A $10,000 Boost Helps VDCA
September 18, 2015
Vermillion Downtown Cultural Association
What is the VDCA?
January 17, 2016

Why does going to the local cinema make good economic sense (and some thoughts about running a local theater)?

local cinema

Read on if you’re interested in learning why staying local makes sense and where it doesn’t make economic sense. Warning – it’s long and we talk about opportunity costs.

A dialogue with a concerned patron and our response(s): Last week, we had a discussion with a patron – kept anonymous because we don’t want this to be about a person but about a dialogue – expressing concern about our pricing. The dialogue is below. Our longer response is below (labeled “The Longer Story”) and lays out the economics of shopping local not just for the Coyote Twin but for anyone in Vermillion.

We hope it also tells you more about how running a movie theater works. We’ve learned a good deal about that over the past few months and will continue to get better and serve you better in the coming months and years.Thanks for your patronage! We want you as customers and want to be open about how and why we do what we do. It’s your Community Cinema!

The Dialogue

Comment 1: Can you explain to the people of Vermillion why you keep making everything more expensive? I have been going to movies at the Coyote Twin/Vermillion Theater for 20 years and I’m about ready to stop. Yankton is only 30 minutes away and Sioux Falls is an hour. You are the only theater I have ever heard of that charges full price for a weekend matinee. I know that the 2nd matinee of the day is the lower price. You now charge more than the Century Theaters in Sioux Falls for a 1pm show. I was optimistic when management changed that there might be some improvements, but almost every single change that has been made has made the movie going experience more expensive or more restrictive. You eliminated the $2 printable coupon for the Deals. You have reduced the number of showings, giving people less choices on when to go. You increased the price of refreshments. Now you have increased the cost of tickets. Then there is the move in showtimes for the Free Family movies. 10am is really early in the day for a movie. Not that I expect this to make any difference.

Our response: Thanks for the note. We have multiple affordable options and have been responsive to you and the community. All while making several improvements to the movie experience. If our experience isn’t for you, we understand. Free movies, discounted late matinees, Tuesday bargain night, greater concession selection, new equipment. Decreasing permanently the cult classic cost at your suggestion. We understand if this isn’t sufficient to retain your business. Thanks for being a customer. Driving to Yankton and Sioux Falls costs fuel, money, and time. We understand if that’s a better option for some.

Comment 2: But why increase the price of the 1pm show? I have literally never seen a theater that charges full price for that show. Free movies, late matinee, and Tuesday were all there before you took over. The only changes I’ve noticed on concessions are the increased price and the switch to Coke (which I was annoyed by because your reasoning was that people were asking for Coke. You didn’t hear from the people that prefer Pepsi because they already had it). I thought this was supposed to be run by a Not For Profit. Prices shouldn’t go upI appreciate the change in the Cult Classic pricing. Although I feel like it should have been an obvious business decision.

Our response: Thank you again. We hope to see you or hope you find the cinema experience that best fits your needs and expectations.

Comment 3: But you are going to ignore the question about pricing of the first matinee. What happened to being responsive to the community. I know I’m not the only person upset about this.

Our response: Again, thank you. We will consider best pricing options. So far, you are the first person bringing it to our attention. We hope the $5.50 cost for the 3:30 matinee prove a good option until we reassess pricing as a whole.

The Longer Story

We’ve done some more research. The Century theaters pricing is interesting as a comparison: all tickets are $7.25 for the 1:30 matinee for the Good Dinosaur, as an example. Two adults taking three children would cost $36.25. The same show at the Vermillion Theaters – same volumes – would cost that same family $36.50. Same show at the Carmike in Yankton – admissions – via Fandango is $37.50.

Caveats: pricing is online pricing available. The one exception that might be a common destination for Vermillionites is the Promenade in Sioux City, where online ticket purchases for the same group is $30. Sending the kids alone, however, is an easy call: the Coyote Twin is cheaper than all but the Promenade and even then, it’s not much different. And if someone decides to bring the family to the late matinee at the Coyote Twin, we are cheaper than all but the Promenade with our $5.50 flat ticket price.

The only circumstance in which someone might feel like they aren’t getting a great deal with us is if they purchase adult tickets at the 1 p.m. matinee on Saturday or Sunday and those are the only tickets they purchase. In that circumstance, two adults would save $2 at the Carmike in Yankton vs. coming to the Coyote Twin or would save $5 at the Promenade or $2.50 at the Century Theaters in Sioux Falls vs. the Coyote Twin.

Concession prices are comparable or higher at all of those theaters.
Some important additional background as you price things: fuel prices to Sioux Falls, round-trip, assuming a car that gets 30 miles per gallon (at $1.89 per gallon) and a 100-mile roundtrip drive, but not factoring in wear and tear on the car (which the Federal Government reimburses for, but we won’t consider because it isn’t fair) is $6.27. For Yankton, this is $3.78. For Sioux City, the gas cost is just a bit more than Yankton. This doesn’t include travel time but we’ll assume that people going to Sioux Falls or Yankton or Sioux City don’t mind spending the time and aren’t valuing the time at any particular dollar amount.
Any way a person adds it up, the math doesn’t work to go to Sioux Falls or Yankton or Sioux City unless the value of going there for other things (shopping, etc.) decreases the overall opportunity cost for attending a film there.

In addition, some important points that merit consideration. First, not-for-profit doesn’t mean as an organization we don’t have to pay a mortgage, make improvements, purchase supplies, pay employees, advertise and market, or pay studios dollars for the films we run.- On average, those costs are 50-60% of net (after tax) revenue per film. Because we are a small, independent theater, we have little leverage with the studios to negotiate better percentage rates with the studios. Cinemark, Century, AMC, and others can negotiate lower rates because of volume and are charging ticket prices at or greater than those we charge.

All pricing at the Coyote Twin factors these things in as part of the business model we had to submit to our first investors and the bank to prove that a not-for-profit merited their investment in the Vermillion Downtown Cultural Association and our purchase of the theaters. That excludes the capital improvements that our revenues have had to make and will continue to have to make, including repair to the HVAC, a new speaker in Coyote 2, a new ice machine and new flooring to repair flooring destroyed by the older, leaking ice machine, new exterior paint, and a more aggressive cleaning schedule to keep the theaters neat for guests.

We’ve changed show times based on data – we had little to no attendance most week nights and Sunday nights and were taking a net loss – not even break-even – on those nights because of staffing and energy costs. We are happy to show this data to anyone who wonders about those changes. Our new POS system – another investment – has enabled that kind of data analysis previously unavailable with past available systems. It’s a wonderful resource to help us manage operations much more smartly.

Finally, there’s a pretty simple appeal that goes along with all of this: we are a local cinema. We don’t use that as a crutch because we never want to assume that we deserve the community’s business. We want to earn it. But we hope – even apples to apples where our pricing is comparable or higher – that people who live here, believe in shopping and being local, and who care about the future of downtown and the community as a whole – will invest a little in us and other local businesses like us.

Investment means coming to movies but also volunteering on our boards and committees, coming to theater clean-ups, and providing solid, supportable numbers and facts when suggesting changes to the theater’s operations. It also means caring about not just us but other businesses in the community that want to provide you the best goods and services. We hope that have the opportunity to continue to do so.