SIC 7832 Motion Picture Theaters, Except Drive-in

Encyclopedia of American Industries | 2005 | Copyright

SIC 7832
MOTION PICTURE THEATERS, EXCEPT DRIVE-IN

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 digital video discs (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' 35,000 movie screens create the initial market for a film's future formats. The industry, along with the rest of the U.S. economy, endured a recession in 1990 and 1991, but box-office receipts rose from $4.8 billion in 1991 to a record $6.95 billion in 1998. Weak economic conditions returned in the early 2000s, wreaking havoc on many sectors of the U.S. economy. However, box-office receipts continued to reach record levels each year, peaking at $9.5 billion in 2002. Admissions reached 1.63 billion in 2002, a 44-year high.

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 boxoffice 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 included 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 films' technical quality and popularity grew, they became attractions in and of themselves. The first building devoted exclusively to...

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