With the 2017 box office hitting a 24-year low, (and forecast to be worse this year) the question of how movie theaters will survive in the long run has come up again. While more theaters have started offering booze and other big ideas to entice customers, one company that keeps coming up in the conversation is MoviePass, which has come to be known as the “Netflix for movie theaters.” Whereas Netflix helped redefine how we watch TV at home, MoviePass wants to offer up the same type of service for movie theaters via a flat-rate monthly subscription. But will it work? So far, the process has not been without bumps.
MoviePass has been around in some form or another since 2011, but at the end of 2017 the company lowered its subscription price, which resulted in a surge of membership — and with it lingering questions about how the service works, if it’s really beneficial to movie theaters, and whether or not it’s a sustainable option for theater-goers.
MoviePass charges a monthly service fee of $9.95, which gives members the chance to see up to one movie per day, every day. Once you’re near the theater, you select your ticket via MoviePass’ smartphone app, and swipe the special prepaid debit card when picking it up. Outside of the monthly subscription fee, there’s no added cost, even if you head out to the theater on a daily basis.
There are some limitations: You can only see each movie one time, so no repeat viewings of Paddington 2, and you can’t use it for any IMAX or 3-D showings. Still, with an average movie ticket costing about $9, MoviePass started seeming like a worthy investment for even the most casual movie-goer. If you only make it to one movie a month, you basically come out even.
Behind the scenes, MoviePass pays the theater for the cost of your ticket, having negotiated a discounted pricing structure with several national chains. The company believes that the number of members that use the service will be offset by those that underuse it. Still, despite the reimbursements, some theaters have been publicly outspoken about the service, most notably AMC, the biggest movie theater chain in the U.S., which has a history with MoviePass going all the way back to its early days.
Though both companies have the same objective — to fill up increasingly vacant theater seats — they have a drastically different philosophy about how to do it, and the back-and-forth between the two started to boil over last week. Before getting into that, here’s a quick look back at the history of MoviePass, as well as its off-again/on-again relationship with AMC.
The Launch That Never Happened
MoviePass was first set to launch in the San Francisco area back in 2011. The initial pitch: for $50/month members could see unlimited movies from a list of 21 theaters in the metro area. The problem was that MoviePass hadn’t reached out to the theaters beforehand, and when they did find out, not all were interested in participating. One of those chains was AMC, which learned that six of its locations were on that list of theaters. The company openly scoffed at the idea, viewing MoviePass as some industry outsider showing up to their party uninvited.
It was a serious blow to the startup, and the night before a planned Beta launch, MoviePass abruptly pulled the plug, and the company went into “temporary hiatus.”
While it seemed like it MoviePass may be over before it started, they continued to operate with only a small list of invite-only members and had a waiting list of around 75,000 eager to join their ranks. Of its members, MoviePass reported that 64% started going to the movies more often, and not having to pay for a ticket (in the traditional sense) meant they were dropping about 123% more on concessions.
By October 2012, MoviePass launched nationwide, touting a revamped interface and reduced membership fees. The cost now varied from $20-$45 a month, depending on where you lived, and the new interface was more-or-less how it operates today. You go to the theater, secure your ticket on the app, and use your MoviePass card to redeem it.
In response to the news, AMC issued a statement to The Hollywood Reporter that they had “no affiliation with MoviePass, and we’ve had no discussions with the company about participation.”
Of course, getting any theater’s permission wasn’t really necessary. All MoviePass members had a prepaid card, and theaters were reimbursed for the cost of the ticket. Unless those theaters wanted to stop taking MasterCard altogether, there really wasn’t much in the way of recourse –– save for possibly petitioning MoviePass to remove their theaters from its app altogether, though that could potentially cost the theater at the box office as well as the concession stand.
Within two years, AMC seemed willing to see potential value in the service, and (briefly) joined forces with MoviePass. At the end of 2014, the two companies announced they’d try out a “MoviePass Premium” option in Denver and Boston. The cost of a subscription ranged from $35-$45 a month and allowed eligible members unlimited monthly viewings at any AMC theater in those cities — including IMAX and 3-D. This came after the launch of AMC’s own in-house rewards program, AMC Stubs, with offerings that included a chance for participants to pay $20 to see Interstellar as many times as they wanted, ($35 to see it in a premium format), which showed that the chain was becoming receptive to subscription-based models.
Though AMC’s trial run with MoviePass came and went, by the summer of 2016, MoviePass could be used in about 90% of theaters nationwide. Around that same time, Netflix co-founder and former Redbox president Mitch Lowe became the company’s new CEO. He began toying with the pricing structure to draw in more members, offering multiple tiers that came with two or three movies a month, as well as a pricier unlimited plan. It was designed to appeal to less-frequent moviegoers while offering more affordable price points.
Meanwhile, AMC was looking for new ways to draw in customers on its own, even floating the idea of allowing the use of cell phones in its theaters. After being called out by Alamo Drafthouse CEO Tim League, AMC quickly reversed its decision.
A Blockbuster Success
In August of 2017, the analytics firm Helios and Matheson purchased a majority stake in MoviePass with an eye toward optimizing their data in the service of targeted advertising. This gave MoviePass a parent company that was willing to invest millions of dollars into the service to acquire that data.
By no coincidence, MoviePass announced a new flat-rate membership of $9.95 at the end of that month. By the end of 2017, the service reached one million members, up from about 20,000 the year prior. Within just 9 days, that number ticked up by another 500,000.
AMC responded by threatening legal action. They called the service “a small fringe player” and called its business model a detriment for movie studios, theaters, and audiences.
While AMC took no legal action, the reasoning behind their opposition to the service started to become more clear. The statement they gave claimed that MoviePass was trying to “turn lead into gold,” and inevitably setting up its members for disappointment given their unsustainable business model. Should MoviePass collapse, it could mean even fewer people would make the trip to the theater knowing they had to pay full price for a seat. AMC also made it clear that, unlike other chains, they wouldn’t be offering MoviePass any discounts on the cost of the tickets it pays to reimburse.
MoviePass Makes Drama
With a membership now approaching two million, which makes up about 3% of theater-goers nationwide, and a new venture in film acquisition that they announced at Sundance this year, MoviePass is starting to flex a little muscle to get its way.
Last Thursday, some MoviePass users noticed they couldn’t acquire tickets at certain locations — and all of them happened to be AMC theaters. The next day, an email went out to MoviePass members explaining that 10 AMC theaters were no longer available on their platform, including theaters in LA, Chicago, and Boston. AMC quickly responded on Twitter, making it clear that this wasn’t their decision, and that they hadn’t “restricted MoviePass acceptance at our theatres, nor have we heard from MoviePass about this.”
While movie theaters have little leeway when it comes to accepting MoviePass members, MoviePass does hold all the cards regarding which theaters it makes available on its smartphone app. By removing these locations, MoviePass is showing its willingness to play hardball to get $3 for every ticket sold at an AMC theater, along with 20% of concession sales. This could also mean they’re willing to remove more, if not all, AMC theaters from their platform until they get their way.
Ultimately, both want more people in theater seats, but MoviePass alienating its members by taking theaters off their platform seems like a risky way to go about it. Meanwhile, AMC doesn’t seem to keen on the idea of lowering their prices. In fact, they have even floated the idea of variable ticket costs, which would mean charging more per ticket for big-budget movies.
Either way, with fewer people going out to the movies (attendance was down 6% in 2017) and ticket prices likely to continue hitting record highs, no one company has figured out a catch-all solution to the problem, and it’s unlikely to be solved by corporate feuding that ends up leaving the movie-going public out to dry.