SIC 7832 Motion Picture Theaters, Except Drive-In

 
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SIC 7832

This category covers commercially operated theaters primarily engaged in the indoor exhibition of motion pictures.

NAICS CODE(S)

512131

Motion Picture Theaters, Except Drive-In

INDUSTRY SNAPSHOT

Motion picture theaters are part of an increasingly complex film industry that has been characterized by large initial capital investments and long revenue streams. Movie theaters are one aspect of the film industry, which also includes movie studios, broadcast and cable television, and the sale and rental of both DVDs and videotapes.

Motion picture theaters remain a significant contributor to the film industry. Although videos have surpassed theaters as the biggest contributor to film industry revenue, the United States' more than 38,000 movie screens create the initial market for a film's future formats. After disappointing revenues for years, domestic box-office receipts rose steadily in the 2000s, peaking at a record high of $9.53 billion in 2004, with a record worldwide high in 2006 of $25.82 billion. Domestic admission, 1.45 billion in 2006, reached 1.63 billion in 2002, a 44-year high.

The 2006 leaders in the motion picture theater industry included Regal Entertainment Group, AMC Entertainment, Cinemark Holdings, and Carmike Cinemas. Regional markets were influenced by a number of other chains or local establishments.

ORGANIZATION AND STRUCTURE

The movie theater industry is represented by the National Association of Theatre Owners (NATO). NATO was formed through the 1966 merger of the Theatre Owners of America, which was founded in 1920, and the Allied States Association of Motion Picture Exhibitors, which was created in 1939. The organization compiles and publishes statistical and historical information on the economics of theater and concession operations, film producers and distributors, theater equipment, box-office sales, and attendance.

Throughout the movie theater industry's history, entrepreneurs have had to make high up-front investments. Film rental fees are usually negotiated in terms of box-office revenue in which movie studios charge a percentage of the box-office receipts.

Total theater receipts are derived from three sources: admissions, concessions, and screen advertising. Although it accounts for a much smaller percentage of revenues than ticket sales, concession income is a favorite of cinema operators because it commands a high profit margin that is not split with movie studios. Concessions and screen advertising have been recent avenues for growth. On-screen ads include live-action spots and slide-show-type reels that promote local businesses. The advertising concept was not particularly well received by patrons and some distributors, and by the late 1980s several studios rebelled against the practice. In fact, Walt Disney Company and Warner Bros. banned on-screen advertising in theaters showing their films.

BACKGROUND AND DEVELOPMENT

The motion picture theater industry was born at the dawn of the twentieth century following the 1903 release of The Great Train Robbery, which is widely regarded as the first feature film. Previously, movies were given second billing in deference to live vaudeville acts, but as the technical quality and popularity of films grew, they became attractions in and of themselves. The first building devoted exclusively to movies was built in Pittsburgh in 1905, and the first movie house opened in Manhattan, New York, in 1913.

Theaters became the United States' primary source of entertainment during the 1920s, and some theaters boasted full houses three or four times each day. During this decade, elaborate venues seating as many as 5,000 were built in cities and towns across the country. These theaters sometimes upstaged their featured films with architectural styles that ranged from baroque, Greek, and Spanish to Egyptian, Byzantine, and Aztecan. Details included imported marble columns, crystal chandeliers, and gold-painted figures, and huge pipe organs were built for many theaters to provide music for silent films. Services included immaculately uniformed doormen, ushers, and lounge attendants.

The 1927 release of The Jazz Singer, the first film with synchronized sound, revolutionized the motion picture industry. Millions of dollars were spent to upgrade film production facilities and buy equipment for movie houses. Within three years the transformation to sound was complete and silent films, pipe organs, and many movie stars of the silent film era faded from the limelight.

Many theaters were able to convert efficiently to sound because they had the backing of major movie studios. The motion picture theater industry in the first half of the century was dominated by a handful of companies known as "the five majors": Paramount, Twentieth Century Fox, Warner Bros., MGM, and RKO Pictures. The five...

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