Surprise Monthly Movie Pass Angers Theater Chains, Studios (Updated)

AMC chain says it will not honor the passes in its theaters

There's another war brewing on the theatrical landscape — but unlike the battles over Premium VOD and shorter windows, this time exhibitors and studios may well be on the same side.

Both are skeptical of and angry about a Netflix-style subscription service launched this week by the New York-based MoviePass. The company quietly rolled out a beta test of its service in San Francisco, where select patrons can pay $50 a month to receive unlimited admission to more than 20 theaters in the Bay Area.

MoviePass executives say their "best-case scenario" is an expansion into more cities in August, and nationwide by the fall.

But the move has inflamed exhibitors and distributors, both for the way in which it upends the traditional price structure for movie tickets and because MoviePass did not ask for feedback or even inform them of its plans before announcing the program just before the crucial Fourth of July weekend.

MoviePass made its deals with online ticketing services rather than individual theaters or theater chains.

"We knew nothing about it," Landmark Theatres CEO Ted Mundorff told TheWrap. "We are stunned that an announcement like this was made, and they 'forgot’ to discuss it with their clients. We are not interested in outside entities setting ticket prices for us." 

Mundorff also said that his company was "reviewing our contract" to determine what action the company could take to prevent MoviePass from offering tickets to the Landmark theaters.

AMC Theatres, meanwhile, issued a press release on Thursday stating that it would not participate in the program, and that it has told its theaters not to honor MoviePass vouchers.

“Plans for this program were developed without AMC’s knowledge or input,” said AMC chief marketing officer Stephen Colanero in the press release. “As MoviePass is currently designed, it does not integrate well into our programs and could create significant guest experience issues.”

MoviePass president Stacy Spikes told TheWrap on Thursday that he thinks exhibitor concerns are due to a misunderstanding of the system. "We really feel as if we are offering value and assuming all the risks ourselves," he said. "Once we have the data from this test, and once we show the chains what we've built, I think they'll be very excited."

Until now, he admitted, MoviePass has had difficulty communicating with studios and exhibitors, which is why the San Francisco test was developed without much outside input.

"Getting meetings has been challenging," he said, "and we haven't really been taken seriously."

The beta test, he added, involves fewer than 1,000 consumers — and only after data from the test has been analyzed and shared with exhibitors and distributors will the company move forward.

"It'll be very difficult to make it work without cooperation from theaters — and historically, they've been extraordinarily protective of their business, almost to the point of obesssion," Larry Gerbrandt, an industry analyst for Media Valuation Partners, told TheWrap.

Distributors, who have had an often-frosty relationship with theaters as they've looked for alternatives to theatrical in the past year, are also upset about a system that could complicate the business of counting box-office grosses.

"A lot of people were caught off guard by this," said one studio distribution executive. "They seem to have made the deal with third parties [ticketing services] without letting anybody know, and that has made the rumor mill go crazy."

Spikes said that rumor mill was one of the reasons for the negative reaction. On the issue of pricing, he said, MoviePass will pay full the theaters the full admission price, plus fees, for each ticket redeemed. 

In addition, he claimed that MoviePass research shows "an uptick in concession sales when people aren't out-of-pocket every time they go to the theater."

That data, he said, comes from subscription systems that have been in place in France and the UK for years.

In San Francisco, consumers will be able to search for films, select show times and reserve tickets on their mobile devices, then simply flash those screens at the box office to claim their tickets — although if AMC succeeds in refusing to honor all MoviePass admissions, that will cut the 21-theater rollout by six theaters and almost 100 screens.

Customers are restricted to one movie per day and one ticket per film, with a $3 surcharge for 3D and IMAX films.

The plan, said Spikes, is fully compatible with exhibitors' own incentive programs, and will also offer theaters the ability to offer special deals and communicate directly with consumers deciding where to go to see a film.

"We give the theaters the kind of direct communication with consumers that they don't really have right now," he said.

After data from the test, he added, he expects that the company can prove an increase in concession purchases, and can sell studios on the ability to order DVDs directly through the MoviePass mobile app. 

"We definitely want them to feel comfortable before we move forward," he said, "and I think we can make sure that they are comfortable and that the financial models work.

"And if they see what happens and they still feel as if this isn't good for the industry, then there's nothing we can do about it."

Still, the whole thing might be moot, if most consumers decide that Hollywood doesn't put out enough good product to justify a subscription that at the unlimited rate would require at least five monthly trips to the theater to be worthwhile.

"It  could work for a particular subset of moviephiles, for people who see multiple movies every weekend," said analyst Gerbrandt. "But it's not going to be Netflix, because the price is a high number and it's only appealing to a small slice of the population."

For now, MoviePass remains hopeful and Hollywood remains skeptical. A consultant who works with both studios and exhibitors put it succinctly: "Any time you mess around with pricing, I guarantee it'll cause a problem."