Why are some theaters refusing to play The Last Jedi?

A blockbuster like a Star Wars movie is a cultural event that generates its own gravity. It doesn't matter if you're interested—it's a movie so big, you'll be drawn into its orbit no matter what you want.

Which is to say that December 15 is a bad day to be a new movie that's not Star Wars: The Last Jedi, the long-awaited eighth episode of the decades-spanning Star Wars story. 

One would think that theaters would want to put a movie like that up on every screen that had access to for its opening weekend, to maximize screenings and crank up profits. So why are some theaters flat-out refusing to screen the movie at all? 

According to a report by The Wall Street Journal, Disney is imposing harsh financial requirements on the theaters they'll partner with to screen The Last Jedi—terms which many theater owners are calling the worst they've ever encountered in the business. 

The standard way that movie studios and theaters make money off of the release of a new movie involves splitting the profits from ticket sales on a percentage basis. First-run films often earn more of a percentage for the studio—typically 55% to 60% of ticket sales, with that percentage decreasing as the weeks go on and interest in the movie begins to flag. 

But Disney is in an immensely advantageous position with The Last Jedi, a direct sequel to the highest-grossing movie of all time domestically, and by a fair margin at that. The company is using that advantage to impose extremely restrictive terms on theaters that want to show the film. One film buyer noted in the Journal article that by their metric, Disney right now is "in the most powerful position any studio has ever been in, maybe since MGM in the 1930s."

So what are these restrictions? First of all, regarding shares of ticket revenue, Disney is asking for what is evidently an all-time high for Hollywood: 65% from all participating theaters. Also, their agreement mandates that theaters showing The Last Jedi have to screen it in their largest auditorium for at least four weeks.

In addition to these terms, the company is also imposing an uncommon penalty for violating them. Should Disney deem any theater to be in violation of the agreement, the agreement says that Disney is then allowed to take an additional 5% of ticket sales from the theater—meaning that for four weeks, 70% of all money earned from The Last Jedi in a theater would go straight to Disney. 

Violations, according to Disney, would include pulling even one screening from a theater's schedule, or using marketing materials for the movie before Disney gives the go-ahead.

Most theaters will simply have no choice but to play by the rules, but some independent operations intend to push back. 

While these terms still are harsh for your AMCs and Cinemarks, what these conditions really hurt are smaller theaters, serving small populations. One cinema owner who operates a single-screen theater noted that in his small town, everyone who wanted to see The Last Jedi would see it in the first two weeks, leaving the owner stuck playing the movie for four weeks to what would eventually be an empty room. For this trouble, the theater would keep only 35% of the increasingly meager profits from it all—or 30%, if Disney decides they broke a rule.

Considering the record-breaking success of The Force Awakens, it's easy to see why Disney would impose such a strict agreement on theaters. But surprisingly, it's also easy to see why some theaters wouldn't want to play ball. Amazing as it sounds, it may actually be better business, for some places, to let everyone else stick with Star Wars.