MoviePass has shown how excited people are to go to the movies again, but its sustainability has been called into question as more signs of trouble loom on the horizon.
How MoviePass broke out
In August 2017, MoviePass had 20K subscribers that paid a monthly subscription fee of $24.99 to see one movie in theaters a day for a flat rate. Less than six months later, MoviePass passed 2 million subscribers as a result of a price cut that allows subscribers to use the service for $9.95 a month. With this boom in participants, MoviePass made moves to further ingrain itself in the market. It worked with chains to share concession revenue, while also working on distributing its own movies (as MoviePass Ventures).
Leverage would presumably come from proving to theaters that MoviePass subscriptions increase overall ticket sales which drive growth in other areas such as concessions – more than eight in 10 moviegoers say they purchase food at a theater, according to Mintel research on the US movie theaters industry. Theaters are already getting reimbursed by MoviePass for every ticket purchased, meaning MoviePass is working at a loss for every ticket sold (the average cost of a ticket was $8.97 in 2017, according to the National Association of Theater Owners). Still, MoviePass’ parent company Helios & Matheson insists that selling consumer data and brand partnerships will make the discounted service profitable in the long run.
Hitting a wall
The “too good to be true” perception of MoviePass has come to a head in the last few months. Following another boom in subscribers after a limited-time offer of a $6.99 per month subscription, MoviePass took some measures to limit service. Current subscribers are now unable to see the same movie multiple times, while new subscribers can now only see four movies per month for the rate.
Restrictions like these signal potential risk to the current model’s sustainability. By the end of April 2018, Helios & Matheson had $15.5 million in cash for MoviePass, but the firm has been going through nearly $22 million every month since the price drop in late 2017, according to company filings. MoviePass likely planned for people to purchase a subscription and go to the movies as often as they currently do, but that doesn’t appear to be the case. AMC Entertainment said that MoviePass subscribers are attending nearly three movies a month at an average of $12 a ticket. With the subscription fee, that equates to more than $20 lost on every customer at AMC theaters alone.
The future of movie theater subscription services
The strengths and vulnerabilities of the movie theater model have been on full display with the story of MoviePass in the past year. On the plus side, the subscription service has shown its clout in disrupting the traditional model of movie marketing. Movie theater attendance has been improved by MoviePass and theaters could come to depend on the service for more attendance. In the face of declining ticket sales and box office revenue, a service like MoviePass may be a solution to prevent future revenue decline for movie theaters.
On the other hand, MoviePass itself is running out of time. It needs a substantial boost through an influx of subscribers that the service doesn’t necessarily have the resources to incentivize. Moviegoers are primarily driven to a particular theater by convenience and while MoviePass has made the theater experience more convenient, it has done so at a significant detriment to its own short-term business interests. It is unclear whether MoviePass will exist as it does within a year, but it has shown that consumers want to go to the theater more if the theater experience can appropriately compete with at-home viewing.
Movie theaters will likely be more open to new services entering the space or trying their hand at something similar. For example, Cinemark started Movie Club, a subscription that allows people to buy a ticket a month for a discounted price of $8.99, plus 20% off concessions. However, services such as Movie Club highlight how risk-averse theaters are at this time of uncertainty and stagnation. Theaters were willing to partner with MoviePass because using the service meant no risk to the theaters they partnered with. If MoviePass gets hit hard, movie theaters may need to take some more risks, or face disengagement from a consumer base that has more options outside of a theater that they can turn to.
