The Exhibitor (1955)

12 MOTIONPICTUREEXHIBITOR Continuing:— THE SLIDING SCALE METHOD . . . of arriving at A FAIR FILM PRICING FORMULA PART TWO of a very sincere effort by MOTION PICTURE EXHIBITOR to bring peace to this business SUMMARY OF DATA ALREADY COVERED IN NOV. 9 ISSUE: 1. A general discussion of current conditions and the need for A LIVE-AND-LET-LIVE FILM PRICING FORMULA. 2. What is ALLOWABLE OVERHEAD, and why an AUDIT is necessary if overhead is to be a part of the film pricing formula. 3. What are PLAYING TIME UNITS, and how such units can be applied to both the Overhead and the Gross of any playdate. 4. The theory and objective of the SLIDING SCALE Film Pricing Formula. How it lends itself to ARBITRATION of difference. e Explanation and Construction of Three Different SLIDING SCALE Methods Generally speaking, all SLIDING SCALE selling formulas are based on overhead, and are the same in operation and intent, with the only variable being the profit percentage basis on which the theatre will be permitted to operate. Some very optimistic scales that we have inspected permit the theatre to keep the same profit as the film price, which is the same as saying a straight 50-50 “partnership” after the overhead has been recouped. That would be a most unusually favorable deal that any theatreman would jump at in this present day and age. Hoping to com¬ plete any such arrangement however is so far into the realm of dreams that any discussion here would be a waste of space. The more common “slides” are as fol¬ lows: (A) Under which the theatre is allowed to keep as Profit a sum equal to 50% of what is paid to the distributor as Film Rental. (B) Under which the theatre is allowed to keep as Profit a sum equal to 33%% of what is paid to the distributor as Film Rental (C) Under which the theatre is allowed to keep as Profit the same % of what is paid to the distributor as Film Rental, as that Film Rental relates to the Boxoffice Gross. Following determination of which of these “slides” will be acceptable to the distributor, the next point for decision is whether the percentage “steps,” govern¬ ing the slide range (between 20%' and 50%), will be at 1% intervals or at 2%% intervals. It would be possible to lAse in¬ tervals of a fraction of a percentage point, but this would prove to be more time consuming than it was worth, and just a matter of splitting hairs. It would also be possible to use intez’vals of 5%, but this might be considered just a little too loose. Normal “steps” in general use are either 1% or 21/2%, with the former the most common. With ALLOWABLE OVERHEAD ac¬ cepted by the distributor, with agreement on the PLAYING TIME UNITS that will control, with a determination of which of the three “slides” (A, B or C) will be allowed, and with a decision on the per¬ centage “steps” on which the “slide” will operate, the rest is just mathematics. Be¬ cause of variables in one or more of these four points, particularly in overhead that is seldom alike in any two theatres, any SLIDING SCALE is more or less tailor made for the particular theatre; but all of the ingredients are here. Just to start, let us presume that you have a theatre in a seven day town and that your overhead has been audited and allowed at $780.00 per week, or $78.00 per playing time unit, with Saturday and Sunday each worth 2^/2 units. The distri¬ butor agrees to let you operate under Slide “A” (retaining 50% of the film rental as profit), and steps are to be at 1% intervals. To set up the gross, at which you would pay a 20% film rental, with one half of that (10%f of gross) as theatre profit, overhead would obviously represent the remaining 70%;. By dividing 70% into the 100 Vc which represents the gross, you arrive at a relationship or ratio of 1.429. Multiplying your overhead unit of $78.00 by 1.429 you arrive at a gross unit of $111.46, or a weekly gross of $1,114.60. (Checked out: 20% of $1,114.60 equals $222.92 of film rental; one half of that film rental equals $111.46 of theatre profit; add these two items to $780.00 of overhead; and the total is $1,114.38). For a date that represents only three playing time units (i. e. Monday, Tuesday and Wednesday), multiply the gross unit of $111.46 by three, or $334.38. For a date that represents only four and one-half playing time units (i.e. Thursday, Friday and Saturday) multiply the gross unit of $111.46 by four and one-half or $501.57. But at this particular SLIDING SCALE “A,” whenever a gross unit of $111.46 is reached, you pay 20% for your film. To set up the gross, at which you would pay a 21% film rental, and earn one half of that (icy2% of the gross) as theatre profit, overhead would only represent the remaining 681/2% of the gross. By divid¬ ing 681/2% into 100%; you arrive at a ratio of 1.460. By multiplying your overhead unit of $78.00 by 1.460 you arrive at a gross unit of $113.88 or a weekly gross of $1,138.80. So at this particular SLIDING SCALE “A,” whenever a gross unit of $113.88 is reached, you pay 21%. for your film. Now to take a big jump, to set up the gross under this SLIDING SCALE “A” at which you would pay 41% film rental, and earn one half of that (201/2% of the gross) theatre profit, overhead would only represent the remaining 381/2% of the gross. By dividing 881/2% into 100%r you arrive at a ratio of 2.597. By multiplying your overhead unit of $78.00 by 2.597 you arrive at a gross unit of $202.57. So at this particular SLIDING SCALE “A,” whenever a gross unit of $202.57, or a weekly gross of $2,025.70, is reached, you pay 41% for your film. (Checked out: 41% of a $2,025.70 gross equals $830.54 as film rental; one half of that (201/2% of the gross) equals $415.27 as theatre profit; add these two items to $780.00 of overhead; and the total is $2,025.81) . In any use of percentage figures, even to decimal-point-three-times, there are certain to be discrepancies of a few pen¬ nies in any ultimate total. This is not important to the distributor or to the theatre, for its is a very minor “break¬ age” that benefits one or the other just about an equal number of times. If this were your theatre, you could now work out a complete chart of the grosses under SLIDING SCALE “A,” at each 1% step, so that in operation you would only need to refer to your chart instead of doing individual mathematical computations. (NOTE: Actual “ROBOT” CHARTS for the three Slides, “A,” “B,” and “C,” and at 1% and 21/2 %r steps be¬ tween 20% and 50%, will be presented in the following chapter) . It also should be noted that, should your chart be mislaid or unavailable, it is always possible to figure backwards from the gross and to arrive at the film rental and profit. As an example, let us take the last gross to be checked out under this Slide “A.” Suppose we know that the gross is $2,025.70 and that the overhead is $780.00. By dividing the gross into the overhead we can determine what percentage the latter bears to the former or 38V2%. This leaves us 611/2% or $1,245.81 to be divided two thirds for film rental ($830.54) and one third for profit ($415.27). As gross varies through pennies and dollars, you pay off at the percentage point on your chart that is nearest to the particular gross. We noted earlier that a gross unit of $111.46 paid off at 20%, while a gross unit of $113.88 paid off at 21%. The dividing line would be $112.67, with 20% paid under that line, and 21% paid over that line. Once again, the “breakage” favors the distributor just about as often as it favors the theatre. Now let us see how Slide “B” (retain¬ ing 33 Vs % of the film rental as profit) would work out on these same film deals. The gross at which you would pay a 20% film rental with one third of that, or 6%%, as theatre profit, would leave 73 % % as representing the overhead unit of $78.00. Dividing 73%% into 100% of the gross, you arrive at a relationship or ratio of 1.364. Multiplying the overhead unit of $78.00 by 1.364 you arrive at a gross unit of $106.39, or a weekly gross of $1,063.90, under SLIDING SCALE “B.” November 16, 1955