What are the relevant costs for AMC’s decision to offer to rent its theatres for $99?

movie theater

The pandemic has greatly impacted movie theater operations. Some theater locations have been forced to close. Major film releases have been delayed or moved to a streaming platform. Moviegoers have been reluctant to share indoor space with strangers. All those factors have contributed to a challenging year for movie theaters.

In response to the pandemic, AMC Theatres now offers private theater rentals starting at $99 plus tax, allowing groups of up to 20 people to watch a movie together privately. The group organizer will select a movie from a selection of several films. The films offered range from older films to newer; newer films are priced higher than the $99 fee. The group can show up at the theater up to 15 minutes before the scheduled show time.

AMC offers prepaid food packages for groups. Groups can also bring in their own food for a fee of $250. The group can rent a microphone to welcome guests for $100. The group can pay extra for early entrance to the theatre.

Discussion questions

  1. For movie theaters that are currently open during the pandemic, what extra costs do you think the movie companies are experiencing? Are they saving on any types of costs during the pandemic?
  2. When deciding on a price to charge for a private theater viewing, what are some relevant costs that you think AMC would need to consider?
  3. Assume that the average theater has 100 seats and that the average movie ticket price is $9 per ticket. When would this information be relevant to the private theater viewing pricing decision?
  4. How would the pricing decision for extras such as food, microphones, and the like be different than the pricing decision for the rental of the theater itself?
  5. How might movie theater offerings be changed once the pandemic is over? Do you think any of the changes we are seeing now will stick around?

About Dr. Wendy Tietz, CPA, CMA, CSCA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Education.

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