Who buys records anymore? I’m not sure, but certainly the record industry was flipped by Itunes and then turned updside down by streaming services like Pandora and Spotify. Even how we listen to the radio was flipped when Satellite radio hit the market. Well get ready, it looks as though a new service MoviePass is about to revolutionize how we enjoy an evening out at the movies.

For $9.95 per month, MoviePass allows you to see one movie per day at your local movie theater. Yes, that’s less than it costs to buy one ticket at most theaters. No wonder the company is taking off like wildfire, but only after a slow first six years.

The company struggled to find just the right combination of price and services to attract subscribers. Until August, the service was between $30 to $50 per month, a price point that wasn’t good enough to get people off their sofa and into movie theaters. However, the $9.95 price point introduced in August seems to be the answer.

How does it work?

For $9.95 per month, MoviePass will allow subscribers to see one movie a day at any theater that accepts debit card payment. The only restrictions that have been announced so far are that 3D and Imax films are off limits. In addition, the tickets are only for same day viewing, not advance purchases.

The service requires customers to have an Android or IPhone and download an app. At the theater, you sign into your MoviePass’ App, and when the clerk or ticket machine asks for payment, you just swipe your MoviePass card.

The service is available in over 91% of all theaters in the U.S., including AMC, Regal and Cinemark theaters along with independent theaters.

Who’s Losing Money?

At just $9.95 per month, someone is losing money, right? Is it the movie theater or MoviePass? Well according to the model, at least for now, it’s MoviePass. The movie theaters win, since MoviePass pays them for your ticket and with this new model, movie theaters should finally be able to accomplish something they’ve been struggling with for years — getting people up off their sofas and back into their theaters.

So why would MoviePass adopt this model that just doesn’t seem to make economic sense? Remember how we wondered how Facebook would make money when their services were free? We’ll Facebook figured out how to monetize their product, and MoviePass has a plan.

Netflix of Movie Theaters

One potential profit model is based on the Netflix model. In fact, former Netflix exec Mitch Lowe is MoviePass’ CEO.

Lowe took over in June and he’s the genius behind the company’s new $9.95 model. Prior to his arrival the service had amassed just 20,000 subscribers in six years. With the rate decrease, the company gained 150,000 new subscribers in just two days and in a month had surpassed 400,000 subscribers.

Does the whole idea still seem a little crazy and a sure fire way for MoviePass to go broke quick? AMC Theaters has called the model “unsustainable,” but Lowe is drawing on years of knowledge about consumer habits gained from his years at Netflix, followed by Redbox. He’s certain he has a winner on his hands.

He also has data gathered in an initial trial with AMC Theatres.

“We found that on a $40 per month plan, subscribers would attend an average of 3.8 times per month,” Lowe told Forbes Magazine. “At a higher price they would attend more frequently, and at a lower price, less. At $9.95 per month we expect the average subscriber to settle into a pattern of just over a movie ticket per month.”

Other Revenue Potential

When MoviePass lowered its rate to $9.95, AMC filed a protest, but MoviePass says theater operators ought to be pleased with the impact MoviePass is having on their bottom line. If MoviePass becomes the model through which most people attend movie theaters, a twist might be theater chains paying MoviePass to make sure they’re theaters are “MoviePass” theaters. In the future, theaters who don’t take MovePass could struggle even more to get buts in the seats.

How about MoviePass negotiating for a portion of the movie theater concession sales, i.e., “I’ll send you customers, but I want a piece of the concession revenue.”

Other potential revenue sources: MoviePass could benefit from all the data it collects on its subscribers, their locations, habits and tastes. It can package and sell that data to movie distributors and marketers. Of course, they’ll sell ads on the App, and with millions of movie customers, an add purchased to promote your new movie could really increase ticket sales, and the bottom line for companies like Disney, Lionsgate and Pixsar, just to name a few.

New investors

Lowe isn’t the only one who believes in the MoviePass Model. Helios and Matheson Analytics – a publicly traded company, recently purchased a majority stake in MovePass.

“This is about getting funded in order to launch our new price point,” Lowe told Variety. “After years of studying and analysis we found that people want to go to the movies more often, but the pricing keeps going up, and that prevents them from going more. We’re making it more affordable for people.”

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