Right around the time I found out I loved to write and talk about movies as much as I loved to watch them, the opportunity of a lifetime came along. Some small business was offering a subscription service, promising a ticket to one movie in theaters per day, all for the low price of $9.95 a month. It was September 2017, right before awards-season movies hit local theaters, and MoviePass gave me an opportunity—or an excuse—to brush up on the movies released this year, seemingly without restriction. This subscription plan was too good to be true.
Only a few months later, it became clear that in fact it might not be true much longer. After MoviePass’s parent company, Helios and Matheson Analytics, announced a $150 million debt this April, the fate of the company became less assured. Of course, companies often experience debt after receiving a boom in customers. Even Netflix, who this past year announced a $20 Billion debt in new content and licensing fees, will probably make it out alright. The old adage, “You need to spend money to make money,” must give MoviePass CEO Mitch Lowe (a former Netflix executive) some reassurance as hell starts to break loose.
But has MoviePass lost too much money without making any at all? How did they plan to break even with their pricing models? Where did they go wrong, and where could they go from here?
First, a little history…
MoviePass, like Peter Parker or Steve Rogers, came from humble beginnings. In June 2011, the newcomer to the movie industry tried to shake things up by starting a private beta in San Francisco. The beta plan allowed unlimited movies for subscribers willing to pay $50 per month, a bit more conservatively priced than today’s unlimited model. Nevertheless, the company withdrew from the beta shortly after theater chains like AMC and Landmark publicly rejected the model MoviePass tested, lasting barely one weekend and not making it to July 4th like investors hoped.
In 2012, they bounced back with a bigger, voucher-based beta, before officially launching in October with a mobile app and a special, pre-loaded debit card. The debit card model, which MoviePass still uses today, requires users to select a movie showtime in the app while outside the theater of their choice. The debit card is then loaded with a charge to pay for that movie specifically. When MoviePass founder Stacy Spikes was asked about the cost of the service—since $34 per month to see one movie each day seems like it could run dry if users go to the movies frequently—he responded by enumerating three additional sources of revenue the service generates: advertising other products to its users, “sell-through” or targeted coupons and discounts aimed at specific users, and selling data to theater chains and movie companies.
In 2016, Lowe became the CEO of MoviePass. He announced big changes to the service, including steps toward a lower-priced basic model, tiered subscription services, and a greater national reach. In 2017, the analytics company Helios and Matheson bought a majority share in MoviePass, and shortly afterwards, Lowe introduced a major change in the subscription model: Flying in the face of all common sense, the unlimited movie plan dropped in price to only $9.95 per month. This is when I, along with many other movie fans, started to seriously consider a subscription.
This is also when the flaws in MoviePass’s model began to show, almost immediately. After subscribing, users were told that they could expect their debit cards to be delivered within a week. In reality, my card didn’t arrive for an entire month (I wasn’t charged until the card arrived). With many users reporting delays, the service’s small staff seemed unable to keep up with their unprecedented growth. In fact, their membership skyrocketed from 20,000 subscribers at the end of 2016 to one million users by the end of 2017.
Lowe never provided an explanation for how exactly he thought the new plan would be profitable, aside from reaffirming his stance that there was a huge demand for the service MoviePass provided. However, the average movie ticket price in the United States, depending on region and showtime, is $9.16. Going to see just two movies on the unlimited plan runs MoviePass at a loss; it’s not clear how much data and advertising covers on average, but frequent moviegoers ran the company into a fairly large deficit. And with a large user base consistently running MoviePass into the red, it wasn’t long before restrictions came into place. First, MoviePass banned repeat viewings of the same title; then, to verify purchases, users uploaded pictures of their ticket stubs in the app.
Tragically, on July 29th, 2018, MoviePass faltered near-fatally. After a shaky couple of months—including a disastrous distribution of two independent films, and Helios and Matheson’s plummeting debt—the app experienced outages (caused by a missed service payment), and subscribers wishing to see Mission Impossible: Fallout on opening weekend found the showtimes frustratingly blacked out in the app. The MI:F restriction was revealed to be purposefully enacted by MoviePass, possibly after theaters refused to sell tickets to a summer blockbuster bought with borrowed money.
