Movie theaters make no money on tickets---it's concessions where the money is. That's why it's $10 for a small bag of popcorn and a drink (which costs the theater pennies on the dollars).

They make plenty of money on ticket sales. Just not much profit on tickets. They still rely on getting the ticket sales money on order to buy the rights to show movies and keep the lights on. They can't just give that up.

They make little money on tickets the first week or two. After that the percentage changes.

Then it becomes rational for the user to buy tickets elsewhere.

I really don't see how. What are the alternatives you envision? Switching to a more expensive service that doesn't show ads but charges a markup? Physically waiting in line at the box office?

Sadly, if "give it away for free and make money from advertising" is the dominant business model in an industry, it's very hard to disrupt. That's precisely because there aren't really any sustainable incentives for users to switch to a different model.

How much do they make per add shown? Is it more than a price difference users would care about, say 50c?

If one experience is awful and one is pleasant but 50c more then most aren't going to notice the difference.

Not to mention the effects on the advertiser, being disrupted from what I'm doing to see your ad makes me not want to see your movie.

For theatre's over reliance on advertising has already turned a lot of people away. We've all made and heard complaints about 20 minutes of advertising before a movie starts. The only thing they've got going for them anymore is timed exclusivity.

All those points could just as easily be used to argue that paid services are a superior business model to ad-supported services in general. Unfortunately, history doesn't bear that out. The revealed preferences of actual customers is different from what you and I think they should want. Just look at an app store.

For what it's worth, I'm with you. I'd rather pay a small fee to avoid ads (and I do so whenever available.) But I've come to the sad conclusion that we are a small minority of consumers. Better to accept that than fall prey to the is-ought fallacy.

I bet they have low conversions anyway, because who in the hell wants to pay $2 fees for a $15 movie ticket?

They don't really save time, as you need to show up early for a seat in most places.