When MoviePass—the subscription-based company that allows its customers to see a film a day—announced it was dropping its monthly fee to $10, the biggest theater chain in the country objected. On paper, it was hard to tell why AMC would do this: MoviePass reimburses cinemas for the full cost of each ticket purchased, theoretically driving more traffic to participating multiplexes without any financial loss. But last week, the downside of that arrangement became clearer, as MoviePass summarily blocked its users from buying tickets at 10 big AMC locations as a negotiating tactic, seeking a cut of ticket sales from the company in exchange for full cooperation.
MoviePass initially launched in 2011 as a voucher system, where you had to print your tickets from home. It later switched to its current credit-card format (requiring check-in on an app before a purchase can be made), but with much higher monthly fees that ranged from $30 to $50 depending on location. Last August, the data-analytics firm Helios and Matheson acquired a majority stake in the company and slashed its subscription price to just $9.95 a month (users can buy one ticket a day for any film, excluding 3D or IMAX screenings). The Helios and Matheson CEO Ted Farnsworth said MoviePass could absorb the price cut because it would attract more subscribers, and the resulting data on their filmgoing habits would be valuable to advertisers. Within months, a niche service for cinephiles became a national trend—MoviePass now has 1.5 million members.
AMC Theaters, which runs 661 theaters around the country, immediately signaled its displeasure at the price cut. “From what we can tell, by definition and absent some other form of other compensation, MoviePass will be losing money on every subscriber seeing two movies or more in a month,” the company said in a release at the time. “That price level is unsustainable and only sets up consumers for ultimate disappointment down the road if or when the product can no longer be fulfilled.”
AMC’s initial panic seemed to be over MoviePass lowering the price point for theatergoers; if the service went away, would viewers be able to stomach paying full price for tickets again? But it appears the only thing more frightening to AMC than MoviePass’s failure is its success, as the company now has the ability to bargain with real strength. By removing AMC from its app, MoviePass can direct viewers to other chains and independent theaters, which could make for a tangible difference in sales.
Essentially, this is a show of force, and the next step is seeing if MoviePass’s change can actually hurt AMC. “As we’ve grown our subscriber base, we’ve seen a dramatic increase in movie-theater attendance among our subscribers, which proves to us that MoviePass is working to revitalize a declining industry,” Farnsworth said in a statement. “Other theater companies have seen this attendance resurgence and have approached MoviePass to collaborate. Since the get-go, AMC has not been interested in collaborating with MoviePass—a move that is not in the interest of our subscribers and AMC theater-goers.”
MoviePass is claiming that its subscribers represent 62 percent of AMC’s operating income. The demand for “partnership,” or a $3 cut of ticket sales, is partially rooted in the assumption that MoviePass users then spend even more money at the concession stand, given that their ticket was “free.” Popcorn, drink, and candy sales are the bedrock of any theater chains’ profits, and MoviePass is saying that its members contribute to those numbers. Anecdotally, I’ve found that to be true—I’ve been a MoviePass subscriber for six months now, and the high cost of popcorn is easier for me to stomach if it’s my first purchase at the theater.
MoviePass’s bold display against AMC is an example of how its growing monopoly of subscribers can be used to “disrupt” the industry. It’s just a question of how effective that disruption is. AMC responded with a public shrug, saying in a statement, “We have no further comment about MoviePass’s unilateral actions. We are, however, disappointed that MoviePass continues to make false statements about AMC, including today when MoviePass greatly exaggerated its contributions to AMC’s profitability.” (Further examination of MoviePass’s claims shows that its subscribers account for about 4 percent of AMC’s revenue.)
There’s little question that major chains like AMC and Regal have struggled to keep up with expanded home-viewing options—most multiplexes are simply not as comfortable, and certainly not as cheap, as staying home and watching Netflix on a big TV. These chains are now moving to revamp the theater experience (adding reclining chairs and reserved seating), but it’s been a slow process. Perhaps the increased pressure from MoviePass will speed AMC’s efforts to spruce up its theaters and draw a loyal customer base, or will at least convince the chain that the old way of doing business (rather than the subscription- and advertising-based model) is dying.
At the same time, it’s hard to tell if MoviePass is really built for the long run. The company’s customer service ranges from slow to nonexistent, with new subscribers often waiting weeks for their cards to arrive in the mail. The $9.95 price point is so ludicrously low that it surely cannot be sustained forever, even if MoviePass starts getting a cut of ticket sales. Perhaps Farnsworth is right about advertising data being enough to shore up finances (it certainly works for Google and Facebook). But so far every public move the company has made has been a PR splash, whether it’s the drastic price cuts, or these aggressive negotiations, or the fact that MoviePass actually acquired a film for distribution at this year’s Sundance Film Festival.
The rapid success of MoviePass since the price drop is hard to deny. Even the most optimistic predictions wouldn’t have foreseen it hitting 1.5 million subscribers this soon after the fee change, and the company insists that independent theaters and chains have been happier to negotiate as a result. I’ve visited multiple indie theaters like the Metrograph and IFC Center in New York since the price cut and noticed that their ticket sellers keep a tally of MoviePass users—sometimes it’s half of the audience for a single showing, sometimes higher. It seems the cinephiles are already on board, and casual viewers are coming in droves, too. If this trend keeps up, AMC and other chains are going to have to respond with more than a shrug.