Analysis: Why MoviePass' innovations could outlive the company

  • MoviePass has already fundamentally changed the movie business, and there's little chance the business will go back.

    MoviePass has already fundamentally changed the movie business, and there's little chance the business will go back. (AP Photo/Darron Cummings, File)

Posted5/12/2018 1:05 AM

Since MoviePass slashed its prices last year, many Hollywood folks - and more than a few consumers - have been saying the company can't last. The idea of collecting $10 monthly from a subscriber and then subsidizing that person's many trips to the movies was a clear recipe for financial ruin.

This week that dish finally seemed to reach a boil. MoviePass's parent company Helios and Matheson Analytics warned in a regulatory filing that it had about $43 million of cash available even as it has been spending average of nearly $22 million a month. If it can't muster more money, the company said, it "may be required to reduce the scope of our planned growth or otherwise alter our business model, objectives and operations." Wall Street has abandoned ship - the stock has lost 71 percent of its value since Tuesday. It closed Thursday at 61 cents.


Reached by text at the Cannes Film Festival, Helios and Matheson chief executive Ted Farnsworth played down the cash concerns. "Not worried at all," he said to The Washington Post, echoing his thoughts at the CinemaCon convention last month that profitability and even revenue mattered less, in the long term, than the company's fast-growing subscriber base and the loyalty and data that came with it. Plus, he said, the company can sell its stock if it needs more cash.

But even if MoviePass needs to scale back or be sold in the coming months - heck, even if it shut down tomorrow - it wouldn't mean the end of the radical new model it has brought to theater-going. MoviePass has already fundamentally changed the movie business, and there's little chance the business will go back.

Movie pricing has remained strongly constant over the years, even as other entertainment has implemented new models. Sports and theater have long had variable pricing depending on seats or the quality of what's being offered; they also had season passes that allowed you to pay a flat fee and come as much as you want.

Movies haven't had any of this. The industry has kept, the occasional discount or 3-D price notwithstanding, the same basic plan. You come, you pay one fee, you come again, you pay the same fee again.

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MoviePass said there was a better way. Frequent users could pay a flat fee and come whenever they liked. We could treat the multiplex not as a one-off but a place they dipped into, like our living room television. We could have season tickets.

It worked. People signed up in droves, more than 2 million people since last summer.

Of course, the appeal to MoviePass was very different from its appeal to its subscribers. The company doesn't want people to go to the movies too much; it wants, in the manner of a gym membership, for the initial enthusiasm to give way to infrequent usage. (Currently, MoviePass pays full price to the theater every time a subscriber uses their card.) And that is proving to be MoviePass's undoing. Because subscribers are coming so often, the company continually has to pay theaters - often a lot more than it's taking in with that small $10 monthly fee. Essentially, MoviePass is a victim of its own success.

But the important distinction here is that these struggles are not a function of the appeal of the subscription model itself - that part is just fine. Instead, it's a function of the particular system that MoviePass implemented to ramp up subscribers as quickly as possible. Before last summer, the company charged a whopping $50 per month. Then it gambled that if it deeply slashed prices it would attract enough consumers to make it worthwhile.

That's turning out to be a not-so-great move - for MoviePass. But it's turning out to be pretty good for subscription models as a whole. If priced right, it turns out, a subscription model will bring out consumers. It's that compelling.


But can it be priced right? Can companies charge an amount that persuades consumers to buy subscriptions and still preserves the profit margins of theater owners?

Some chains, prompted by MoviePass, have begun to experiment to test exactly this hypothesis. A modest version comes from the U.S. chain Cinemark, which basically allows one monthly ticket for about $9 but gives you concession and other discounts.

A more ambitious one is being tried out in England by a U.K. chain called Cineworld - which, incidentally, also owns Regal in this country. Under its plan, a $25 monthly purchase gives you unlimited movies and other discounts, too. Expect more such plans to come our way in this post-MoviePass world.

(Profitability in all these cases will of course ultimately depend on these subscriptions attracting not just existing heavy moviegoers who are going to give their card a good workout but also new people who wouldn't otherwise come to theaters - or, at the very least, existing moviegoers who are willing to buy new concession items.)

The idea of a movie-theater subscription in some ways is a throwback. The trend in television for several years has in fact been toward unbundling - a fancy way of saying people should pay only for channels they want instead of one catch-all fee. In multiplex terms, that's a trend toward individual movie purchases, not theater subscriber fees.

But it turns out the bundle existed for a reason: People like it. Judging by the millions who've signed up for MoviePass in the past few months, the idea of paying a flat fee and then just watching what you want is deeply appealing. It may have taken a kamikaze company like MoviePass to demonstrate that. It won't take much more for another company to demonstrate it can work.

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