MoviePass Gets Serious About Customer Acquisition

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An investment from Studio Movie Grill coincides with a promotion that can get filmgoers 30 trips to the theater for just $10, and MoviePass CEO Mitch Lowe says his service can help studios and exhibitors market more efficiently.

It's likely most filmgoers have never heard of MoviePass, but they might want to check out the service's newest offering: For 10 bucks they can seen a movie at a theater every day for a month, providing they live near one of 24 Studio Movie Grill locations.

The promotion was announced Monday in conjunction with a partnership and an equity investment, whereby Studio Movie Grill took a stake in MoviePass, a subscription moviegoing service headed by Mitch Lowe, a co-founder of both Netflix and Redbox.

Lowe wouldn't say how much Studio Movie Grill invested in MoviePass, but the exhibition chain joins Lowe and former Facebook chief privacy officer (and Sacramento Kings co-owner) Chris Kelly as a primary investor.

Studio Movie Grill owns 24 theaters in 10 states and is known for its in-theater dining experience, whereby servers bring food and drinks, including alcohol, to patrons already seated in the theater.

For a limited time, theaters owned by Studio Movie Grill will be offering their customers a MoviePass subscription for just $10, which will get them a movie ticket every day. The service normally costs $50 a month.

"It will be expensive for us, but it's part of our subscriber acquisition costs," said Lowe.

MoviePass launched four years ago but Lowe signed on as an investor and CEO in June. The service has 20,000 subscribers and the company, which also offers more limited, cheaper subscriptions, has just shy of $10 million in revenue yearly. It's still a couple of years from profitability, Lowe said.

MoviePass works at nearly every theater in the country. MoviePass collects the $50 monthly fee, then pays the going rate — or sometimes a discounted rate — for the tickets used by its subscribers. "We bear the risk of over-usage, and get the benefit of under-usage," Lowe explained.

The partnership with Studio Music Grill also has the two companies testing an "open tab" feature, whereby subscribers won't need to pull out a credit card to pay for the food and drinks ordered because "geo-location technology" automatically closes their tab when they leave the theater.

For now, MoviePass hasn't partnered with distributors, but Lowe is making his case that the moviemaking industry will benefit from its service, because the average subscriber doubles the number of movies he or she sees in a year and spends much more on concessions.

"There's no downside to the film not being great. We incentivize experimentation," he said. "With 3 million subscribers, we can add 5 percent to total ticket sales, but growing that big requires a lot of investment."

From 1984 to 1998 Lowe ran 10 video-rental stores in California, then he helped Reed Hastings create Netflix. Before leaving in 2003, he was instrumental in bringing chief content officer Ted Sarandos aboard. Lowe co-founded Redbox next, and left that company in 2011. Now, he sees opportunity in MoviePass that goes beyond subscriptions for consumers.

"Seventy percent of our customers are millennials, and that's exactly the group watching movies on their mobile devices that the industry needs to get back into theaters," he said. "Going to a movie at a theater is the last of the old business models. The exhibitors and studios don't know who their customers are. We can help them with that so they can market their films more efficiently."