MoviePass has been an unavoidable topic of conversation in entertainment circles for the past seven months. The movie ticket subscription service–which allows users to see one 2D movie per day for $7.95 per month after its most recent price cut–has experienced explosive growth since it dramatically slashed its price to $9.95 in August 2017. When the news dropped, the internet awed in disbelief at the value of MoviePass. In February, the company reported it had surpassed two million subscribers and purchased $110 million worth of tickets in 2017. Those are eye-popping numbers, especially considering the company is paying theaters the full price of the ticket in most cases.
While the theater chains believe this model is unsustainable, MoviePass CEO Mitch Lowe was keen on sharing an internal statistic which says more about moviegoers’ habits than boiling down the short-term interest in MoviePass as merely an avenue to discounted tickets. The statistic in question is a weekly report on how many different titles MoviePass’ subscribers saw in a given week. I guessed under 10. Lowe countered with 200. It’s a confirmation of the hunger audiences have to check out a variety of movies, indies, foreign films, documentaries, and Oscar contenders—interests that extend far beyond tentpole franchises like Star Wars and Marvel.
It’s hardly surprising that consumers have a diverse appetite for film, yet the reception to MoviePass from an industry where studios, distributors, and theater owners have held the purse strings virtually unchallenged for decades has been expectedly tepid.
Lowe is a natural at absorbing and deflecting the skepticism surrounding his product. He was the VP of Business Development in the early days of Netflix and later was President of RedBox, two companies that upended an industry once dominated by video stores. Lowe himself was an owner of a Bay Area video store chain, which he still claims was the best job he’s ever had. Today, he’s about as good at winning PR battles as he is putting butts into movie theater seats. In a short period of time, Lowe and MoviePass had to weather customer service concerns (after the price slash they scaled up from a staff of nine employees to its current 40), near constant doubts about the sustainability of its business model, and a frosty relationship with AMC, the largest theater chain in the world and a one-time champion of MoviePass. If Lowe has the weight of the film industry on his shoulders, he certainly doesn’t show it. Having been in the disruptive space of a changing market before, he understands the immeasurable value of public opinion. Simply put: The cost of moviegoing is too high.
The average cost of a movie ticket has doubled in the past two decades. Audiences have more entertainment choices than ever before, yet in markets like New York and Los Angeles, a single movie ticket costs more than a monthly subscription to Netflix.
“Everybody is saying ‘It’s the end of movie theaters,’” Lowe says. “People want to watch everything at home or on their devices. Year after year, the exhibitors’ solution to declining transactions is raising prices.”
Box office admissions hit a 25-year low in 2017 with 1.2 billion tickets sold. As average tickets prices have steadily increased, theaters have seen a steady downward trend from the all-time high of 1.6 billion tickets sold in 2002.
“We’ve got regular television, we’ve got a couple of subscriptions, and you start thinking, ‘Geeze it costs 16 bucks.’ You know the popcorn isn’t cheap and you have to get out of the house and talk yourself out of seeing those marginally marketed films,” Lowe says of the abundance of consumer choices for entertainment.
Audiences are more cautious about which films they choose to spend their money on. In turn, marketing dollars have shifted away from medium-budget films to tentpoles, which hurts lower budgeted movies and indies. With its low price point and collection of user data, MoviePass is touting its ability to fix that.
“We’re creating an easier way to go to the movies,” Lowe says. “All these things that reduce the friction of a transaction all end up leading to higher consumption.”
In price and accessibility alone, it’s mission accomplished. But how can MoviePass survive by paying the full price of the ticket back to the theater? Given the rapid growth of their subscriber base since August, even the most conservative projection could see MoviePass pay out well over $500 million in tickets in 2018. MoviePass has caught the attention of the industry, but what happens in its next phase could change moviegoing for good.
