Movie theater subscription service MoviePass announced on Friday that it would offer a package letting subscribers go to the multiplex as often as once a day for an entire year for only $89.95 – which works out to $6.95 a month plus a small fee.
The service has been around since 2011, but attracted a huge influx of subscribers when it lowered its monthly charge to $9.95 in August. You might think MoviePass is able to offer such a good deal because it’s passing along discounts from theaters – but you’d be wrong. MoviePass pays full price for each ticket, meaning that a subscriber who goes to even two films a month is probably costing the company money. The new, even steeper rate cut signals a willingness to continue trading profit for market share as MoviePass crafts a sustainable business model.
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In the long run, MoviePass says it wants to turn losses into profits by selling subscriber data to studios and other advertisers, and cut deals to share concession stand revenue. Parent company Helios & Matheson Analytics’ stock has exploded on that premise. But despite denials from the company, it also seems likely to recalibrate prices and terms of service – the $6.95 a month deal will only be available for a limited time, suggesting this is a market test and expansion push backed up by deep pockets.
The new deal is also likely to renew theaters’ anxiety over the service. AMC Theaters has already floated the possibility of legal action, echoing the idea that MoviePass was a “shaky and unsustainable” money-losing proposition that would ultimately frustrate consumers when its prices inevitably changed. More to the point, AMC explicitly said that it “will not be able to offer discounts to MoviePass in the future, which seems to be among their aims.” The implicit plan to push down underlying ticket prices is one reason theater stocks dipped after MoviePass’s August rate cut.
But AMC doth protest too much. MoviePass is a hypothetical threat that is probably increasing attendance in the short run, while theater and studio stocks have been battered much more directly by the worst summer movie season in a decade. Under those circumstances, MoviePass’s aggressive expansion gives it increasing leverage to extract concessions (pun intended) from theaters looking to fill empty seats, but the opportunity only exists because so many movies have disappointed theatergoers. MoviePass’s CEO, in fact, has frequently referred to the service as “bad movie insurance.”
That makes MoviePass, like Rotten Tomatoes before it, a convenient scapegoat for an industry whose wounds are largely self-inflicted.