A startup whose CEO has a Netflix pedigree is trying to upend the traditional movie theater experience by offering membership at a rock-bottom price point. But theaters are skeptical that the company can pull it off.
For decades, the movie industry’s revenue model has worked something like this: You buy a ticket, you buy some concessions, and the industry tracks the sales that an individual movie receives.
But on Tuesday, a disruptor made a big move that could upend this model.
MoviePass, a startup founded in 2011, announced that it was lowering the price of membership to $9.95 per month. The pass allows moviegoers to see one film per day at thousands of theaters around the country. If you wanted to, you could go to the movies every day for a month for 10 bucks. Considering that a single movie ticket costs around $10 in many cities—and more than that in lots of places—it’s a pretty impressive-sounding deal.
It attaches membership to movie theaters in an unexpected way and may prove how data and scale can help boost membership programs with low price tags. It’s an approach that could suggest some new thinking about association membership models.
(There are some limitations, of course. You’re stuck with 2D movies, and no IMAX.)
If you think this sounds kind of like Netflix, you’d be right. And you might not be surprised to learn that a cofounder of both Netflix and Redbox is the CEO of MoviePass. Mitch Lowe, who became chief executive last year, says the trend behind the ambitious price cut—the service once cost as much as $50 per month—is that theaters are struggling with foot traffic.
“People really do want to see movies more often,” Lowe told Fox Business. “The problem is that the price and risk of seeing a bad movie is high. So people tend to wait until it comes out on video or streaming services.”
But Wait. How?
MoviePass will pay theaters the full admission price when a member uses his or her MoviePass subscription to see a show. How can that business model work? It comes down to data.
Bloomberg notes that the original MoviePass model was like a gym membership—the company presumed that many subscribers would not use their memberships fully every month, and MoviePass would pocket the difference. But the gym model starts to break down at a lower price point.
So how does the company expect to make money? A hint comes from the other news floating around about MoviePass on Tuesday: The company sold a majority stake to Helios and Matheson Analytics Inc.
With that firm’s backing, MoviePass plans to monetize the data on consumer habits that it accumulates from members as they use their subscriptions, which can then be used for highly targeted advertising campaigns. (Think ads for concessions, except on your phone.)
“It’s no different than Facebook or Google,” Helios and Matheson CEO Ted Farnsworth told Bloomberg. “The more we understand our fans, the more we can target them.”
But like Uber or, well, Netflix, the potential of the model will probably only show itself at scale.
AMC: Not a Fan
Although the offering sounds good for consumers, movie theaters are skeptical. In particular, AMC Theatres, the nation’s largest chain, said in a statement that “a price below $10 per month over time will not provide sufficient revenue to operate quality theatres, nor will it produce enough income to provide filmmakers with sufficient incentive to make great new movies.”
The chain, which once had a partnership with MoviePass, has threatened legal action, according to Variety.
Lowe compared AMC’s position to his former employers’. “This is so much like Blockbuster was when we rolled out Netflix or Redbox,” Lowe said. “It’s the big guy being afraid of the little guy offering better value to consumers.”