Wealth and Business After 55.

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