MoviePass Is Luring Millennials Back to the Multiplex. Why Is Hollywood So ‘Meh’?

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Illustration: Zohar Lazar/Vulture

Given the rage freely flowing from America’s largest theater operator, AMC, toward MoviePass — the controversial, defiantly inexpensive subscription ticketing service that allows filmgoers to attend one movie per day, every day, for a $9.95 monthly fee — it’s easy enough to forget that until just last month, the two companies were partners in the putting-asses-in-seats business.

Amid slumping box-office tallies estimated to be the worst in a quarter-century of summer moviegoing, and on the heels of its own dismal quarterly earnings announcement, AMC blasted the service as a “small fringe player” and “unsustainable” in a widely cited press release in August that also raised the specter of legal action to block subscriptions.

Contrast all that with the good ol’ days of 2014, when the two companies heralded a partnership to roll out MoviePass’s $35 to $45 packages at AMC theaters in Boston and Denver on a kind of test basis — one that not coincidentally yielded an 18-month blind study, tracking moviegoer behavior. The findings? Viewers went to the movies 100 percent more thanks to MoviePass. And perhaps even more meaningfully for the bottom line, popcorn sales shot up by a whopping 123 percent.

But over the last year, the subscription fee has dropped to just under $10 (the average price for a single movie ticket in most of the country is just under $9) and the subscription base exploded from around 20,000 subscribers to more than 300,000 paying customers. Corporate contretemps has since taken a back seat to larger questions about MoviePass’s sustainability.

The pros: It’s a sweet deal. That $9.95 price tag amortizes to about 33 cents per film (if you use the service 30 times a month) and streamlines the act of ticket-buying via a mobile app through which users choose their preferred theater and showtime, front-loading the admission cost onto a prepaid MoviePass debit card. The cons: Although MoviePass is accepted at 91 percent of theaters in the country (including Regal, Cinemark, and, yes, AMC), the service does not apply to 3-D or IMAX screenings. In theaters belonging to two out of the three major exhibitors, users can’t select their seat in advance. And chains including ArcLight Cinemas and Landmark Theatres are still outside the system.

With distribution executives seemingly content to take a wait-and-see attitude (none of the major Hollywood studios agreed to respond on the record for this story), the issue vexing most industry observers remains: How the fuck can MoviePass avoid bankruptcy — let alone expect to turn a profit — when the company hemorrhages money every time a subscriber sees more than six movies a month?

And if MoviePass pays full freight for every admission — with data establishing the program attracts millennials at a time when younger viewers have vanished from the multiplex by 20 percent over the last five years — why does Hollywood seem so “meh” about it?

In a word: Netflix. MoviePass’s chief executive Mitch Lowe earned his disruptor stripes as co-founder of the entertainment company, back when it was just a DVD-by-mail rental business making a run at Blockbuster’s movie-rental hegemony. He likens the AMC blowback to predictions of an earlier business’s demise that never came to pass.

“When we launched Netflix, Blockbuster said, ‘This is a ridiculous idea. You’re going to create confusion in the market. You’re never going to make it,’” says Lowe, pointing out that AMC and only AMC, among the major exhibition chains, has put MoviePass on blast. “The incumbent player — the largest entity in any space — spends more time protecting their business as opposed to listening to their customer. It’s the nature of the beast. They have so many assets to protect, the executives have lost complete touch with what their customer wants and the fact the customer wants subscription.” (AMC did not respond to email and telephone requests for comment from Vulture.)

At stake is no less than the future of the movie-exhibition business, an industry that has seen ticket prices rise almost 100 percent over the last 20 years while offering scanty new innovation over that time — e-ticketing and, to a lesser extent, reclining seats comprising its premium product. To hear it from Lowe (who, notably, also functioned as the COO for the similarly disruptive automated DVD-rental-kiosk business Redbox prior to running MoviePass), millennials live and breathe subscription media — Hulu, Amazon Prime, Spotify, even HBO — and already comprise 75 percent of MoviePass’s customers. Moreover, they’re looking for new reasons to return to the movies.

