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Michigan Movie Buff Sues AMC for Grossly Overpriced Popcorn

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Like many of us, Joshua Thompson had become increasingly fed up with the rising prices of movie theater concessions like soda and popcorn. But while we may grumble about it even as we begrudgingly pay up for our sugar fix, Thompson decided that enough was enough.
This week, the Livonia, Michigan native filed a class action suit against his local AMC theater, claiming that the national theater chain was overcharging for snacks, and seeking refunds for all movie buffs.
"He got tired of being taken advantage of," Thompson's lawyer, Kerry Morgan told the Detroit Free Press. "It's hard to justify prices that are three- and four-times higher than anywhere else."
In his suit, Thompson said that he was charged $8 for a Coke and a pack of Goobers chocolate-covered peanuts at the Livonia AMC, a price almost triple that of the same items found at a fast food restaurant and drug store close by.
According to Morgan, Thompson used to bring his own snacks into the cinema. However, recently, he discovered that his local theater had put up a sign informing customers that outside food and drinks were henceforth banned, the LA Times reports.

"He called me and said, 'Can they do that?' " Morgan told The Times. The attorney said his first reaction was, "Sure, they can do that, it's private property." But then he began doing a little legal research and came across the Michigan Consumer Protection Act, a statute designed to prevent price gouging.

And a lawsuit was born.

There’s no doubt that concessions from national chains like AMC and competitors Regal Entertainment (RGC) and Cinemark (CNK) are very pricey. The Hollywood Reporter cites a Morningstar equity analyst who says that 85% of every dollar spent on candy and soda is profit to a theater chain. A bag of raw popcorn costing $30 could bring up to $3,000 in revenue to movie theaters, notes the Reporter.
However, a quick look at AMC’s annual report reveals that even with the big profit margins from concessions sales, the company lost money in two of the past five fiscal years. Given that a theater chain’s two revenue sources are concessions and the box office, that means that if revenue from one is reduced, prices of the other have to increase to make up for that lost income, ergo, higher ticket prices.
Given that that bag of (unhealthy) popcorn is an optional purchase, I think I would rather have those willing to pay the premium for concessions help keep down the cost of my movie ticket. Meanwhile, I’ll just sneak in an apple or a granola bar into the theater.
POSITION:  No positions in stocks mentioned.