In Jackson, MS, the state’s capital city, there are no movie theaters. The lack of a movie theater in the city is perplexing - the city boasts a population of more than 175,000 people (surely, there is enough of a demand for at least a small cinema) and city leaders would love for Jackson to have a theater (leaders are discussing using grants or tax incentives to attract a theater). In Sarah Goodyear’s recent Atlantic Cities article, “Mississippi’s Capital City Doesn’t Have a Movie Theater. Will That Ever Change?,” historian Jerry Dallas puts forth an explanation for this paradox: a continuing fear of crime in Jackson, white flight to the suburbs, and the convenience of suburban theaters in surrounding counties. 

Mr. Dallas’ explanations for Jackson’s movie theater situation (or lack thereof) suggest market failure may be to blame. Dallas hints that Jackson is perceived as a crime infested urban locale that is incapable of sustaining a movie theater. Such a perspective would appear to be the result of an information gap; in Harvard Business School Professor Michael Porter’s “New Strategies for Inner-City Economic Development,” he cites information gaps about the purchasing power and crime rates of inner-cities stemming from social biases about inner-cities as a key barrier to attracting investment to such areas. In Jackson, the median income is $34,567, which, when combined with a population of over 175,000, demonstrates the city has a large pool of purchasing power. In addition, although parts of Jackson, like most cities, do have alarmingly high crime rates, the city also has areas that are very safe. 

Assuming an information gap is indeed to blame for Jackson not being able to attract a movie theater, the city should step in - the role of government is to intervene in precisely such a situation, when a market failure is occurring. Some would assert that this intervention should take the form of tax incentives but such an approach has been met with large opposition (see Richard Florida and others) as it is seen as subsidizing companies without achieving a lasting impact for a locality. Others would suggest correcting the information gap by taking steps to foster a better business environment in Jackson (see Porter). While this approach sounds great, in a place like Jackson, with deep-rooted biases at play, it may not be feasible to simply build a vision of the city as having an attractive business environment. Rather than tax incentives or pursuing a better business environment, Jackson might be better off doing the unthinkable - running its own movie theater.

If city leaders truly believe that a movie theater can turn a profit in Jackson, why shouldn’t the city realize such profit and provide a service that its population values? Cities across the nation engage in enterprising endeavors - Phoenix, AZ sells methane gas, San Bruno, CA has its own cable television company, and the Milwaukee Sewage District transforms sludge to fertilizer and sells it. But, the simple fact that other cities have developed and operated businesses does not alleviate the concerns about government engaging in such efforts and, specifically, a city operating a movie theater. With the city’s access to taxes, it will have an unfair advantage over other theaters - they will have to respond to market pressures, whereas the city’s theater will be able to offer lower ticket prices since it is “subsidized” by the people. In addition, the pursuit of profit opens up the door to corruption among public officials. Lastly, movie theaters are very risky business endeavors, creating the risk of tax payer dollars being wasted. 

These concerns about a city operating a movie theater can be allayed relatively easily. After start-up assistance (say, an amount close to what the city would offer to a potential theater via tax incentives), the theater can be required to be self-sustaining, thus preventing the theater from being continually subsidized and possessing an unfair market advantage. A private third party can be left in charge of theater operations to prevent manipulations by public officials attempting to extract funds or resources from the theater. Lastly, to mitigate the risk of operating a theater, the city could run a small-scale trial period to determine whether investing the full amount a theater would require would be prudent. 

In addition to overcoming opponents of such substantial government intervention into the market, Jackson would likely face major legal barriers to establishing its own movie theater. Local government law greatly restricts the ability of cities to engage in efforts to raise money, such as operating a business. But, in our current economic climate in which localities across the country are starving for revenues, the city may be able to convince the state legislature to allow them to pursue this creative revenue stream.

While this post has focused on Jackson’s movie theater woes, the idea of localities operating businesses is something states and cities across the country should begin to consider. As mentioned above, our localities are extremely limited in how they can raise revenues and many are experiencing economic crises as a result of declining tax bases and rising costs. We must pursue innovative, creative ways to sustain our towns and cities - allowing them access to profits that we reserve solely for the private sector is an example of such an approach.