The Exhibitor (1959)

April 15, 1959 MOTION PICTURE EXHIBITOR 5 a night when an important high priced picture is being shown on straight percentage could force an owner to dig into his own pocket to defray the loss. Under SLIDING SCALE selling formulas, lack of paying patrons, for any reason, would reflect itself in the eventual 5 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 “part¬ nership” 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 complete any such arrange¬ ment 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 follows: (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 3314% 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 ac¬ ceptable to the distributor, the next point for decision is whether the percentage “steps,” governing the slide range (between 20% and 50%), will be at 1% intervals or at 214% intervals. It would be pos¬ sible to use intervals 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 in¬ tervals of 5%, but this might be considered just a little too loose. Normal “steps” in general use are either 1% or 214%, with the former the most common. With ALLOWABLE OVERHEAD accepted 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 percentage “steps” on which the “slide” will operate, the rest is just mathematics. Because of variables in one or more of these four points, particularly in over¬ head 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. SLIDE “A” 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 af $780.00 per week, or $78.00 per playing time unit, with Saturday and Sunday each worth 2*4 units. The distributor agrees tp 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, up to which you would pay a 20% film rental, with one half of that (10% of gross) as theatre profit, overhead would obviously represent the remaining 70%. By dividing 70% into the 100% 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 (10*4% of the gross) as theatre profit, overhead would only represent the remaining 68*4% of the gross. By dividing 68*4 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 (20*4% of the gross) theatre profit, overhead would only represent the remaining 38%% of the gross. By dividing 38*4 into 100 you arrive at a ratio of 2.597. By multiplying your over¬ head 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 film price. But, by the same token, the slightest upward surge in attendance would also reflect itself. We repeat: You will never “steal” a picture under SLIDING SCALE; but you will never get “hurt” either! $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 (20*4% 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-threetimes, there are certain to be discrepancies of a few pennies in any ultimate total. This is not important to the distributor or to the theatre, for it is a very minor “breakage” 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 in¬ stead of doing individual mathematical computations. (NOTE: Actual “ROBOT” CHARTS for the three Slides, “A,” “B ,” and “C,” and at 1% and 2*4% steps between 20% and 50%, will be presented in the following chapter.) It also should be noted that, should your chart be mislaid or un¬ available, 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 38*4%. This leaves us 61*4% 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. SLIDE “B” Now let us see how Slide “B” (retaining 33%% 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 repre¬ senting the overhead unit of $78.00. Dividing 73% into 100 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.” (Checked out: 20% of $1,063.90 equals $212.78 film rental; one third of the $212.78 film rental equals $70.93 theatre profit; add these two items to $780.00 of overhead; and the total is $1,063.71). The gross at which you would pay 21% under SLIDING SCALE “B” is still easier. Film, rental representing 21%, theatre profit would represent 7%, and overhead the remaining 72%. 72 divided into 100 would produce a ratio of 1.389. Multiplying the known overhead unit of $78.00 by 1.389 will produce a gross unit of $108.34, or a weekly gross of $1,083.40. 21% of this gross would be a $227.51 weekly film rental, and one third of the film rental, or $75.84, would be the weekly theatre profit. And let us see what would happen at that mythical 41% film rental under SLIDING SCALE “B.” We know that the theatre profit will be one third of that or 13%%, and that the two will total 54%% of the gross. So overhead would be the remaining 45%% and divided into 100 equals a ratio of 2.206. Based on an overhead unit of $78.00, the gross unit would therefore need to be 2.206 times $78.00, or $172.07, or a weekly gross of $1,720.70. 41% would produce a $705.49 weekly film rental, and one third of that film rental, or $235.16, would be the weekly theatre profit. Total $1,720.65. SLIDE “C” Slide “C” produces the greatest variance, because it is actually a double slide, with both the film rental and the theatre profit as variables, that move one point at a time or two and one half points at a time. Under Slide A and B, only the film rentals were a slide and the theatre profits bore fixed percentage relationships to them. Under Slide C, when the film rental is 20% of the gross, the theatre profit is only 20% or one fifth of that film rental. As the film rental moves to 21%, the theatre profit moves to 21% of that film rental. And so on, up and up, so that at our mythical 41% film rental the theatre profit is 41% of that 41%. From this it can be seen that, from the standpoint of theatre profit, while Slide C minimizes profit on the small grossing pictures, it produces a better share than Slide B as soon as the film rental passes 33%%, but only equals Slide A at a film rental of 50%. Applying our three hypothetical grosses, necessary to the earning of 20%, 21% and 41% film rentals, to SLIDING SCALE “C”, we must re-emphasize that theatre profit is not a fixed percentage of such rentals. At a 20% film rental, the theatre profit would be 20% or