Why Is Cinema Popcorn So Expensive?

The economics behind high snack prices at movie theatres, from revenue sharing with film studios to a clever form of price discrimination.

A tub of popcorn at a multiplex can cost several times what the same amount would cost outside. Why do cinemas charge so much, and why do people pay?

Explanation 1: Who keeps the ticket money

Cinemas share ticket revenue with film distributors, often handing over a large portion, especially in a film’s first weeks. But they usually keep all the snack revenue. So cinemas have a strong incentive to keep ticket prices moderate to fill seats and make their profit on food and drinks.

Explanation 2: Captive customers

Once inside, customers have few alternatives, and many cinemas do not allow outside food. With little competition inside the hall, the cinema can charge more. This is an example of market power over a captive audience.

Explanation 3: Price discrimination

Economists Ricard Gil and Wesley Hartmann studied cinema pricing and found evidence for a clever idea: high snack prices act as a form of price discrimination.

Customers who care a lot about the whole experience, and are willing to pay more, buy snacks.
Price-sensitive customers skip snacks and just pay for the ticket.

By keeping tickets moderate and snacks expensive, the cinema charges more to those willing to pay more, without losing price-sensitive viewers.

Why not just raise ticket prices?

Raising ticket prices would drive away price-sensitive viewers, and much of the extra money would go to distributors. Expensive snacks are a more profitable way to capture value.

The customer’s side

Many people accept high snack prices as part of a treat. Some cinemas also offer combos and loyalty deals to encourage spending. In India, the high cost of multiplex food has sparked public debate and even court cases about whether outside food should be allowed.

Two families at the movies

One family buys tickets only and eats dinner at home first. Another family buys tickets plus large popcorn and drinks. The cinema earns modest profit from the first family and a lot from the second, while both see the same film. Snack prices let the cinema charge different customers different amounts.

Thinking popcorn is expensive because it costs a lot to make

Popcorn costs very little to make. High prices reflect revenue sharing, captive customers and price discrimination, not production costs.

Key takeaways

Cinemas share ticket revenue with distributors but keep snack revenue.
Customers inside have few alternatives, giving cinemas market power.
High snack prices let cinemas charge more to those willing to pay more.
Production cost has little to do with snack prices.