Is MoviePass’ $10 Monthly Subscription Deal Too Good to Be True?

Subscription models for frequent moviegoers work in Europe, but not at such a cheap price point

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Who wouldn’t want to see all of this November’s biggest movies like “Thor: Ragnarok,” “Justice League,” and Pixar’s “Coco” for just $9.95?

Since MoviePass announced a new subscription plan to give frequent moviegoers a big, big discount on tickets, the company has seen a surge in customers. According to filings from Helios & Matheson, the data analytics company that bought a majority stake in the company for $27 million, MoviePass subscribers have increased from 20,000 at the end of 2016 to 150,000.

But movie theaters are not on board so far — led by AMC Theatres, which dismissed the MoviePass plan and announced it was seeking to end its current deal with the company.

At a time when the market value of the world’s largest movie theater chain has taken an enormous hit from this summer’s anemic box office, AMC thinks that selling unlimited tickets for 10 bucks a month “will not provide sufficient revenue to operate quality theatres.”

Some smaller chains, including the dine-in Studio Movie Grill, said they would continue to accept MoviePass subscriptions. But while other major theater companies have yet to join AMC in public opposition to MoviePass’ new plan, exhibition executives who spoke to TheWrap on the condition of anonymity say they share AMC’s skepticism that this new model can function in the long run.

“There’s a possibility that subscription services can work out for the industry, but it’s something that needs to be figured out by each company individually,” one executive told TheWrap.

Another executive from a regional chain was struggling to grasp MoviePass’ new subscription model, which allows users to see as many movies as they want and theaters to get the full cost of each ticket but limits MoviePass’ income to the monthly fee and any other deals it can cut for marketing partnerships or a share of concession sales.

“Some level of discounting does possibly make sense to all parties if MoviePass drives higher guest frequency, but from my estimations, the math doesn’t work out,” the executive said. “There are multiple successful subscriptions models in Europe operating today, but this $9.95 seems very far off the mark from those companies.”

In Europe, subscription models like Odeon Cinemas’ Limitless pass and The Light Cinemas’ Infinity pass have helped keep a steady stream of hardcore moviegoers coming into theaters so that they can count on increased revenue from high-margin concessions sales to make up for lost ticket revenue.

But there are two major differences. First, they’re in-house programs that encourage customer loyalty instead of a third-party program like MoviePass.

And second, they’re set at a higher monthly price point. In the U.K., subscription passes cost £16-20, or approximately $21-24. (That’s roughly two times the price of an average U.K. ticket.)

“We approximate that people are going to use the service three to four times a month and price both the subscription and normal ticket price accordingly,” John Sullivan, senior consultant at the London-based movie consulting firm CinemaNext, explained. “We come to an arrangement with the distributor that this is a price that will be booked at. So the tickets will be set at £9-12 and then the subscription rate will be set at around £19 or whatever price the distributors agree to.”

But MoviePass’ plan is significantly cheaper — especially given that the average U.S. ticket price is $8.65, according to the National Association of Theatre Owners. (AMC, which has many theaters in pricier urban markets, says its own tickets cost $9.33 on average.)

“The price level is unsustainable and only sets up consumers for ultimate disappointment down the road if or when the product can no longer be fulfilled,” AMC said in its statement.

Like many exhibitors, AMC is worried that launching a model that is immediately unprofitable for MoviePass — and perhaps doomed to collapse — could depress moviegoing even further once bargain-hunting subscribers are asked to pay for full-price tickets once again down the line.

MoviePass CEO Mitch Lowe said AMC just doesn’t understand what it’s trying to do. “We hope that we can work with them and convince them that we’re not looking for anything more than an incremental piece of the business that we drive to them,” he said. “We’re not looking to cut into any existing revenue.”

Lowe said MoviePass will continue to build its subscriber base as quickly as possible and then leverage that audience to try to renegotiate for more cuts of popcorn and drinks revenue — a deal it has with some chains already — and to sell moviegoers other goods and services. For instance, Lowe hopes to allow subscribers to use its MoviePass debit cards at restaurants and bars near theaters. 

And while Lowe says MoviePass have no current plans to sell its data to outside companies, he does want to use subscribers’ tendency to experiment with smaller films to help studios hone their marketing.

“So many smaller movies out there don’t get seen because the marketing isn’t reaching the people who might be interested in them,” Lowe said. “If we can build our subscriber base large enough, we can use our data and the information we get from our customers to help get the right people into the theater for a certain kind of movie.”

But if that lofty goal of turning MoviePass into an aid for studio marketing departments is going to be reached, it’s going to need several million people to subscribe and stick with the program.