Warner Bros. will impose for the first time on all its films per capita minimums of $5 for adults and $3 for children in major markets and $4 and $2, respectively, in smaller situations beginning this summer at firstrun theaters nationwide.
The main reason for instituting the minimums, which begin with the June 14 release of “Robin Hood: Prince Of Thieves,” is to give Warners an “insurance policy” against exhibitors discount-pricing WB product. That practice is becoming more prevalent and more distasteful to the majors in light of their escalating investment in films.
Warners not only hopes to combat current discounting practices but to discourage exhibs from considering future ticket-price-cutting gimmicks such as two-for-one discounts, promotional give-aways, group ticketing and other endeavors that distribs feel deprive them of their fair share of grosses.
Warners’ action may generate a loud outcry from those exhibs, including some of the larger circuits like American Multi-Cinema and Cineplex Odeon, which offer such incentives to filmgoers as twilight pricing and discount nights.
In major markets, where theaters earn more than $5,000 in film rental for the run of an engagement, the per capita is based on a minimum of $5 admission price for adults and $3 for children. A secondary per capita of $4 for adults and $2 for children will apply to smaller markets, where exhibs earn under $5,000 film rental per run.
The minimums will apply to all show times, with a special provision for bargain matinees. Whether any other allowances will be made is not clear.
Per capita pricing will be based on whatever the agreed upon film terms are for a given week. For example, if week one is set at a 60% film rental on a $5 admission, the distrib would receive $3; on a $3 admission, $1.80.
Since today’s average ticket price nationwide is more than $4.90 (according to VARIETY’S figures, the average ticket price in 1990 was just over $4.75), most theaters with competitive pricing will generally not be affected by Warners’ new per capita.
Exhibs in major markets that charge less than $5 for full-priced adult admissions or less than $3 for kids will feel the pinch since they will wind up paying more in film rental, in which case they likely will either raise ticket prices or eat the difference and attempt to settle with Warners after a film’s run.
Exhibs contacted said they were unaware of Warners’ plan and most preferred to reserve comment until they can study the new policy.
One major exhibitor who requested anonymity acknowledged that while “on its face it doesn’t sound too onerous it will definitely nick us.”
Another theater owner suggested, “Every exhibitor will have some problem with this of one kind or another, but it will effect everyone differently.”
While Warners, like most of the major distribs, has had some per capita pricing, it always had resisted it as a general policy and had only demanded minimum admission on selected pics (major films like “Batman”) rather than on all releases. An increase in price-cutting by exhibitors motivated Warners to apply a per capita to all of its product.
“We want to protect against price-cutting, two-for-ones, give-aways and any oddball gimmicks,” explained a Warners insider, insisting, “Those theaters that have normal pricing won’t get hurt.”
Most of the majors have some form of per capita policy, but not all enforce it.
For instance, 20th Century Fox uses a per capita on each of its firstrun films, but only on a market-by-market basis, taking into consideration the value of a film based on a particular market’s circumstances.
Tri-Star’s contracts with exhibitors allow for per capita pricing, though the distrib normally doesn’t enforce it.
A big flap erupted in May 1989 when Paramount tightened its per capita restrictions ($1.05 for adults and 75¢ for children) against dollar houses and other discount theaters. But in April 1990, Paramount relaxed its policy somewhat by enabling discount theaters to play its product without per capita restrictions four months after firstrun openings instead of the five-month window it previously had enforced.
One rival distributor who applauded Warners’ new policy said, “It will do away with exhibitors giving away our movies. It’s putting a value on our films and protecting it because of the enormous investment we make in movies these days.”
While over the years per capita pricing has been challenged and has been reviewed by the U.S. Justice Dept., since 1953 the government’s position has been that “a per capita royal charge did not constitute fixing minimum admission prices.”
The JD takes the view that “so long as the per capita charge alternative is a measure of film rental and nothing more, this is permissible.”