“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.

Almost.

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.

The last known picture of Lowe’s “deep-pocketed backer”

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.

Any new movie this month will be lucky to tough $30m on opening weekend

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.

Meanwhile, AMC lets you see 3 movies – any movies, in any format – a week for just $20 a month.

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.”

Mitch Lowe

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.

Atom Tickets, meanwhile, is holding a raffle to give one lucky winner a free movie ticket a day for an entire year. All you have to do is cut up your MoviePass card and tweet a picture of it with the hastags #MOVIEPAST and #ATOMSWEEPS

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.

Sources: Variety, Mashable

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Posted by Kelly Konda

Grew up obsessing over movies and TV shows. Worked in a video store. Minored in film at college because my college didn't offer a film major. Worked in academia for a while. Have been freelance writing and running this blog since 2013.

9 Comments

  1. As a frequent moviegoer, I was initially interested in looking into MoviePass, but when I caught wind my viewing habits were likely going to be shared using the service, I ended up deciding against it. It sounded like a good deal, but as you say, it was probably too good to be true.

    There was a time when more than half the country visited theaters on a weekly basis, but that percentage dropped after the forties and remained consistently at ten percent ever since the mid-sixties or so. There are plenty of people who go out of their way to see as many films as possible who couldn’t be continued toward that total (including myself). Realistically, the only people who do that are critics, so naturally, that’s reflected in ticket sales as well.

    Reply

    1. “There was a time when more than half the country visited theaters on a weekly basis, but that percentage dropped after the forties and remained consistently at ten percent ever since the mid-sixties or so.”

      100% true. Mitch Lowe’s point about declining attendance was often rebuffed by longtime theater owners who knew that things have basically been the same for decades. In those years when Hollywood releases movies people want to see, attendance spikes; In down years for new content, attendance goes down. The average American only sees 2-3 movies a year, leaving the industry reliant on those super users who see more than 10 movies a year. 18-24-year-olds are the coveted demographic, but they are also the most fickle and easily distracted by other options.

      Nothing new. It’s just the level of competition from streaming and TV that has changed.

      Raising ticket prices masks most of the problems and helps a company like AMC’s stock price stay in a healthy place.

      But when we start seeing some of the attendance figures dip to historic lows it ventures outside the normal cyclical declines and into the “there’s something seriously wrong here” territory. Maybe it’s time to innovate.

      The theater owners are reluctant to switch to subscription models because they know all too well what’s become of video stores, book stores, and record shops in the age of digital expansion. Heck, the theater owners are reluctant to give up their exclusive windows and fight the studios on VOD releases all the time. The sensible thing is to say “Look, you have to react to what modern consumers want and expect from viewing options, which is instantaneous gratification and subscription-based payment” whereas the old theater owners shout back “But how do we make money that way?”

      MoviePass’s looming death just proved the theater owners right in one regard. In fact, AMC has already admitted its running A List at a loss, which leads me to believe they will simply wait a 9-12 month period to build up a customer base before raising prices, especially if MoviePass is gone and thus no competition other than small potatoes Sinemia.

      Reply

      1. I get the sense that Hollywood is making the same mistakes as the AAA gaming industry – they keep themselves afloat with a series of short-term victories, but it’s not going to be pretty when that bubble bursts. There are other parallels between the two industries as well – having to break records just to break even, a problem with innovation, critics willing to give more praise to independent efforts, etc. People in Hollywood were lamenting about not making enough money back in 2017, but it’s unsurprising in hindsight considering they didn’t exactly bring their A-game that year.

        I heard that statistic that the average American only sees 2-3 films per year. I am definitely an outlier to that statistic, and though the heavily advertised films have a packed house, there have been a lot of screenings of independent efforts in which there were only four other people in the theater (last year, I remember being the only one in the theater when I saw Good Time).

        I wonder how a subscription-based model would work. If it meant having to commit to a company, we could run into the problem video games face in that some of them would doubtlessly resort to exclusive screenings to get an edge over the competition. It would be quite annoying subscribing to AMC only to learn the latest film you want to see can only be viewed at Regal. Raising ticket prices might work in the short term, but in the long run, it’s only going to justify people deciding not to go to the theaters – especially because most people prefer to watch films in the comfort of their living room.

      2. I think we will have new movie production companies starting films and buying other studios to sell on a subscription basis rather than split by individual production companies.

      3. It’s difficult to say at this point. In any case, it’ll be interesting to see how things are in the film industry going into the 2030s.

  2. What happened to the idea of being able to stream movies in cinema 5 days after they are released? Can MP not get into that model? This feels a lot like Kodak comadore atari and amstrad otherwise. Adapt or die

    Reply

    1. The streaming model is certainly more commonplace. The indie theaters are mostly cool with it. That’s why the new Timothy Chalamet movie was playing in LA and NY this weekend while we all could just rent it on Vudu. MoviePass, however, was supposed to be the last stand for brick & mortar theatrical exhibition (the theater owners, of course, would beg to differ about things being quite so dire). It was launched by one of the co-founders of Netflix to be the Netflix for movie theaters, a familiar price point to drive more people back into movie theaters. Streaming is the enemy of MoviePass as much as it is for the movie theaters.

      Reply

      1. Its napster all over again folks. All the music companies were in denial about streaming but you cant turn back time. We are in a streaming age for films now whether people got rich out of cinema box office reciepts or not. Take it from me. I am okd enough to remember when water was free of charge and you had to pay to see porn. Now its the other way round.

      2. “ake it from me. I am okd enough to remember when water was free of charge and you had to pay to see porn. Now its the other way round.”

        Hold on. Hold on. People used to actually pay for porn? Madness! Madness, I say!

        Of course, I joke, but there are all sorts of articles out there pointing out that similar to anyone else in the streaming/digital most porn companies/stars/websites struggle to make money.

        No, seriously, I get what you’re saying. It’s an adapt or die time, and Mitch Lowe saw that and tried to exploit by forcing the theater owners to change. In fact, the way theaters sold movie tickets hadn’t changed since the 60s, not too long after the Supreme Court forced the studios to sell all of their movie theaters. So, we’ve had decades of relative stability in terms of how theaters charge their customers. Sure, the prices have gone up, but it’s still been a “here’s how much for a matinee/here’s how much for night showing” model for decades. No surge pricing, no higher fees for more popular movies, smaller for indies. The only significant departure has been the influx of premium pricing for 3D and IMAX. Whereas those were essentially price increases, though, Lowe proposed an entirely new paradigm because subscription pricing is what we’re all used to now, especially younger generations who’ve never known anything different.

        The problem for the theaters is fear. They’ve somehow weathered all of this change and outlasted their brick & mortar rivals, primarily because people used to go to stores to buy things they would then consume elsewhere whereas a movie theater has the exclusive on that consumption. You go there specifically to see something which only they can offer. But as TV shows have become the new movies and Hollywood has turned toward blockbuster dependency the theaters are losing their allure and seriously struggle with 18-24-year-olds. That’s where Lowe’s idea had an extremely good point about the need to adapt. What he didn’t anticipate, however, is the industry would simply cut out the middleman and adapt without him, thus AMC introducing their own model instead of working with MoviePass.

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