“Millennials are very value conscious,” he says. “They look at a film and go, ‘Hmm, I don’t know much about it, I don’t know people who’ve seen it. I’ll just wait for it to come out on television or on my mobile device. I don’t care if it takes six months or a year.’ More often than not, they talk themselves out of going to movies. What subscription really does for them is give them bad movie insurance.”

But insurance at what cost to the company? The CEO is the first to admit the $9.95 monthly fee results in “us getting killed on margin” when subscribers go to see six or more films a month. But the service is gambling that even though viewers can binge-watch, they won’t. At least not once the novelty wears off. “It’s like a buffet. If you went to an all-you-can-eat buffet every day, how often would you pile your plate high?” Lowe explains. “Fifty-one percent of moviegoers go to one movie a month or less. The average is four to five movies a year. We knew if we priced it at $120, that’s roughly three times as much as they are currently spending. But 70 to 80 percent of our customers are those people who start out going three to six times. And after MoviePass, they go nine times on average.”

The service’s bigger play, of course, is Big Data: the accumulation of detailed user profiles indicating moviegoers’ locations, genre preferences, their go-to multiplex, frequency of attendance, and even snacking habits. Last month, the company sold a 51 percent stake to the firm Helios and Matheson Analytics — whose home page actually roars in all-caps 50-point font, “WE ARE BIG DATA” — for $27 million. And Lowe isn’t shy about envisioning a future in which the MoviePass card (or phone app) might provide a larger “night at the movies” experience based around a Jetsons-esque Information Age interface: “We want to create a whole, ‘Go to this bar, go to this restaurant, get discounts. Use your MoviePass card to pay for everything. And get a bill at the end of the month.’ You walk out of the movie theater, we can offer you a digital soundtrack to that film, right when you’re emotionally charged. Or offer you a copy of the film when it comes out.”

While the six-year-old New York–based company’s idea for now is to “remove as much friction as we can in going to the movies” — liberating viewers from the anxiety of having to ask themselves, “Is this film worth my money and time?” — the service’s implementation has not been without hiccups. “The app is buggy,” says a veteran Hollywood marketing consultant. “There have been user-interface problems. You have to go single rider; you can’t go with a group of friends. [MoviePass] were promising that you’d get those cards within five to seven days. Now they’re saying it’s going to be weeks. You have fickle and impatient consumers who have expectations when they show up at theaters. And you can’t select your seat in advance.” (A spokesman for MoviePass points out the self-selection of seats is only unavailable at AMC and Regal Cinemas.)

For the time being, Hollywood’s jury remains out. “I still don’t get how MoviePass is coming out ahead in this game,” says the consultant, a former ranking studio executive who requested anonymity out of concern for sensitive ongoing business relationships. “I’m trying to go way downstream on this model, assuming [Lowe] has studio marketers paying to market directly through him and doing different tricky things with the data. I’m assuming because he has that scale, he’s going to be able to negotiate with the exhibition community to get preference. A cut of the concessions. A preferential rate to fill those seats. But that assumes a lot of ifs and butts in seats.”

For his part, the CEO remains sanguine that both the filmmaking and exhibition communities will come around to MoviePass’s way of thinking inside half a year. “We’re putting our money where our mouth is over the next six months to prove we can be a beneficial part of the Hollywood ecosystem,” Lowe says. “That’s why we’re not asking for anything from anybody. We pay full price. The theaters keep all of the concession revenue. The studios make more money. At some point in the future, if we can prove we increase the profits of studios and theaters, then we’ll want to sit down and get our fair share.”

“We want the whole industry to be healthy. We want a great experience for our customers,” he continues, suddenly switching to address Hollywood in the second person. “But at a later date, if we’re doubling the frequency of the customers who’ve been abandoning you, you’d think they’d cut us in on some of your increased profits. That’s what we’re hoping.”

MoviePass Works. Why Is Hollywood So ‘Meh’?