Why is Movie Theater Popcorn so Expensive?

Every now and then, when reading an article or blog post, the author will mention some question, or unidentified song or unknown word, that has been plaguing them, something they can't get out of their head. For some reason, when I read this sort of thing, I have a tendency to catch the bug as well, and find myself thinking of the same problem.This happened recently with an article I read in Slate. Steven Landsburg wrote an Everyday Economics article regarding WiFi in hotels. He mentions that some offer the service for free, while others charge, and how, from an economics perspective, this doesn't make much sense. Read the article to see what he has to say.

Towards the end of the article, he circles back to a situation he often thinks about, which is, Why is movie theater popcorn so expensive? While on the surface the answers seems to be greed, it goes deeper than that. Obviously all business owners try to maximize profits, but the real-world economics of the situation also need to allow them to do it. In this scenario, the market accepts the high cost of the popcorn. Why?

I’ve been thinking about it for the last few days. I don’t necessarily have an answer, but I have a few theories. This is my first foray into writing anything even remotely associated with economics since college, so bear with me.

I suppose an important factor in this scenario customer expectations. Since prices have always been high in the past, people have come to expect high prices at the movie theater, and we begrudgingly accept it. (Keep in mind when I refer to the ‘past,’ I mean recent past. Not the days of double features for a nickel.) I saw this at play while traveling recently.

I recently flew on Delta/Song to Los Angeles, and even though it was a 5 hour flight, a meal was not provided, though they did have meals and snacks available for purchase. My first reaction was somewhat negative, thinking it was a bit cheap they didn’t provide a meal. But then it made me think of my expectations regarding train travel. Being from Long Island, the majority of my train experience comes from riding the Long Island Rail Road. LIRR’s longest train ride is only a bit over 2 hours, so there is no dining or beverage car. The first time I rode Amtrak, which was a 5 hour ride to Washington, DC, I thought it was great that they sold food and drinks. It never occurred to me that it should be free, as it did on Delta. This comes from nothing more than past experience. I expected a free meal on the plane, and was unhappy when I didn’t get one. I didn’t expect any food service on a train, so I appreciated the fact that Amtrak offered it.

The movie theater experience sees the same phenomenon. We all know food is expensive at the theater. For the most part, it always has been. So we anticipate that when we go. Same thing with their No Outside Food rule (Assuming you’re not one of the clever folks who stops at the deli for candy and snacks beforehand.) We know the rule has always been in place, and expect it. If outside food had been allowed in the recent past, and the theater owners instituted a new policy banning it, people would be a lot more upset about it.

Now, it then raises the question of, If we expect the costs to be high because they always have been, how did they get high in the first place? I’m not sure, and I know others out there will probably have the right answer. I only have another theory.

My theory is that movie theaters exhibit the characteristics of a commodity product. Most consumers seek out a specific movie, then see where it’s playing. There may be preferences based around cleanliness, snack choices, seating, etc, but the movie showing is the main factor. I doubt any of us often go see our second choice movie because of the theater it’s playing in, and forego seeing our first choice altogether.

Location is also a factor. We all usually go to the closest theater that is showing the movie we want to see.

Since the competitive element of the movie experience takes place between competing movies, it isn’t effecting the prices in the theater. If there were two theaters located right next to each other, showing the same exact movies, then you’d see snack prices being lowered, as each owner would be forced to focus on price/value as a selling point. But since the selling points are movies being shown, followed by location, snack prices remain high. There is no snack price competition between theater owners to drive it down.

That’s the best I could come up with. I’m not sure if it’s right, but seems common-sense enough for me to move on past the popcorn price dilemma, and stand ready to inherit some other writer’s problem…