January 5, 2018
NEWS ANALYSIS — In an age of over-the-top video, two services have emerged selling movie tickets via monthly subscription – a business model predicated on user indifference toward actually going to the movies.
MoviePass, the New York-based service headed by Mitch Lowe, former CEO of Redbox, enables subs access to one theatrical movie per day for a flat $9.95 monthly fee.
The service – majority owned by Wall Street investment firm Helios and Matheson Analytics – ended 2017 with 1 million subs (after dropping the original $29.99 price). It recently partnered with Costco selling $89.99 annual passes. The promotion includes access to indie film service Fandor.com.
Cinemark, which operates nearly 6,000 screens in the United States and Latin America, last month launched Movie Club enabling members access to no more than two tickets monthly for a discounted $8.99 fee. The service allows users to roll over unused tickets and discounts on concessions – a significant perk and unavailable at MoviePass.
Both MoviePass and Movie Club are targeting consumers who attend movie theaters infrequently. Indeed, audiences between the ages of 18 and 24 attended an average of 6.5 movies over the course of the year – more than any other age group, according to the Motion Picture Association of America.
This data is key to the survival of both services, especially MoviePass, which pays theaters full price of any subscriber ticket admittance.
In a sense, MoviePass and Movie Club operate like a gym membership, marketing loss-leader pricing to a wide spectrum of consumers, hoping only a small percentage of members actually use the service as advertised.
For MoviePass to make a gross profit, on average each of its subs would have to visit the theater at most once a month. Two or more visits per month on average would drive significant losses for the company, at least until MoviePass is able to secure additional sources of revenue.
The platform has revenue-sharing agreements with select indie theaters, which comprise less than 6% of its tickets sold, according to Wedbush Securities’ Michael Pachter.
The analyst contends MoviePass would achieve less than 1% gross profit on 2 million subs and 20% rev/share with indies.
“[It] could surpass break-even gross profit if its subs on average see only one movie per month throughout the year,” Pachter wrote in a note. “If its members on average see more than one movie per month its losses will be substantially higher.”
By comparison, Pachter believes Movie Club’s exposure to Cinemark’s bottom line is more manageable.
“We expect the net impact to be positive, with the magnitude dependent upon the program’s ultimate penetration,” he wrote.