How viable is MoviePass? Those predicting the company would be crushed under the weight of its own “buy all the movie theater tickets you want for $9.95 a month” business model may be disappointed so far.
While the company, controlled by Helios and Matheson Analytics, said that it would boast 3 million subscriptions by August, CEO Mitch Lowe says he expects to hit that mark by the end of April, and the New York-based outfit has increased staff from 10 five months ago to 50.
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MoviePass had been stuck in neutral since launching in 2011, offering subscribers one ticket to a movie per day for $50 — then $20 — a month. On Aug. 15 it dropped its price to $9.95, and subscribers swelled from just 20,000 to 1 million in four months. To put that into perspective, it took Netflix (where Lowe is a founding executive) 39 months to reach that many streaming subscribers.
But offering 30 admissions for the price of one each month has attracted skepticism, since MoviePass pays full price for the tickets its members use (except at a few theater partners). AMC, with 8,000-plus screens in the U.S., has sought legal counsel in its quest to opt out of the service, and Adam Aron, its CEO, said in November that AMC has “no intention of sharing any — I repeat, any — of our admissions revenue or our concessions” with MoviePass.
While some frequent moviegoers signed up for MoviePass, Lowe is targeting the average consumer who goes to a theater 4.5 times annually. The CEO says he’s filling theaters showing smaller movies, since subscribers no longer feel the need to only spend their moviegoing bucks on big-budget event films.
Lowe likens it to “insurance” — if you can basically see any movie you like for no charge, there’s no need to fear plunking down cash to see a little-known title that might disappoint. And the company announced Jan. 19 the creation of MoviePass Ventures to invest in the indie films its subscribers flock to.
While Lowe concedes that MoviePass is losing money (he won’t say how much), he predicts profits by the time it hits 4 million subs. “It’s a very strong offering if they can structure the business so that they’re not constantly needing to raise cash,” says B. Riley analyst Eric Wold.
No problem there, says Lowe, since Heiios and Matheson recently plowed $60 million into MoviePass. Plus, MoviePass knows which theaters its subscribers are at so that soon it will be selling targeted ads for products beyond film titles, like restaurants that could offer discounts to customers who show their MoviePass app.
If MoviePass can return growth to the industry (admissions fell 6 percent in 2017 to 1.24 billion, says the National Association of Theatre Owners), it would be such a valuable service that it would deserve partnerships with not only theater owners who will share revenue but also studios, argues Lowe, though no majors have yet signed on.
“We’re signing five contracts a week with independent theaters where we get a lower cost on tickets and that will ultimately lead to a piece of concession sales, and we have a team in L.A. striking deals with studios,” says Lowe.
“Heavy usage of the card by subscribers is unprofitable for MoviePass, so these other revenue opportunities are key to long-run survival,” says analyst Steven Birenberg of Northlake Capital Management.
Birenberg is also a subscriber who “loves” the service after using it eight itmes in December and five times so far in January. “Wall Street is pretty generous for rapidly growing subscriber models, so MoviePass can probably attract capital to fund losses for at least a year or two more,” he says.
Adds Wible: “If MoviePass drives box office higher, studios and exhibitors should embrace it. It could be great for the entire industry.”
This story first appeared in the Jan. 25 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
