MoviePass is the answer to movie theaters’ prayers. No, it’s just another challenge for an already beleaguered industry. No, it’s a crazy idea that’s doomed to fail.
Industry watchers have voiced all three theories this week about a business that few had even heard of a week ago.
The subscription movie service, introduced in 2011, received publicity beyond its wildest dreams this week after it dropped its monthly price to $9.95 from $14.95. Many consumers were intrigued by the thought that they could avoid today’s soaring admission prices, using MoviePass to go to the movies every day for the price of a single ticket.
AMC Entertainment quickly poured gasoline on the flicker of publicity by announcing that MoviePass was “not welcome here” and its lawyers are looking for a way to block “this shaky and unsustainable program.”
The reactions reflect the general sense of uncertainty about exhibition in a period of weaker-than-expected box office sales and plummeting stock prices. Things could deteriorate if Hollywood studios introduce premium video on demand — offering movies to home viewers in the 90 day period when theaters typically have them exclusively.
Here’s our look at how MoviePass works, and what’s ahead — with input from CEO Mitch Lowe, who knows the industry from his years helping to found Netflix and lead Redbox.
Q: How do MoviePass subscribers buy tickets?
A: Customers who pay $9.95 a month get a debit card that they can use at theaters to buy a ticket. It’s good for up to one movie a day.
Q: Does that include Imax, 3D, recliner seats or other venues with premium priced tickets?
A: No for Imax or 3D. As for recliner seats, that’s hit-or-miss — you’ll have to check. MoviePass decides which ones to include, mostly after looking at how much of a premium the theater charges.
Q: Any other restrictions?
A: Yes, several. You must install the MoviePass app on your smartphone; it shows you the available theaters and showtimes (in other words, not including 3D and Imax venues).
But you can’t use the ticket buying function until you’re within 100 yards of the theater. At that point, you can select the film there that you want to see. MoviePass will apply to your card enough funds to pay for that ticket. The clock is ticking: The authorization expires if you don’t buy your ticket from the theater kiosk or box office within a half hour.
Q: What if there’s a long line that takes more than a half hour?
A: You can use the app again to secure funds for the same movie and showing.
Q: If the theater has reserved seating, can I make a choice from home and buy the ticket later?
A: “That’s a problem,” CEO Lowe tells me. Users can reserve seats at about 6% of the theaters it serves; they have direct relationships with MoviePass. “It is definitely one of the shortcomings of our system,” he says — but one he’s trying to solve by forging more direct relationships.
Q: MoviePass uses the smartphone to see my location. Will it still work when I’m away from home — perhaps on vacation?
A: Yes, as long as you’re in the country, it should work.
Q: At all theaters?
A: No. MoviePass says it works at 91% of theaters accounted for by the National Association of Theatre Owners. Some small venues don’t accept debit cards. They also have to be included in the database to which MoviePass subscribes that provides information for the app about showtimes for specific movies at specific venues. That rules out many seasonal venues, including drive-ins.
Q: But otherwise, all major venues?
A: MoviePass also takes out some larger, mainstream theaters in areas where it wants to demonstrate to the parent company how it can improve sales. “We have to hold out some locations so, instead of theorizing — hey, you’re going to get a big improvement — we can show some A-B testing where this theater is in, and this theater is out, and look at the difference,” Lowe says.
Q: Can I use MoviePass to watch alternative content on weeknights, such as the Fathom Events concerts, sports events, and fan festivals?
A: Probably not. “We haven’t started doing that yet,” Lowe says — adding that customers should still check the app to see if some events do get into the system. He acknowledges that “we need to make it clearer for our customers.”
Q: How about art houses?
A: Lowe says that MoviePass has “a lot” of them, but not all.
Q: Despite the hassles, it can be a bargain if I see just see two movies a month. Who’s taking the haircut?
A: MoviePass. It pays the theater full price for its ticket.
Q: Why would MoviePass do that?
A:.It’s making a bet that it will become big enough to make deals with others who want access to its audiences and data about them.
Q: What could MoviePass offer them?
A: Lowe says he could help persuade people to attend movies that they aren’t sure they’ll like. That currently leads them to wait until the titles appear on, say, Netflix or HBO. “Nothing happens until we get millions of subscribers,” Lowe says. People double their theater-going when they have MoviePass, he says, and “almost 100% of that is to films that gross under $20 million.”
Eventually, then, “we would charge the studio marketing fees solely based on the people we actually get into the theater. We pay full price [for the ticket], and they might rebate us.”
Q: Any other possibilities?
A: “Eventually there are at least a dozen things we could do” to make up for any losses from ticket sales, Lowe says. For example, MoviePass has a yet-to-be-implemented deal with Studio Movie Grill that will enable subscribers to use their debit card for concessions in a special line. “A 20% [revenue share] for MoviePass would be reasonable especially since our customers are spending 20% to 123% more than they did before on those concessions.”
Q: If theaters get paid in full, then why does AMC Entertainment say that MoviePass is “not welcome here”?
A: It says it fears that people using MoviePass will think movies are just worth $10 a month, as opposed to $10 a ticket. That’s “unsustainable and only sets up consumers for ultimate disappointment down the road if or when the product can no longer be fulfilled,” the exhibition chain says. The average AMC customer paid $9.33 for a ticket in Q2.
Q: So is AMC not honoring MoviePass?
A: AMC has to honor it. The subscription service’s debit card is issued through MasterCard. As long as AMC — or any theater — has a deal with MasterCard to accept its debit cards, then the contract bars it from discriminating. It can’t decided to honor cards from some people, but not others.
Q: Is there another explanation for AMC’s vigorous objection?
A: AMC might want to stop consumers from flocking to MoviePass while the chain prepares its own subscription plan. In its attack on MoviePass this week, AMC noted that it is “not opposed to subscription programs generally.”
The company also told investors this month that it hopes to add $30 million to its bottom line this year with several changes including “strategic pricing” and “promotional incentives.” And it’s been investing heavily in its Stubs loyalty program: It now has 9.3 million household members, up from 2.5 million a year ago.
Q: How does that compare to MoviePass?
A: It had about 20,000 subscribers in December when it charged $14.95 a month. But that jumped this week with the price reduction to $9.95 — made in conjunction with a deal to sell the company to data firm Helios and Matheson Analytics, and for MoviePass to go public soon. They had targeted 100,000 subscribers in a year.
Lowe can’t disclose yet how many customers it has now. But he offers that with this week’s publicity “we were way, way, way, way, way above any idea of where we could have been at this point in time.”