After having to borrow another $5 million, MoviePass announced further service restrictions, meaning all showtimes for one weekend received “surge-pricing,” charging an additional fee to obtain a ticket in the app, and other opening weekend titles were blacked out in the app. The final nail in the coffin, however? Lowe releases an email apologizing to subscribers for the outage, and announcing the plan would take a drastic step away from what many users signed up for: for the same $9.95 monthly subscription, users could see three movies covered completely by the subscription, and any additional movies that month would receive a $5 discount after purchasing in the app. Lowe explained that their research identified the average user as seeing an average of three movies per month, and that the new model fit their current business situation. As of today, users are reporting that the app limits the choice of movie each day to only two available titles. Today, it’s Slenderman and The Spy Who Dumped Me, and it’s unclear how those two were chosen.
So, what now?
The future of MoviePass hangs in jeopardy. Despite becoming wildly popular and possibly boosting theater attendance this year, an unrealistic price for daily movie tickets dug the service into an enormous pit. I’m no expert on the movie industry or startups, but allow me to go Doctor Strange for a minute and elaborate on all the possible outcomes:
1. The new pricing model works: Though highly unlikely, maybe MoviePass has figured out how to balance their profits from subscriptions, advertising, and data analytics. Hopefully, this will put moviemakers and theater chains at ease. The service will undoubtedly keep a number of users who still think $9.95 per month for three tickets (on average $27 without MoviePass). However, it’s not quite the promise many users, like myself, signed up for. Inevitably, a lot of people will cancel their subscriptions, and instead…
2. Everyone moves to a different service: Theater chains are stepping in to offer subscription models that rival MoviePass. For $20 per month, AMC Stubs A-List promises three movies per week, including IMAX and 3D screenings (which MoviePass would not cover). Covering that deficit will be easier for AMC, who sets its own ticket prices and can operate easier by eating the cost that they can make up with concessions and promotions directly for the customers. The main drawback, however, is loyalty to AMC chains. MoviePass covers a variety of theaters, including independent and locally-owned cinemas, which Stubs A-List holders would still need to pay full price for. Sinemia, a service without any theater affiliation, offers tiered subscriptions and family plans, albeit more restrictively than either MoviePass and AMC; the most expensive plan, $15 per month for three movies, offers no discount pricing after those three movies per month. Even if MoviePass folds, its impact on the movie market will live on through these competitor services.
3. Amazon buys out MoviePass: Okay, maybe not Amazon specifically, but if Helios and Matheson stay in a stock market freefall, an even larger firm might step in to purchase a majority stake in the service. Amazon purchased Whole Foods in June 2017, expanding its reach into physical business locations, and with a burgeoning slew of titles coming out of Amazon Studios, their film production division, the company might have their sights set on the loyal user base MoviePass has amassed. It also probably goes without saying that Amazon probably values the moviegoing data MoviePass collects. With Amazon’s astounding $53.4 billion earnings this past quarter, they could easily cover the debt MoviePass accumulated this year, giving it a financial rebirth. Whether this service bolstered by Amazon could still thrive and gain subscribers after the disastrous past year remains to be seen.
4. MoviePass dies: Perhaps it was doomed from the start. We all should have realized when the price dropped and millions of people started using the service that there was a slim chance for the service to stay sustainable. That shaky business model no doubt made other theaters nervous about ticket subscription plans, and it might be a while until we see either another company try to do what MoviePass did.
At the end of the day, MoviePass wasn’t trying to hurt the movie industry. It gave us what we didn’t know we wanted: unlimited movies, or at least something to offset the fairly high cost of going to the theater. The service made moviegoing more reasonable, and it encouraged me and millions of other people to get interested in new releases again. Coming at a time where people preferred waiting for new movies to get inexpensive digital rentals or to drop on Netflix or HBO, MoviePass wanted to give audiences an excuse to check out new movies as they got released. Every person I know who used MoviePass loved going to the theater again. We would check out indie movies, retro screenings, blockbusters, Oscar bait, and trashy movies, all for a really unreasonable price. Although our time together was short, I’ll always remember the magical ten months I spent seeing any movie my heart desired.
MoviePass, here’s hoping you can hold out and somehow get through this. If not, then I’ll miss you.