MoviePass On Saving The Movie Theater Model

Movie theaters may have been under the impression that services like Netflix and Redbox were to blame for declining attendance, especially from millennials. After all, millennial movie attendance has dropped more than 20 percent over the past five years. But ask the millennials and it becomes clear. Netflix and Redbox didn’t kill traditional moviegoing — theaters did that all on their own. Rather, services like Netflix and Redbox are popular because they answer the problem movie theaters have refused to address: how much it costs to see a movie.

Dinner and a movie used to be the classic date night, but today, taking a partner to a movie can easily cost $60 — and that’s just two tickets and a tub of popcorn. Add a couple of sodas and a box of Sno-Caps and you’re within striking distance of $100. For that money, millennials would rather take a date out for a nice dinner and wait for the movie to come out on Netflix.

As such, MoviePass is out to bring date night back to the movie theaters with a model that doesn’t break the bank. MoviePass is just as it sounds. It charges members a monthly subscription fee that gives them free reign to see as many standard 2-D movies as they want in a month, even as often as once a day. The goal? To turn once-a-month moviegoers (about 30 million people in the U.S.) into twice- or thrice-a-month visitors, and to drive more regular business from the majority of people who only go to the movies approximately four times a year. So far, it seems to be working.

“We’re bringing millennials back to the theater,” said Ted Farnsworth, chairman and CEO of Helios and Matheson Analytics Inc. (HMNY), which last week acquired a majority stake in MoviePass. In a recent interview with PYMNTS’ Karen Webster, Farnsworth said up to this point, about three-quarters of MoviePass subscribers have been millennials.

But something else happened last week that pitched all previous data into chaos — the good kind of chaos, fortunately. MoviePass dropped its subscription price to $9.95 per month, the same as the cost of monthly Spotify, Netflix and Apple Music access. The company’s 15,000 to 20,000 members had previously been paying $39.95 per month, $29.95 per month or most commonly $14.95 per month, depending on subscription package.

After the price break, the MoviePass service went viral. It’s gained more than 150,000 new subscribers in the past week, and theaters are (mostly) loving it, with MoviePass member attendance up as much as 2,000 percent this week in certain venues. The lone hater has been AMC, which Farnsworth said seems to fear MoviePass will disrupt the industry much like Redbox did to Blockbuster back in the day. AMC has said it’s considering opting out of what it called a “shaky and unsustainable program.”

However, MoviePass partners with Mastercard on its member debit cards, so unless AMC plans to start declining Mastercard purchases — which seems like a great way to further alienate consumers — it won’t be able to stop MoviePass members from leveraging the program at its theaters, said Farnsworth. It will just force them to wait in line with non-members.

Farnsworth doesn’t get it.

“If I owned a theater and you were increasing my attendance by 2,000 percent, I’d be flying you down on a plane and putting you up in a hotel and buying you steak dinners!” he said.

“Or at least a lifetime supply of Sno-Caps,” Webster agreed.

MoviePass and HMNY believe MoviePass can ultimately save, rather than destroy, the movie theater business. Consumers, theaters and studios alike can win with a model like this, Farnsworth noted, and MoviePass can still turn a profit, too.

The consumer wins because the tickets are cheap, but the theater still gets paid the full ticket price by MoviePass — minus a 20 percent discount, which Farnsworth said theaters are happy to offer because they see the benefit of bringing more people into the theater. While movie ticket purchases account for $10 billion of revenue a year, concession purchases account for just as much, and moviegoers who have paid less for their tickets will attend more often and spend more on snacks. AMC performed an independent study which showed MoviePass cardholders were spending an average of 123 percent more on concessions than AMC member cardholders, and attended twice as often.

As for the studios, MoviePass is collecting data that others aren’t, such as what percentage of people who viewed a trailer then went on to buy a ticket to the movie. That’s one area where MoviePass may stand to earn its keep, since it’s not always going to profit from every $9.95 subscription payment. It all depends on how much each member uses the service.

Farnsworth compared the model to Amazon, where the company may lose money by offering free shipping on a 125-pound grill for an infrequent customer. What it loses on that transaction, though, it gains in the insane level of loyalty shown by its devotees, and that’s something MoviePass is seeing in its userbase as well. The company simply is not seeing the frantic churn rate that’s putting other subscription-based startups out of business.

In fact, monetizing the aforementioned data would only give the company a wider margin. For instance, Facebook does tens of millions of dollars in movie trailer advertising each month, said Farnsworth, but they can’t tell advertisers whether the people who watched the ad actually went to the movie. That information could help studios and advertisers create more effective campaigns by showing them which ones worked and which didn’t.

Farnsworth further said MoviePass could work with studios to urge members to attend a showing on opening weekend and boost box office numbers. In the past, when studios have asked MoviePass to help with this, it’s driven as much as an 18 to 20 percent increase in ticket sales — and that was before the service had 150,000 subscribers. With numbers like that, there’s definitely a way to monetize the service.

There’s also potential for retail benefits, according to Farnsworth. A customer who is emotionally charged after seeing a movie is more likely to buy its soundtrack or other merchandise if it is offered to them. All of this adds up to a moviegoing experience that fits with the twenty-first century environment. The current model has been around for 80 years, Farnsworth noted. It’s about time somebody shook it up.