In August, when MoviePass cut its price to $9.95 a month, AMC decided the subscription card that allows customers to buy one movie ticket a day was an existential threat.
“[This is] not in the best interest of moviegoers, movie theatres and movie studios,” read AMC’s August 15 statement in response to the price drop. The lamenting went on to say MoviePass was unsustainable, sets up disappointment, won’t provide AMC the revenue needed to run its theaters, or let filmmakers make great movies. Also, MoviePass kills puppies.
The last claim is the most absurd, but they are all equally untrue. Every time a customer uses MoviePass, it means the theater benefits from the purchase of a full-price ticket. AMC’s anxiety stems from the fact that MoviePass could reverse the decline in moviegoing — but it’s not the messiah it was looking for.
It’s a tender time for theaters as home-streaming services like Netflix become increasingly dominant and the decline of moviegoing seems inevitable. MoviePass and its super-deep discounts intimidate; between August 14-October 18, MoviePass saw subscribers leap from 20,000 to 600,000; it now estimates that it will comfortably surpass 3 million subscribers by the end of next summer.
However, hand wringing about the “death of movies” is as old as cinema itself, and an industry that reacts to change by trying to push back the ocean may be part of the problem. Indeed, MoviePass may have a seismic impact, if not the one AMC precisely fears: It’s a potential antidote to the movie chains’ stale practices and their tentpole-addicted Hollywood accomplices.
If you’ve been paying attention to middle-age columnists, the new generation of now-young adults (more than twice the size of Gen X, and even bigger than the Baby Boomers) is destroying all that is sacred and good in culture. Adverse to paying for content and addicted to streaming, it takes “Star Wars” or “Dunkirk” to get them in theaters.
However, the average age of a MoviePass holder is 26. Of the first 300,000 new subscribers this fall, 75 percent were millennials. These the exactly the customers Hollywood is losing, and they’re excited about movies. Based on what advertisers know about millennials, they respond to authentic and experiential activities — like moviegoing.
Unlike home entertainment, movies failed to adapt to the first generation of digital natives. Hollywood’s current approach of “this movie is so big you can’t miss it” runs counter to the lessons of Spotify, Netflix, and Amazon. MoviePass’ $10 price point and its business model are millennial favorites. They like the flexibility of subscriptions and the ability to sample, rather than commit to an individual piece of content they don’t know if they’ll like. When businesses give millennials the ability to walk through walled gardens, they find enthusiastic customers.
MoviePass, like Netflix and Spotify, turns subscribers into samplers willing to give movies a chance. As MoviePass co-founder Stacey Snipes told IndieWire in a recent interview, the subscription service will not put a dent in tentpole ticket sales, especially sold-out Friday and Saturday night screenings when advance ticket sales keep MoviePass users out. Instead, it removes the millennial speed bump of asking, “Is this movie worth $15?” MoviePass encourages a mindset of exploration without consequence, similar to how Netflix customers click on an intriguing documentary.
Snipes and co-founder Mitch Lowe, who was once part of Netflix’s management team, believe their product has the potential to build demand for films made for less than $50 million — often, much less. For example, last weekend MoviePass represented 1 percent of ticket sales to “Thor: Ragnorok,” but accounted for 8 percent of ticket sales for “Lady Bird” overall, and 16 percent of ticket sales in theaters where customers could use MoviePass.
This business model has been in play in Europe since 2000. MoviePass also has years of data from their higher-priced service — as well as an 18-month experiment with AMC (yep) in Denver and Boston. Just five percent of MoviePass subscribers are “super users” — the movie-loving customers who read IndieWire and could bankrupt MoviePass by going to 30 movies a month.
As James Schamus recently pointed out, super-users in moderation are a good thing as they generate interest and buzz around movies. They are also often balanced out by those who blindly pay the $9.95 monthly charge on their credit card.
MoviePass said 75 percent of its customers are seasonal users — those who go to the movies during the summer, Oscar season, and holidays. That’s why the company recently announced once you leave the service, there’s a nine-month waiting period before you can subscribe again.
At $120 annually, that’s significantly more than the average American currently spends going to the movies each year. MoviePass said approximately 75 percent of new cardholders come to MoviePass having only gone to three to six movies a year. Even if the subscription service increases subscribers’ moviegoing — as it’s proven to do — there’s room for growth before that $120 a year is exceeded by what the company pays for movie tickets.
However, let’s say MoviePass is a huge success and the average costumer gets significantly more out of their card than $120 of movie tickets. Tickets are only one MoviePass revenue stream; there’s advertising, selling soundtracks, or offering discounted beer across the street. It’s also at that point, having brought in new customers, that MoviePass would turn to the theaters for a piece of the profits… and that’s the part that scares AMC.
As AMC knows from its own experiments, subscription services double ticket sales among subscribers, create dramatically increased popcorn sales, and create a bump in mid-week movie attendance. The real problem is MoviePass’s price drop has likely torpedoed the company’s own plans to offer a higher-priced unlimited subscription card to be used at their 20,000-plus theaters, which make up approximately half of the screens in the U.S.
If MoviePass proves it brings new customers, that will mean a cut of popcorn and ticket sales. MoviePass has a boilerplate partnership agreement in which it shares in the profits of those customers MoviePass brought to the theater (as opposed to regulars who also hold the card). Partners can offer e-ticketing and seat selection through MoviePass (for theaters that offer it) — deciding factors for the theaters customers choose.
Partners also share in data — something that exhibitors have done a horrid job in tracking. MoviePass can tell companies the theaters customers attend, the movies they see, and the concessions they buy. It’s the knowledge that companies like Netflix and Amazon used to clean Hollywood’s clock and what Walmart used to vary what they put on their shelves region-to-region and helped grow their business.