The turbulent administration of Mayor Vincent Gray got a bit rockier last week, when the Mayor announced a new plan to fund tax incentives to lure Hollywood movie and TV productions to DC and entice some company to build a movie theater "east of the Anacostia River." How does the Mayor want to pay for it all?
Higher taxes on movie concessions. Yikes!
Unfortunately, the proposal might fund a DC movie production that can't be seen in DC because the movie theaters will be out of business. I'll let others comment on the politics and economic theories involved (and we could write a whole college term paper on that), so we can focus on the impact on movie theaters (also known as The Victims in this plan).
As we have discussed before, movie theaters make their money selling popcorn and soda, not so much selling movie tickets. Studios and distributors take as much as 90% of the ticket sales in the opening weekend of a big blockbuster release, with that percentage decreasing each week a movie plays in theaters. Unfortunately, the cineplex owners start taking a higher percentage of the ticket sales 4 or 5 weeks into a movie's run, which, these days, is long after most people have seen it.
That leaves them with concession sales to make up the difference and approach some level of being profitable (or just staying in business). This is why you pay $5 for a soda, or $7 for a bag of popcorn. Without those sales, movie theaters are deader than wagon wheel makers or VCR manufacturers, especially as the wait to see a movie at home grows shorter and home theaters become more and more impressive.
Money already is tight, and asking people to fork over an additional 5% sales tax for goodies and treats at the cineplex could be the tipping point to cause even more people to sneak in some M&Ms, pass on snacks all together, or stay at home where they can watch a movie with their own popcorn and soda. Worse yet, would movie theater owners have to find a way to keep prices the same to avoid passing the extra taxes onto moviegoers?
Maybe the bigger complexes in Georgetown or Gallery Place might be able to survive, but the impact on smaller operations, like The Uptown or The Avalon or The West End, could be devastating in an industry already struggling to survive. We aren't required to keep movie theaters alive, but should we kill them off unnecessarily?
Plus, who wants to build a movie theater in DC knowing your concession sales will be hit with an additional 5% tax from the day you open? It creates a bad environment in which to do business.
And, why should existing movie theaters take an economic hit so the money can go to a new competitor? Try telling Safeway their customers are going to get hit with additional taxes and the store could potentially lose business to pay for a Wegman's opening up, which can take away even more of its business thanks to government support that wasn't available to Safeway.
Instead, can't we come up with another solution? AMC, in conjunction with Magic Johnson, has had great success building movie theaters in areas other companies have avoided. If the Mayor wants a movie theater "east of the Anacostia River" maybe he could talk to them about why they should build there, what it would take to entice them or learn why companies are avoiding the area and change those conditions to make it a place movie theaters want to build.
Doesn't DC have an $89 million budget surplus? If building a theater "east of the Anacostia River" is a popular idea (and one I support), why not use some of that surplus as an enticement to convince a company or entrepreneur to take the leap and break ground? If the popular will is there, City Council will make it happen, especially with an election just around the corner.
Building a theater can help generate jobs and business in an area of DC that needs it, and bringing movie and TV production to DC can have the same effect all over the District, but hurting your current tax payers and tax paying businesses doesn't seem to be the right way to do it.
Time to go back to the drawing board.
As we have discussed before, movie theaters make their money selling popcorn and soda, not so much selling movie tickets. Studios and distributors take as much as 90% of the ticket sales in the opening weekend of a big blockbuster release, with that percentage decreasing each week a movie plays in theaters. Unfortunately, the cineplex owners start taking a higher percentage of the ticket sales 4 or 5 weeks into a movie's run, which, these days, is long after most people have seen it.
That leaves them with concession sales to make up the difference and approach some level of being profitable (or just staying in business). This is why you pay $5 for a soda, or $7 for a bag of popcorn. Without those sales, movie theaters are deader than wagon wheel makers or VCR manufacturers, especially as the wait to see a movie at home grows shorter and home theaters become more and more impressive.
Money already is tight, and asking people to fork over an additional 5% sales tax for goodies and treats at the cineplex could be the tipping point to cause even more people to sneak in some M&Ms, pass on snacks all together, or stay at home where they can watch a movie with their own popcorn and soda. Worse yet, would movie theater owners have to find a way to keep prices the same to avoid passing the extra taxes onto moviegoers?
Maybe the bigger complexes in Georgetown or Gallery Place might be able to survive, but the impact on smaller operations, like The Uptown or The Avalon or The West End, could be devastating in an industry already struggling to survive. We aren't required to keep movie theaters alive, but should we kill them off unnecessarily?
Plus, who wants to build a movie theater in DC knowing your concession sales will be hit with an additional 5% tax from the day you open? It creates a bad environment in which to do business.
And, why should existing movie theaters take an economic hit so the money can go to a new competitor? Try telling Safeway their customers are going to get hit with additional taxes and the store could potentially lose business to pay for a Wegman's opening up, which can take away even more of its business thanks to government support that wasn't available to Safeway.
Instead, can't we come up with another solution? AMC, in conjunction with Magic Johnson, has had great success building movie theaters in areas other companies have avoided. If the Mayor wants a movie theater "east of the Anacostia River" maybe he could talk to them about why they should build there, what it would take to entice them or learn why companies are avoiding the area and change those conditions to make it a place movie theaters want to build.
Doesn't DC have an $89 million budget surplus? If building a theater "east of the Anacostia River" is a popular idea (and one I support), why not use some of that surplus as an enticement to convince a company or entrepreneur to take the leap and break ground? If the popular will is there, City Council will make it happen, especially with an election just around the corner.
Building a theater can help generate jobs and business in an area of DC that needs it, and bringing movie and TV production to DC can have the same effect all over the District, but hurting your current tax payers and tax paying businesses doesn't seem to be the right way to do it.
Time to go back to the drawing board.
