“We are the fastest-growing entertainment service, with no free trials. Everybody’s paying. We have a deep-pocketed backer that is prepared to fund us all the way.”
That’s MoviePass CEO Mitch Lowe earlier this year, talking to Recode (as quoted in the Spring 2008 MovieMaker Magazine).Confidence bordering on arrogance and a supreme belief in his company’s bright and never-ending future, regardless of annoying little things like profitability – that’s been the Mitch Lowe way since he joined MoviePass in 2016. If he proclaimed MoviePass to be the way of the future enough times he could will it into existence mostly by strong-arming the theaters into offering a cut of ticket and concession sales and convincing enough advertisers to come begging to gain access to their user data. It almost worked.
Here’s Mitch Lowe in a letter sent to all MoviePass subscribers yesterday:
“We believe that the company we have built — the fastest growing subscription company in history with more than 3 million members — has revolutionized the movie industry in the U.S. The first half of 2018 saw the total box office grow by almost 10 percent compared to last year, and we know MoviePass is responsible for a significant portion of that unprecedented growth.
In order to continue growing our service and maintaining a high level of financial discipline, we need to make some modifications:
MoviePass dying. The stock price, which once traded at $32 a share, has suffered a humiliating disappearing act, now selling for literally just $0.49 a share (it plunged 38% on Tuesday alone). The app has suffered two seperate outages this month and is still unusable for certain users. Their parent company just had to take out a $5 million loan just to meet their financial obligations. That mysterious “deep-pocketed backer” is long gone, if, indeed, they ever existed.
Yet, Lowe can’t quite quit his salesman act. He can’t quite admit the end is almost here. Should they go under, he’s warning, the theatrical exhibition industry will see a steep decline in attendance. If only they’d listened to Mitch, they’ll all say. If only they’d let him in on their profit margins.
He might be right. Attendance might indeed plummet, but we’re already moving into what is typically one of the worst months, August, of the year for new movies as the summer movie season dies a quick death while everyone prepares for the new school year to begin.
Yet, MoviePass is in such bad shape it can’t even ride the month out. Instead, in that letter I quoted Lowe went on to explain the service will no longer support any new movies playing in more than 1,000 theaters until their third week of release, unless the studio offers them a promotional discount. Since all big movies open in 1,000 theaters, MoviePass has now essentially become a service geared toward second-run showings and smaller indie movies.
On top of that, at some point in the next 30 days the price is going to increase from $9.99 to $14.99. To make matters even worse, there’s also this confusing tidbit: “Showtimes that are offered through our service will vary from day to day, and every showtime may not be available.”
So, in summation, your options are about to be severely limited AND you’ll have to pay more.
Suddenly, Lowe’s prior boast to Variety about AMC doesn’t look so hot: “We will eventually be working with [AMC] and that we will be working with not just them but with others who claim they will never work with us.”
Apparently not. Instead, AMC will be working to destroy you, and, sadly, you’ll be making their job very easy. As Eric Handler, an analyst with MKM Partners, told Variety, “How on earth are you going to be able to attract new customers when you read the price is going up one day and you’re not going to be able to get tickets to the first weekend of a new release?”
Logic has always warned us that MoviePass’ house was on fire. Lowe kept insisting it wasn’t, or at least that it wasn’t on fire yet but they didn’t need fire insurance because everything would go according to plan. Now, the flames are unmistakable, but Lowe persists, essentially saying they can simply downsize, maybe move to a smaller home and emerge better than ever.
But this feels like the last gasp. According to Michael Pachter, an analyst with Wedbush Securities, MoviePass has been “operating at roughly a $20 million monthly deficit” and were losing $7 on each member.” Even with the price increase, the company still stands to lose $2 per subscriber and will seriously struggle to attract new customers. He’s not optimistic the company will be able to survive much longer.
The lesson Pachter takes from all this: “Don’t delude yourself into thinking that a business that loses money on each customer can make it up with volume.”
In truth, though, like Facebook a large part of MoviePass’ business model was reliant on data mining. As Lowe told Marketing United last year, “The business model of the movie theater business is exactly like it’s been for the last 20 or 30 years. Unlike Netflix, Amazon, or Hulu, who know who exactly who their customers are and how to micro-target them, only 9% of moviegoers are part of a loyalty program or have their email address attached to their film attendance. It’s an incredibly inefficient model. This is why the studios have to spend twenty to fifty marketing million dollars on Superman when they should already know exactly who watched the previous 15 of them.”
We bring in a high volume of customers and then sell back their data to you – sound like a deal, Hollywood?
Not after Cambridge Analytica.
And now here we are: Bad business model, but good recipe for funny memes:
We laugh at the seemingly inevitable death of something that always seemed too good to be true, but in truth Lowe has always had a good point. Film attendance in the U.S. has plateaued. Even this year, with its record-setting summer box office, has sold fewer tickets than 2016 or 2015. Smaller movies continue to struggle, so much so that the trades have taken to going crazy over high per-screen averages at the specialty box office even though playing well in 4 theaters in LA and NY is already known to have limited portability. Most other forms of entertainment have switched to subscription models, and they’ve already been shown to work for movie theaters in Europe as well as art-house theaters in the States. Why not try it here on a larger scale?
By removing the barrier of price, MoviePass was supposed to free everyone to take more chances on all kinds of movies. It was supposed to truly be the Netflix for theaters.
Small problem: have you seen how many damn movies and TV shows the actual Netflix releases every week? Also, what if all you’re doing is enabling the hardcore movie lovers to see all the movies they were probably already going to see anyway?
Some will stick with MoviePass to the bitter end. I’ve been a member since before Lowe joined the company, and I admit to feeling a certain bit of reluctance towards canceling. “It’s still not a totally terrible deal. Maybe, just maybe they’ll somehow manage to turn things around,” I plead. Why not see it through to the end.
As I waffle, the end appears to be drawing ever closer. It was a good ride while it lasted, and the existence of competing services like AMC A-List and Sinemia proves MoviePass might die but its vision will live on. Let the next guy worry about a silly little thing like profitability.