When MoviePass lowered its price to $9.95 in August 2017, AMC initially regarded the company as a fringe player. Since then, AMC has seen plenty of money roll in off the back of MoviePass, although the theater chain disputes exactly how much. While small chains and independent theaters are working directly with MoviePass, AMC still refuses to cut in MoviePass on ticket sales or concessions. Other theater chains like Regal have waited for the dominoes to fall, while Cinemark created its own version of MoviePass albeit with far less value for the consumer – their $8.99 offer is good for one movie per month.
When your company has been labeled a disruptor by every major news outlet, part of the CEO job description is as commanding officer in the PR battle. In late January, Lowe, along with Ted Farnsworth, CEO of the data analytics firm Helios & Matheson, which purchased MoviePass in 2017, fired a deafening shot in a tightly worded press release. MoviePass pulled its service from 10 of the most trafficked AMC theaters in the country. In the interest of not ticking off its subscriber base, MoviePass carefully picked AMC locations that had competing theaters in close proximity. After months of reaping the full ticket and concession benefit from MoviePass, a big chunk of that revenue, which would only continue to grow in 2018, now vanished.
The worry of theater chains is twofold: If MoviePass fails, audiences won’t be happy with paying full price again. If it succeeds, MoviePass could strongarm theaters into cutting deals on ticket prices and concessions, eating into profits. The problem for MoviePass, in spite of its success, is that more subscribers ultimately means larger and larger payouts for tickets. If MoviePass continues to grow at a swift rate, could it afford to spend a billion dollars this year when it’s only bringing in somewhere between $7.95 and $9.95 per subscriber each month?
Lowe is steadfast with his response when I raise the prospect of the potential for the company to spend upwards of a billion dollars in 2018.
“The list of backers is growing,” Lowe says. “No one wants to miss out on the next Netflix. There’s a lot of industry players, a lot of studios that you’ll see who hate the idea that Netflix is now a competitor. We’re not going away.”
Unlike brick and mortar video stores, direct-to-consumer DVD services, and now video streaming platforms, Lowe’s company can draw a direct correlation to its influence in the film industry. Studios may have been unsure what to make of MoviePass at first, but it has proven to be an effective marketing tool for driving users to see certain films.
“When we promote a title like I, Tonya, The Greatest Showman, or Lady Bird or you name it, even Maze Runner, we’re buying eight, 10, and 12 percent of the U.S. box office. So we’re able to triple the amount of times our customers go to those films when we promote it,” he says.
Lowe foresees studios hiring MoviePass to do advance screenings of films, using it as a perk for subscribers and a more sophisticated measurement of audience testing for studios. To make the marketing tools for studios more effective, the company is working on a much needed update of the MoviePass app. During our interview, a new beta app was slowly being rolled out to users. The new app will afford the company more restaurant, marketing, and merchandise tie-ins, as well as subscriber benefits like filmmaker and actor Q&As that Lowe hopes will set the company apart from any future competitors.
“Our long-term goal is to get everything on the phone. You’re picking your concessions, you’re bringing a friend, you’re picking your seats, you’re figuring out who’s going to go together, and it all ends up with one bill at the end of the month on your card,” he says.
Unlike Netflix and Redbox before it, MoviePass is banking on the social aspect of moviegoing to be its main draw.
“We built around this whole night at the movies where there’s a lot more spending going on than just the movie,” he says. “There should be gaming going on, there should be sporting events. It should just be a place to take advantage of getting people together and a big screen. Hopefully, over time we’ll kind of play a role in helping exhibitors kind of go that direction.”
To get there, MoviePass and its parent company Helios & Matheson need to keep the money rolling in. Short term, that means more investors and more Silicon Valley monopoly money going directly to exhibitors like AMC and Regal. To make the numbers work, MoviePass is looking for 20-35 percent off the face value of the ticket sales, and a small number of concessions if they can prove it came from their subscribers. They believe, with MoviePass as an ally, theater exhibitors will still come out way ahead of margin. All they need to do is convince them. If Lowe’s best case scenario comes together, the theaters, studios, and MoviePass stand to preserve the collective experience of going to the movies. And usher in an explosive growth in popcorn sales.